Greetings, and welcome to electroCore first quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Rich Cockrell. Thank you. You may begin.
Thank you all for participating in today's electroCore's earnings call. Joining me today are Dan Goldberger, Chief Executive Officer, Brian Posner, Chief Financial Officer, and Dr. Peter Staats, electroCore's Chief Medical Officer. Earlier today, electroCore released results for the first quarter ended March 31, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call and not statements of historical facts should be deemed to be forward-looking statements.
All forward-looking statements, including without limitation, our examination of operating trends and our future financial expectations, are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. electroCore disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, May 5, 2022. With that, I'll turn the call over to Dan. Go ahead, Dan.
Thank you, Rich. Hello, everybody, and thanks for joining us on today's call. Our U.S. business performance was solid in the first quarter ending March 31, 2022, more than making up for a slow start in our United Kingdom business. Revenue for the first quarter of 2022 hit a record $1.9 million, increasing approximately 58% over the first quarter of 2021, and approximately 27% sequentially. Gross margins expanded to 81%, and net cash used in operations was about $4.8 million for the quarter ended March 31, 2022. Our U.S. Cash pay commercial headache channels are starting to accelerate, and we expect to continue those initiatives through the rest of 2022.
We currently have about 345 active prescribers in our gCDirect program that allows a prescriber to send a prescription directly to our home office for processing by our customer experience team. We work directly with the patient to dispense therapy and collect payment. We have an additional 52 prescribers in our gConcierge program, a physician dispense model where the prescriber purchases inventory from electroCore at a transfer price and provides therapy directly to their patient from their own inventory. E-commerce channels we established in January 2022 are off to a good start. Consumers can go to our website, fill out a questionnaire that is adjudicated by a telehealth process, obtain a prescription, and then move therapy into a shopping cart to obtain a gammaCore Sapphire for their own personal use.
Our customer experience team is available to patients in all of these channels, providing training and support for new prescriptions and following up with patients to ensure they are staying in compliance with their therapeutic protocol. We plan to continue investing in our digital awareness campaigns, initially through paid search and social media, in an effort to drive headache patients to our various channels in the United States and United Kingdom. Net revenue from the U.S. commercial headache channel was $277,000 for the quarter ended March 31, 2022, a 90% increase from $145,000 in the first quarter of 2021. Approximately $254,000 of our U.S. commercial revenue in the first quarter came from cash pay programs.
Net sales from the Department of Veterans Affairs, or the VA, and Department of Defense, or DoD, were $1.3 million, an increase of 86% as compared to $679,000 in the first quarter of 2021. A total of 105 VA and DoD military treatment facilities have purchased gammaCore products through March thirty-first, 2022, as compared to 79 through the first quarter of 2021. Note that there are approximately 1,300 VA healthcare hospitals and clinics and over 400 military hospitals and medical clinics, so we still have plenty of potential growth ahead of us. Revenue from channels outside the United States decreased 20% to $305,000 in the first quarter of 2022, as compared to $380,000 for the first quarter of 2021.
Our U.K. business was affected by the resurgence of COVID, which severely impacted access to headache clinics in January and February. We saw some recovery in March, and April has been encouraging. We look forward to returning to growth in this channel in the second quarter and for the rest of 2022. On April 5, 2022, we announced an exclusive license agreement with Teijin Limited for Japan. The license covers our proprietary non-invasive vagus nerve stimulation technology for headache and provisions to expand to additional indications and/or territories in the future. Teijin will be responsible for the regulatory process in Japan at Teijin's expense, with support from electroCore and leveraging previously published pivotal data. The initial license fee will be recognized over the next four quarters, starting in the current quarter ending June 30, 2022.
The agreement provides for additional license payments tied to successful completion of regulatory and commercial milestones in the future. It also requires an annual license fee that will come due every year, starting in April 2023. In addition to the cash consideration, this license agreement further validates the long-term commercial opportunities for NVNS therapy around the world. On April 19, 2022, we announced that gammaCore non-invasive vagus nerve stimulation has been selected for additional funding by the Department of Defense Biotech Optimized for Operational Solutions and Tactics, or BOOST program. The BOOST research program, which will be conducted under the leadership of the 711th Human Performance Wing Optimization Branch of the United States Air Force, seeks to optimize and validate the efficacy of NVNS in accelerated training, sustained attention, reduced fatigue, and improved mood among Air Force personnel.
Should the BOOST program confirm previous findings, the project schedule calls for electroCore to supply field-ready devices to the Air Force in the second half of 2023. We're optimistic that the solution we ultimately provide to the Air Force will also find favor among other branches of the active military in the future. Now turning to our clinical progress. We continue to advance nVNS across several trials. We participated in a pre-submission meeting with the FDA on May 2, 2022, where we discussed our plans in post-traumatic stress disorder, or PTSD, mild traumatic brain injury or concussion, nVNS as a bridge therapy for inpatient substance abuse programs, and acute stroke, among other topics. We believe our presentation was well-received, and we have several follow-up items to pursue.
In February this year, data was presented at the International Stroke Congress suggesting that NVNS therapy could be an effective acute intervention for ischemic or hemorrhagic stroke. A subsequent larger trial, NOVUS, is more than 50% enrolled towards a 150-patient target. NOVUS is on track to complete enrollment early next year. Stroke data is exciting as there are relatively few acute interventions approved for treating stroke and none that can be deployed before an ischemic or hemorrhagic determination has been made. NVNS could be a very exciting new tool in fighting this debilitating condition. We look forward to the anticipated full publication of the TR-VENUS study in a peer-reviewed journal later this year.
On January twelfth, 2022, we announced that gammaCore NVNS received breakthrough designation from the US Food and Drug Administration, or FDA, for the treatment of PTSD, a highly prevalent and disabling disorder with limited approved treatment options. We will schedule a sprint meeting with the agency shortly based on what we learned in our May second, 2022 pre-submission discussion. Now, I'd like to turn the call over to Brian for a review of our financials and other guidance items. Brian?
Thank you, Dan. For the first quarter ending March 31, 2022, electroCore reported net sales of $1.9 million as compared to $1.2 million during the same period of 2021. This represents a 58% revenue increase over the same period last year. Gross profit for the first quarter of 2022 was $1.5 million as compared to $840,000 for the first quarter of 2021. Gross margin was 81% and 70% for the periods ending March 31, 2022 and 2021, respectively. Our evolving commercial strategy has resulted in a launch of cash payment models under which we license certain starter devices.
The cost of the licensed starter device is being recognized as cost of goods sold over the estimated useful life of the starter device versus expensing the cost of goods at the time of sale. Moreover, in recent quarters, we have sold an increasing amount of longer duration therapy, resulting in a higher average selling price. These factors, along with favorable absorption of labor and overhead costs, contribute to the increase in gross margin. Total operating expenses in the first quarter of 2022 were approximately $7.1 million, an increase of approximately $896,000 from $6.2 million in the first quarter of 2021. Research and development expense in the first quarter of 2022 was $934,000 as compared to $499,000 for the same period in 2021.
R&D expense for the quarter includes investments for our next generation product currently under development. Selling, general, and administrative expense in the first quarter of 2022 was $6.2 million as compared to $5.7 million for the same period in 2021. Total SG&A expenses for the first quarter of 2022 included increased investment in our sales and marketing efforts to support our cash pay initiatives. GAAP net loss for the first quarter of 2022 was $5.6 million, as compared to a GAAP net loss of $5.4 million for the same quarter of 2021.
Adjusted EBITDA net loss in the first quarter of 2022 was $4.7 million, as compared to a loss of $4.2 million during the first quarter of 2021. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Net cash used in operating activities during the quarter ended March 31, 2022 was approximately $4.8 million, as compared to $4.2 million in the first quarter of 2021. The increase in net cash usage in the first quarter of 2022 compared to the fourth quarter of 2021 is largely due to seasonal factors and the timing of disbursements affecting working capital and continued investment in sales and marketing activities.
Cash and cash equivalents at March 31, 2022 totaled approximately $29.9 million, as compared to approximately $34.7 million at December 31, 2021. Looking ahead, for the second quarter of 2022, we expect net revenue to be in excess of $1.9 million and net cash usage to be approximately $3.5 million. You may recall that on December 20, 2021, we received a notification from Nasdaq indicating that we are not in compliance with Nasdaq listing rules because the minimum bid price of our common stock on the Nasdaq Global Select Market closed below $1 per share for 30 consecutive business days. The Nasdaq letter had no immediate effect on the Nasdaq trading or listing of our common stock.
Pursuant to the initial Nasdaq notice and Nasdaq listing rules, we have 180 calendar days from the date of the notice, or until June 20, 2022, to regain compliance with the Global Select rule by achieving a closing bid price for our common stock of at least $1 per share for at least 10 consecutive business days. If we do not regain compliance with the Global Select rule by June 20, 2022, we intend to apply to transfer our securities from the Nasdaq Global Select Market to the Nasdaq Capital Market, which will require that we satisfy the requirements for initial listing on such market as set forth in Nasdaq listing rules, with the exception of the minimum bid price requirement.
If our application for this transfer is approved, we would have an additional 180 calendar days to achieve the minimum bid price requirement for at least 10 consecutive business days in order to comply with the rules of the Nasdaq Capital Market. We believe that the transfer, if required, will not materially affect the Nasdaq trading or listing of our common stock. Now I'll turn the call back over to Dan.
Thank you, Brian. I'm very excited about our operating results this quarter, and we continue to be in a strong financial position. Longer term, indications beyond primary headaches, supported by the ongoing clinical developments discussed earlier, could greatly expand the NVNS therapy market. The Teijin license we announced in April brings in some non-dilutive cash and is a huge validation of the commercial appeal of NVNS therapy around the world. The BOOST project being financed by the Air Force and the Defense Advanced Research Projects Agency, DARPA, could accelerate the adoption of NVNS for a variety of new indications among our active duty military. We continue to build our intellectual property portfolio, and we are developing a very exciting next-generation product platform to leverage it. Our VA DoD channel continues to grow as the pandemic recedes, and our direct-to-consumer initiatives are showing results in our commercial channels.
While our U.K. business was negatively impacted during the first quarter of 2022, we look forward to a return to growth as the pandemic recedes. I see many potential growth drivers through 2022 and 2023, including continued penetration of our VA DoD channel in the United States, continued penetration of the United Kingdom market as the pandemic recedes, growth in our U.S. commercial channel driven by cash pay business models and direct-to-consumer advertising while we continue our efforts to gain commercial insurance coverage. Fourth, expansion of our international business through our distributor network and added traction within the U.K. e-commerce store. Longer term, there are real opportunities for label extensions into PTSD, opioid use disorder, and mild traumatic brain injury. The Air Force BOOST program could lead to incremental product sales to the active duty military as soon as next year.
Lastly, we're exploring growth opportunities to enhance and leverage distribution channels through acquisitions. We're focused on revenue stage targets that might enhance top line growth and offer other synergies. At this time, I'll turn the call over to the operator. Operator, please open the line for questions.
Thank you. We'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question comes from Swayampakula Ramakanth with H.C. Wainwright. Please proceed with your question.
Thank you. This is RK from H.C. Wainwright. Good afternoon, Dan and Brian.
Hi there. How are you?
Good afternoon, R.K.
Good. Certainly, an exciting quarter, you know, in terms of sales growth, and also obviously some interesting programs that you're trying to embark on. Regarding the BOOST program, I'm sure it's a very exciting opportunity, as you work with the Air Force and them trying to assimilate your technology for their needs. In terms of the development cycle itself, you know, how should we think about this, both in terms of, you know, is it electroCore that's going to spend initially and then bill them for the expenses? Or is it them funding you even before you start your initial work on the project?
A second part of that question is, once you develop the device such that Air Force could use it, do they require any additional regulatory approval to ensure that they can prescribe it for military personnel?
Let me try and unpack the questions, RK. Just by coincidence, I'm speaking to you from Hurlburt Field in Florida, where we're having a kickoff meeting for the BOOST program.
Okay. You need to go into the secret room. Please go ahead.
Right. We're getting our arms around it all. The Air Force has been doing quite a bit of work quietly behind the scenes. They have done a few publications about the use of nerve stimulators in general and the gammaCore non-invasive vagus nerve stimulation in particular. The first place that they wanna deploy this technology is in what they call ISR, which is their intelligence surveillance. You know, these are analysts who work in not an office environment, but in a light industrial environment where they're looking at a lot of monitors and they have eight-hour, 10-hour, 12-hour shifts. The next cohort after the ISRs are the remote pilots, the drone operators.
Again, the initial deployment is going to be in relatively benign physical environments. You know, they are looking forward over the long haul to deploy it to the special tactics community and ground tactical operators. You know, talking beyond the Air Force to the Army and Special Forces command about deploying this therapy pretty broadly. As far as how does the money flow, the Air Force has been buying devices in very small quantities from us, and there are two pieces to this program.
They're gonna be buying a few more of our commercial devices to continue their validation, and they're going to be fully funding the development of a hardened, more robust version of our device that would ultimately be deployed, you know, first in that analyst and remote pilot environment and then hopefully longer term into the you know, boots on the ground opportunities. The cash impact on electroCore is small. You know, we're gonna be providing our staff and our know-how, but the vast majority of the development work for their Air Force implementation is fully funded. As far as regulatory process, we may or may not file a special 510(k). That'll be up to the Air Force.
We're not going to be looking for any additional indications beyond what we are FDA cleared for today. There will probably be a variety of MIL-SPEC testing as far as mechanical ruggedness, electrical interference, you know, those kinds of things that are common certification requirements for deploying to active duty military. Hopefully I answered the question, but we're very excited about the program. I think.
Yeah.
I think you know deploying revenue units towards the end of 2023 is achievable, but it may take a little bit longer than that.
No, this is certainly an exciting opportunity, right? You know, also when all is said and done with this new version of gammaCore, how freely can you take that, even if it is as a protocol of a prototype, and work with other military groups you know, call it, say like either IDF in Israel or the Royal Air Force in U.K., you know, could you do that? Or you have certain documentation with the U.S. Air Force that, you know, you could not take this elsewhere?
In principle, it's gonna be exclusive to the U.S. Armed Forces, but presumably with the government's permission, we could take it more internationally.
Okay. Great. Just trying to understand the commercial business, especially in the commercial pay business. How is that working out? Because I know, as a management team, you are pretty excited about, you know, going that route. Where do you think that process is at this point, and what should we expect from that segment going forward?
Yeah, we've been building out our physician dispense model that we call gCDirect and gConcierge.
Mm-hmm.
Slowly but surely. You know, earlier, we talked about some of the numbers of prescribing physicians and that's starting to accelerate. In January, we launched our e-commerce initiative, and we've been ramping up our spending on search, paid search and social media. The e-commerce was relatively small revenue, but all indications are that it's going to scale with our media spending as we go through the year. Our physician dispense models also get a lift from the direct to consumer awareness spending that we're going to do.
I think we're trying to be thoughtful and methodical about the timing of ramping up our consumer spending and make sure that we have channels that you know, as we spend more on advertising, that consumers have a place to go to acquire the therapy, either through our e-commerce platform or from our physician dispense partners. It's off to a great start and now we gotta prove that we're tracking a parameter that we call media efficiency ratio. In other words, how much do we have to spend on advertising to generate a dollar of revenue? I'm looking forward to increasing that investment and getting the associated increase in revenue.
Thank you. Last question from me is on the Teijin license agreement. What should we expect from their, you know, is this going to turn into commercial revenues anytime soon? Or, you know, you need to go through the Japanese Regulatory Agency, which obviously could take a little bit of time, but I'm just trying to understand, you know, when that could start flowing through.
Yeah. That's an interesting challenge. As you know, the Japanese Ministry of Health is no more expeditious than the FDA. A key determination is going to be later this year as Teijin takes the legacy pivotal data that we use for U.S. and European clearances to the Japanese Ministry of Health. Ideally, they will be able to use the existing pivotal data. But it's entirely possible that the Japanese regulators will say that they needed a small in-country cohort of pivotal data, in which case the timeline will be extended to go execute that trial. I'm gonna dodge that question until we know a little bit more.
Absolutely fine. Absolutely fine. Thank you very much for taking all my questions. Talk to you soon.
Our next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
Oh, hi, Dan, Brian, and Peter. How are you?
Good, thank you.
Great.
How are you, sir?
Just fine. I guess firstly, do you have any commentary on this transitional coverage for emerging technologies, the CMS 3421, and if that ever goes through? I know it's just been proposed as kind of a MCIT replacement. Any effect upon the company of material nature?
Not this year. You know, we really have not petitioned for Medicare coverage at this point and have not negotiated with any of the MACs yet. We don't have any CMS reimbursed channels at this point in time. As to the reimbursement process in the future, not really sure yet.
Got it. Okay. I think I heard you say, was it 5,200 on the gConcierge program?
No. I think we have 52 prescribers that are signed up at this point.
Got it. Okay. Those are all HCPs, thus far?
Yes, absolutely. Yes.
Okay. Any color on the direct channel to patients directly?
We're not breaking out that detail just yet. You're asking about the e-commerce channel?
Yes. The gCDirect.
Right. The only detail we've given are the number of prescribers. Roughly 345 gCDirect prescribers and a smaller number of gConcierge prescribers.
Okay, got it. Then from the standpoint of the VA channels, right, you were, I think, at about 100 end of year and 105 now. Can you give us a sense of number of new centers that we should expect to come on board during 2022? More importantly, some of the trends you're seeing at existing facilities as far as number of patients as well as any utilization trends?
In the short run, we're focusing more on going deeper into our existing accounts. You're gonna see that total number increase. As we spend more money on direct to consumer awareness, that also allows us in the VA hospitals to go to other departments. By that I mean, you know, traditionally we've been going to the headache specialists and neurologists, but as we drive consumer awareness, we can go to women's health, we can go to pain management, we can go to psychiatry, all these, you know, more primary care departments within the facility that are seeing headache patients and maybe getting a little bit of demand pull from our direct to consumer advertising. We're seeing.
We're pretty excited about the return we're getting on those efforts of going to our existing customers and opening up additional call points within the hospital campus.
Okay, got it. One more, if I may. I know that you've got a lot of readouts coming, both pivotal and pilot studies in the coming quarters. Any commentary specifically on migraine and the separation of migraine via your cluster headache indications in that market?
You know, there have been publications now that NVNS therapy should be considered first line therapy in cluster headache, and we're able to make quite a bit of traction with headache specialists that do see that subset of cluster headache patients. We're gonna continue to drive that clinical differentiator. Migraine is far more challenging, both because of the heterogeneity of migraine, right? It's a wide, it's a large cohort, but there are different phenotypes and as well as our direct to consumer promotions are bringing forward patients who would not have heard about the therapy from their primary care physicians. Nothing definitive yet, but we do believe that all these channels are gonna get a lift from the direct to consumer awareness that we're doing.
Okay, perfect. That does it, for us. Thanks for taking the questions.
Absolutely.
Our next question comes from John Vandermosten with Zacks. Please proceed with your question.
Good evening, everyone.
Hi.
I've got some additional questions on Teijin. Hey, Dan, how are you?
Good.
What other territories? I think you mentioned there are some other territories that they might develop for you. What are those? Is that other Asia, I assume? Is there any specific countries that are identified?
I'm sorry, I didn't catch the beginning of the question. Teijin, you mean?
Yeah, Teijin. Yeah. Right.
Yeah.
You think you had mentioned that there are some other territories.
In our negotiations with Teijin, you know, look, they are a pretty established international company. They have a substantial footprint in the U.S. and in Europe. More specifically, they're interested in the Pacific Rim, and China, but the real business opportunity in the short run is around Japan. Internally, if they can get comfortable about the effectiveness of our therapy and the business model for our therapy in Japan, they're probably gonna wanna do something much more substantial with us.
Okay. It sounds like there's some opportunities to deepen the relationship there.
Absolutely.
On the BOOST program, is there any more clinical work that needs to be done? It sounds like that has already been completed, and the only thing that the Air Force needs to see from you is just the higher spec, more durable perhaps, or you said the electronic interference issues regarding the device. Is that all that needs to get done? Or is there any more-
Correct.
Clinical work? Okay.
You know, the researchers that have really championed the project want to take it to other cohorts of Air Force personnel and personnel beyond the Air Force and continue to demonstrate the various benefits of this therapy in, you know, in sort of other cohorts of end users. I'm not sure that rises to the level of clinical work, but it's, you know, part of it is demonstrating the effectiveness of the therapy in different groups and therefore opening up additional groups to purchase.
I see. Does the Air Force need FDA clearance to use it for another indication?
They're primarily using it for mood and anxiety and then the peripheral benefits of increased attention span and energy levels with they're looking at things like caffeine consumption and reducing caffeine consumption. They're looking at it as an alternative to, unfortunately, our soldiers self-medicating with alcohol. It's. These are not FDA indications per se. These are more wellness indications.
Mm-hmm. Okay. Last one, Brian, this one's for you. On gross margins, those have continued to be better than our estimate. You know, how should we think about the different channels and the associated margins? Or is that not the driver? Because I'm thinking some are growing faster than others. You know, should we, you know, use some of those growth rates to help modify our margins going forward? Or are there other factors to think about?
Well, we've been in the mid-70s% or better for the past couple quarters. We've been 80% or better for the past two quarters. I think, you know, the margin should be mid-70s% to low 80s%, depending on the mix. Obviously, the VA is the biggest part of our business right now. But like Dan said, we're optimistic on some of the other channels will contribute in an increasing fashion too. I think right now, you know, again, we've been mid-70s% to low 80s% since the middle of last year, and I think there's no reason to maybe change the model significantly at this point.
Are there materially different gross margins between the different channels or
Yeah.
Are there other materially different? Yeah.
There's differences between the channels and sometimes there's differences within the channels as well, depending on the product mix within the particular channel.
If I could interrupt, it's also, you know, I think, Brian, what you said earlier is duration of therapy, which is.
Right.
Another way of saying, you know, refill prescriptions because of our fundamental model is the longer you use the device, the better your clinical results are going to be. We generally get paid on a recurring revenue model.
Mm-hmm.
Got it. Is that? Which channel has the most
All of them.
All of them. Oh, okay. There's no material difference between, you know, the number of refills that people get depending on channels.
Well, yeah, not yet, but we are-
It's just minor. Okay.
Mm-hmm.
Okay. Great. Thank you for taking my questions.
Thank you.
Of course.
As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.
Hi, Dan. This is actually Jeremy on the line for Anthony.
Hi, Jeremy.
Quick follow-up questions. I know you mentioned you said there were 345 active prescribers and 52 for gCDirect and gConcierge. Is that through the end of the first quarter or is that to date?
That was at March 31st.
That was at March first. Okay. Could you maybe give us any more information, you know, what you've seen in the first month in second quarter? Has that pace increased or is it really going in tandem with your marketing spend?
April was solid. There's more and more excitement about signing up to work with us. I think that's not directly driven, but is in part driven by the direct-to-consumer awareness that we're spending money on. We continue to feel like it's accelerating nicely.
That's what you mean you're referring to signing up physicians to be part of this program?
Correct.
Okay, that's great. Just, I know you mentioned also one of the prior questions that right now your short-term focus is to drive deeper into current accounts. Just let's say, looking a little bit past that, you know, I don't know if it's the end of this year, maybe next year, or 2023, what are some initiatives you have planned or that you're, you know, throwing around that will help to bring in more facilities and expand, not, you know, just expand your and broaden your reach as opposed to just driving deeper into the accounts? Any initiatives you could share?
The VA hospital channel is driven by our field sales force to a great degree, supported by our customer experience team in New Jersey. We've been selectively adding direct employees to our field sales function. The bigger cohort is coming from independent distributors that have a call point in the VA hospitals. These are folks who are working for straight commission. You know, we always like that because while it's a little bit more expensive on the SG&A line, it's all variable expense and they only get paid if we're generating the revenue. That leverages the manpower of our smaller direct employee force.
Okay. I understand. Just last question. Is there any updates on the commercial coverage side, or you're just still in, you know, negotiations are just still, you know, proceeding at a slow pace?
You know, we've got some bright spots, but they're not ripe yet. I look forward to announcing that later in the year.
Okay. All right. That's all for me. Thanks for taking my question.
Rob, we have time for one more question.
Our next question comes from John Vitale with Lazarus Fund II. Please proceed with your question.
Yeah. Hi, Dan. Trying to understand the PTSD. I know you're going back in front of the FDA to get FDA approval. Is there a different path or do you have to wait for the FDA on that to sell PTSD into the VA channel?
Unfortunately, it's a simple question. I'm gonna give you a little bit of a complicated answer. PTSD is comorbid with headache in very relatively high percentage. We can talk about headache in PTSD under our current labeling. The idea is to go back to the FDA and get a standalone label for PTSD. The nuance is that within the VA hospital system, PTSD is treated by psychiatry. Headache is treated by neurology. They don't always talk to each other, and that's what we're trying to bridge.
There's nothing really holding it back on the VA yet, and then it's just a matter of access to the different departments.
It's more subtle than that, but that's the gist of it. Yes, sir.
Gotcha. Okay. Thank you. That's all.
We've reached the end of the question and answer session. I would like to turn the call back over to Dan Goldberger for closing comments.
Thank you, everybody. Greatly appreciate your time. It's been a difficult day on Wall Street, I know that. I'd like to give a special thanks to all of our employees who work tirelessly to deliver our amazing therapy to patients. Their hard work and commitment are setting the stage for growth in 2022 and beyond. I also wanna thank our, the healthcare professionals and their patients for their loyal support of gammaCore therapy. We've made tremendous progress, and it couldn't have been done without your unwavering support. Thank you, everybody, and have a better day.
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.