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ECOR: Strong Sales Through VA and NHS Channels


By John Vandermosten, CFA



Third Quarter Operational & Financial Results

electroCore Inc. (NASDAQ:ECOR) released third quarter operational and financial results and filed form 10-Q on November 12, 2020. Revenues surged meaningfully, increasing 58% over prior year levels and 44% sequentially. Costs were also down on a sequential and year over year basis helping drive a material improvement in net income. Other highlights during the quarter and to date included the grant of Emergency Use Authorization (EUA) for gammaCore Sapphire CV for COVID patients, an extension of England’s National Health Service (NHS) program to reimburse gammaCore and Veterans’ Administration (VA) sponsorship of clinical trials using gammaCore in extended indications.

Revenues of $1.1 million represented VA, NHS and commercial sales, with the rise at the VA in excess of 130% year over year. The strong performance in the VA segment was partly attributable to a large, end of fiscal year order, which may have pulled demand forward. Sales to the NHS were up by 64% as penetration continued to increase with this group. Commercial replenishment revenue was $112,000 in the third quarter, up from $60,000 in 2Q:20.

Gross margin achieved a two-year peak of 67.8% compared to 63.7% in 2Q:20 and 48.2% in 3Q:19, aided by absorption of fixed costs. Research and development costs of $629,000 fell 72% compared to 3Q:19 on the termination of the Premium II clinical trial. Selling, general and administrative expenses declined 44% to $4.6 million as sales and marketing activities were reduced as part of the restructuring that has taken place over the last year.

Net loss was ($4.5) million for 3Q:20, an improvement over the ($10.7) million loss in the comparable period. On a per share basis, loss was ($0.10) on a base of 44.0 million shares outstanding. Cash burn was ($4.6) million in the quarter compared to ($8.2) million in 3Q:19. Cash and equivalents were $26.0 million on September 30, 2020 up from $24.1 million at the beginning of the year.

Emergency Use Authorization

In early April, electroCore submitted an application for Emergency Use Authorization to use gammaCore nVNS therapy for treating respiratory symptoms for COVID-19. Early clinical and non-clinical data was submitted to the FDA which suggested that a benefit for those with respiratory distress. By mid-July, the application was approved based on two studies that found preliminary efficacy from the treatment. These included: VNS for the treatment of acute asthma exacerbations and nVNS for the relief of acute bronchoconstriction due to asthma

A telehealth option was offered to help patients access the therapy. The product will only be available for COVID-related respiratory symptoms during the pandemic and further studies as well as FDA approval will be required for COVID related use after the end of the emergency period. In a further effort to quantify the benefit in COVID patients, two studies, designated SAVIOR 1 and SAVIOR 2, were launched in Spain and Pennsylvania, respectively, evaluating the use of gammaCore Sapphire CV in hospitalized COVID patients. These trials started off with slow enrollment during the summer but have accelerated in the fall as the pandemic resurges with record number of cases. While the sales benefit from gammaCore for COVID related respiratory symptoms is expected to be limited, the EUA approval has provided visibility for the therapy and expanded its recognition as a useful therapy.

National Health Service (NHS) Agreements

In April, electroCore reported that it was granted an extension to its participation in England’s NHS Innovation and Technology Payment (ITP) program to run through September 2020. The program was initially launched in April 2019 and electroCore was selected by the ITP program to use the gammaCore product to treat cluster headache in adults. It is the primary program from which revenue in the United Kingdom is sourced. The program funds medical technology products to improve the quality and efficacy of patient care. For details on the NHS ITP program, please refer to our full report here.

Additional VA Studies

The Department of Veteran’s Affairs launched and sponsored a study related to non-invasive vagal nerve stimulation in mild traumatic brain injury (mTBI) and post-traumatic stress disorder (PTSD). The work builds on other research (1) that has been published by Dr. Douglas Bremner, the principal investigator for the trial. The study is supported by a VA Merit Award. While the results will not be available for some time, these indications can drive future expansion of gammaCore use into new areas.

Exhibit I – Potential New Indications for gammaCore (2)


Third quarter revenue trends for electroCore were strong with a 58% year over year growth rate. While sales benefitted from a bulk buy and other one-time effects, the underlying trend remains positive. Management has guided to full-year revenues of $3.3 to $3.5 million, which suggests 4Q revenues of about $850,000. Trends to date have been favorable as indicated by management, but seasonal purchasing in 3Q and additional holidays in late November and December may result in sequential decline which we anticipate will be reversed in 1Q:21.

electroCore has many factors in its favor, making increased inroads into the VA and NHS. Additional indications that are being investigated by third parites such as those in respiratory distress, traumatic headache, mild traumatic brain injury, PTSD, stroke and inflammatory diseases are longer term opportunities. Third quarter’s better than expected revenue and margin result are favorable indicators for continued success. For a summary of our electroCore investment thesis, see our third quarter review here.

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1. Bremner JD. PTSD and mild traumatic brain injury. In: J. D. Bremner, ed. Posttraumatic Stress Disorder: From Neurobiology to Treatment Hoboken, N.J.: Wiley-Blackwell; 2016: 321-344.

2. Source: electroCore November 2020 corporate presentation

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