NeuroMetrix Restructuring Business After Q2 2019 Results Show Weak Performance of Quell Pain Relief Wearable

NeuroMetrix has sought help from investors in an effort to restructure its business.

Image: NeuroMetrix

Following its financial results for the second quarter of 2019, NeuroMetrix has asked investors for help to restructure its business and is moving away from a direct-to-consumer business model for its wearable pain relief platform, Quell.

The company has also laid off more than half of its workforce since the beginning of 2019.

Read more Neurometrix introduces its latest innovation Quell 2.0: A Wearable Pain Relief Technology

"We have brought in external expertise to optimize the value of our company. The reorganization we initiated in June was a difficult but necessary step to better align our operating structure with current revenues," said Shai N. Gozani, M.D., Ph.D., President and Chief Executive Officer of NeuroMetrix. "We are pleased with DPNCheck's performance, particularly in our domestic market, which has offset fluctuating sales abroad, especially in Mexico. With Quell, we are working to find the optimal commercial approach to generate profitable sales with a modest investment in digital advertising. We remain convinced of the effectiveness and unique benefits of Quell technology. Finally, we continue to seek a resolution in the previously announced Federal Trade Commission (FTC) matter related to Quell advertising."

A man wearing a pain relief wearable

In Q2 2019, NeuroMetrix’s total revenues were $2.4 million versus $3.8 million in the prior year period, a decrease of 37%.

Gross margin was a negative $0.8 million after recording an inventory charge of $1.9 million. Excluding the inventory charge, gross margin of $1.1 million represented a gross margin rate of 47.0% in comparison with the gross margin rate of 48.0% in Q2 2018.

Read more Tech Companies Trying to Prevent Opioid Addiction with Pain Relief Wearables

A crucial element in this decrease was declining consumer interest in the Quell product, which dipped to $0.8 million in the quarter after recording $1.6 million in Q1 2019 and $2.1 million in Q2 2018. According to Gozani and Chief Financial Officer Thomas Higgins, much of the drop is attributed to NeuroMetrix scaling back its advertising efforts since last year’s major push. However, the company is also contending with excess stock of Quell 2.0 parts that racked up $1.9 million in inventory costs during the quarter, reports MobiHealthNews.

“It is a process that will take time, and ultimately some financial resources,” Gozani said. “Consistent with our commitment to evaluate all options for the business, in parallel, we are exploring options to sell some or all of the Quell business and intellectual property.”

Sam Draper
August 15, 2019

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