Q3 2020 Pulse Biosciences Inc Earnings Call

Greetings and welcome to pulse Bio Sciences third quarter 2020 earnings conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad that's.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Philip Taylor.

Mr Relations. Thank you you may begin.

Thank you operator before we begin I would like to inform you that comments and responses to your questions. During today's call reflect managements views as of today November nine 2020, only in one clued forward looking statements and opinion state.

These include statements regarding our plans and expectations relating to regulatory clearance, including the process timelines and expected outcomes, our commercial operational scientific clinical and financial projections.

Ducks, including the uses benefits in applications such products.

And our commercial and regulatory strategies.

The impact of the COVID-19 pandemic and other future events actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our most recent quarterly report on form 10-Q filed with the securities.

An exchange Commission on August 10, 2020.

STC filings can be found on our website or on the Fccs website investors are cautioned not to place undue reliance on forward looking statements. Please note that this conference call will be available for audio replay on our website at pulse Bio Sciences Dot com on the news and events section of our Investor Relations Web page.

With that I would now like to turn the call over to President and Chief Executive Officer, Darren Euchre.

Thank you all for joining us this afternoon for our third quarter 2020, <unk> earnings conference call for.

Across the world and in our organization, we all continue to adjust to the challenges presented by Coke at 90.

That said, we have not adjusted admission opposed spouse sciences, which remains to offer bio electric medical solutions that make meaningful differences for the betterment of patients and clinicians.

Throughout these difficult times, our team has shown unwavering dedication in their efforts to bring our technology to the market. We are excited to announce the five tenk application for the self like system has been submitted to the U.S. food and drug administration there's.

This accomplishment and additional developments have positioned pulse bio sciences to potentially receive regulatory clearance for the cell effect system in three strategic geographies as early as the end of the first quarter of 2021.

On the call today, I will discuss this substantial clinical and regulatory progress and provide details on our commercial preparations and strategy.

Ed will detail the planned controlled launch and summarize recent engagements with the scientific community Sandy will discuss the third quarter financial results, then I will conclude and we will open up the call for QNX.

There are two main business objectives, we are focused on to position Paulsboro sciences for long term success.

First is achieving regulatory clearance of Purcell affects system in the U.S. European Union in Canada.

The second is preparing for the commercial launch of the self X system.

In recent months progress towards these objectives has has been significant.

Good work before providing details on the recent progress I will take a moment to explain what our technology does its benefits how it is administered to patients and why the system. We have design is ideally suited for the dermatology market.

Cell effect system is a multi application platform that harnesses, our proprietary nano poll stimulation or NPS technology, NPS technology delivers nano second pulses of electrical energy to non thermally clear cells, while sparing adjacent non cellular tissue.

In the or area of dermatology the cell specific mechanism of action is highly differentiated because it provides the ability to address cellular lesions, while preventing collateral damage to the surrounding healthy skin, thus, enabling treatment of lesions that was not previously practical. This provides clinicians the ability to generate improved outcomes compared to older modalities were treated.

Again could appear worse than the original condition.

So affects system is a tunable software enabled console based platform that powers a handheld treatment applications. It is designed to accommodate the clinical workflow preferred by dermatologists based.

Based on our extensive industry experience and a collaborative process with clinicians, we designed and integrated cloud software infrastructure, we call Teleflex cloud connect.

It is the backbone of our innovative utilization base business model that aligns the interests of patients practices and the company.

Tell effects cloud connect makes possible the wireless connectivity between the customers sell affects system. Our E commerce customer portal practice management tools to track utilization data and other metrics and our internal customer relationship management and enterprise resource planning software systems.

The Celtics marketplace is a customer portal, where medical practices purchase and wireline wireless we download cycle units directly to the Celtics system. So.

Cycle units are purchased and then consumed on a per lesion basis. So the more lesions the patient once cleared the motorcycle units are required. This enables a preferred economic model that physicians have fixed costs per lesion. They can charge the patient on a per lesion basis, which is aligned with the patient's preference our model contrasts with the currently employed display.

As a whole and single use based medical device models, removing the friction for the physician that can occur in those models.

One last note about teletext cloud connect is that it facilitates direct connectivity for pulse to remotely perform software upgrades to the Celtics system.

As well as provide several service and maintenance functions in real time because.

Because of this ability to streamline be responsive and reduce disruption to the clinical workflow teleflex cloud connect allows us to provide next level support and enable practice growth for future customers.

To bring this innovative technology to market. We are initially pursuing regulatory clearances in three key geographies the U.S. the European Union and Canada. These.

These markets represent our top commercial priorities.

In the U.S., we're pursuing a step wise regulatory strategy to achieve ft. A clearance. This was determined to be the best fit for our technology following discussions with FDA.

This approach entails an initial five tenk application for general Dermatologic indication for the cell effect system, followed by subsequent applications for specific treatment indications.

The application for the general Dermatologic indication required preclinical data evaluating the treatment of animals scan at multiple follow up time points.

Results demonstrated strong performance in skin treatment and healing as we expected.

Giving us confidence in the quality of our five 10-K submission.

We believe the time, we spent with F.D.A. confirming the data required to support the general Dermatologic indication will make up the A's review straightforward.

He decision on potential Clarence is on track for as early as the first quarter of 2021.

Another benefit of this stepwise strategy is that it provides us the opportunity to conduct studies for cell effect system indication expansion in parallel this.

This summer we completed an additional pre submission meeting with the FDA to agree on the requirements for a subsequent five 10-K submission for the treatment of patients with sebaceous hyperplasia or S. H.

Following the guidance from this meeting we submitted and received approval for an I'd or investigational device exemption study, allowing us to commence a comparative pivotal study.

And just over five weeks, we were able to fully enroll the study treating 60 patients with facial SH lesions at five study sites.

Ill effects system procedures, and comparative group procedures will be evaluated at follow up intervals out to 60 days post final procedure.

We were very encouraged by how quickly the study enrolled demonstrates the broader patient need and underlying market opportunity for us age and dermatologists excitement about using our technology.

Given where we are given where we are with the study timeline. It is likely we will accelerate the submission of this five 10-K for the treatment of S. H to the first quarter of 2021 versus the second quarter of 2021, as we had previously communicated.

Because of the personal clinical utility of cell effect system to maximize its value. We will continue to seek additional indication expanded clearances with the FDA next in our pipeline is common non genital warts as we have discussed previously findings from our previous investigational studies have shown great promise for our NPS technologys ability to clear awards.

We are finalizing the protocol for a comparative study to support an additional five tenk application for this specific indication following.

Following IB approval, we will start the study, which we anticipate will be similar in scope and duration to the s. each study.

To commercialize itself back system in the European Union, we're required to obtain CE Mark approval. These efforts efforts are focused on working with our you notified body.

As we mentioned on the last call our notified body has accepted our technical file submission and all required supporting documents in.

In line with our prior expectations, we have progressed through the interactive review phase, where we have actively responded to questions and requests.

One important milestone in the technical file review process is the review and acceptance of the clinical evaluation report Clint.

Clinical evaluation report is a supporting documents provided by polls in support of the cell effect system for the proposed indications for use and is reviewed by a physician subject matter expert.

We're pleased to share that the clinical evaluation report for the cell effect system, which included sell effects clinical data for the treatment of sebaceous hyperplasia sebree at care ptosis and wards, including our recent peer reviewed publications was recently accepted by the notified body. The acceptance of this report means the notified body agrees with cell effect system.

It's safe and performs as expected for these clinical indications for use and we believe is a testament to the quality of the cell effects clinical data the high quality of the clinical investigators and the peer reviewed publications.

This also means that when the CE Mark is granted we will be able to promote the use of the cell effect system for those clinical indications Subagents hyperplasia. It's every care doses and words as we commercialize in the European Union.

Given the acceptance of the clinical evaluation report, we believe we're very close to having the technical file review finished and anticipate receiving the CE Mark and initiating our controlled launch in the European Union as early as Q1 2021.

Lastly, on the regulatory front, our health, Canada medical device license application for the Teletext system has been submitted.

As we were able to submit this application ahead of our expectations. It is now possible. We could also receive health Canada approval as early as the first quarter of 2021.

In order to complete this application our design controls manufacturing and quality systems required to be evaluated and certified by the medical device single audit program also known as MD SAP.

This certification along with a previously received ISO 13, 45 certification represent our ongoing commitment to the highest level of quality assurance standards for the production of our system and components.

Now I would like to transition and provide a high level overview of our commercial launch strategy.

The intended result of a regulatory submissions is clearance and approval to market. The celebrex system to aesthetic dermatologist in the U.S. Yoo and Canada following.

Following potential respective clearances, we are prepared to commence controlled sell effects launches in all territories our.

Our controlled launch strategy is intended to place systems in thought leading key opinion leaders practices first anticipating that they will highlight the treatment potential of NPS technology and the cell effect system to a broader group of peers. The controlled launch physicians and their practices have been carefully selected based on their reputations among their peers for clinical EXL.

As well as they're known influence on acceptance of new technologies.

The first wave of early adopters will look to our controlled large participants for guidance on their own cell effects purchase decisions and advice on integrating sell effects into a successful aesthetic dermatology practice.

Notably these controlled launch dermatologist will be strategically located across the territories in the most attractive aesthetic dermatology markets. They have shown great excitement and commitment to becoming early adopters of the Celtics system as excess grows with the controlled launch group. We will then expand to target a larger number of dermatologists.

Our team will be focused on providing the highest level of service to these accounts, while implementing efficient work streams into existing practice workflows.

To support this strategy, we have hired an experienced commercial team, including sales marketing and customer service professionals.

Now I will turn the call over to Ed to provide more details on this strategy and our continued engagement with the scientific community.

Thanks Darren.

I will be discussing overall commercial readiness and market pricing for the first launch of the cell effect system and aesthetic dermatology.

Begin by providing more details on the strategic approach to our global commercial launch which focuses on the important role of world wide key opinion leaders in aesthetic medicine and includes continued marketing research insights from our target pathetic procedure market.

Finally, I will highlight the continuing scientific publications of NPS clinical evidence presented to the professional dermatology community that features our unique non thermal mechanism and how that sell specific mechanism addresses common problems and dermatology that are difficult to treat with older thermal technologies.

[noise] first I want to summarize our launch readiness and how our commercial teams focused strategic approach to launch with key opinion leaders, our Cana wells will lead to a long term and sustainable commercial success.

This top down strategy begins with the impressive clinical evidence and mechanism of action research that has been conducted with some of the most respected scientists and institutions in the world of aesthetic dermatology and energy based devices.

The impressive sell effects body of evidence backed by associated centers of opinion leader advocacy will be highly leveraged in our next phase of care, While foundation building that follows our anticipated regulatory clearance that Darren just talked about.

This foundation building, which we have described as a controlled launch of this opex system is focused on select aesthetic device opinion leaders in North America in Europe.

During the last several months our commercial team has selected 45 centers in North America, and 11 centers in the European Union to be the first positions to launch the Celtics system and the associated Celtics commercial procedures into their respective markets and geographies.

This will take place soon after commercial clients.

These control once physicians and their practices work carefully selected based on a combination of their reputations among their peers for clinical excellence as well as there are no influence on acceptance of new technologies with patients with the media and with the next wave of position early adopters.

The first wave of early adopters will look to our controlled launch participants for guidance on their own self ex purchase decisions and further advice on integrating some opex into a successful aesthetic dermatology practice.

We know from our extensive clinical research and marketing research with our targeted customers that the Celtics system offers dermatologists and other skin specialists and entirely new way to address a broad range of cash paying aesthetic procedures that their patients will demand.

As we transition to this commercial phase of the cell effect system. Our controlled launch aims to accomplish two main objectives first it will lay the proper foundation of success for seamless practice integration, which includes comprehensive training.

Patient support and setting the proper expectations to create a best in class experience for both the physician and the patient we.

We believe this is one key to achieving high utilization rates for each installation as we scale up with.

<unk> is a key success metric, we will directly monitor through the settle fixed cloud connect infrastructure that Darren described earlier.

Secondly, a successful controlled launch with these global kill Wells corrects, the optimal blueprint for broader and stronger long term adoption of the Celtics system with high utilization rates over time.

Good as our commercial teams experience that this next wave of early technology adopters in dermatology will base their purchase decision the advocacy success and media presence of.

The first wave of Kent Wells that we have selected for our controlled launch participation.

Our commercial team has deep experience in the aesthetic market with utilization based business models.

With a track record that has proven that this type of top down approach leads to the steady adoption of new technologies.

And high utilization rates over time, especially as we add future applications to the Celtics system based on our ongoing clinical research investment.

Darren has already discussed our anticipated regulatory clearances and timelines.

As part of our launch planning process, we have been regularly conducting marketing research on aesthetic dermatology practices and how their practices are adapting to patient related COVID-19 protections.

We have tracked aesthetic procedure trends over the last three quarters.

With nationwide nationwide online surveys conducted with aesthetic dermatologist beginning back in may at the beginning of the pandemic since.

Since that time, we've seen a consistent upward trend of procedure volumes. Among the majority of respondents based on the latest survey results and the results from October show a that's the majority of US aesthetic procedure specialist are optimistic that procedure volumes will return to know.

Thermal levels in less than six months from now compare to the server. We took just in August when the majority position, we believe it will take six months or longer.

This cautiously optimistic outlook of future aesthetic procedure demand is also supported by our ongoing monitoring of position virtual meeting discussions and.

And then publish formal guidelines on reopening aesthetic dermatology practices safely, while adjusting to changes in patient workflow PPD usage and social distancing.

The practice safety recommendation stem from a joint task force between the American Society for Dermatologic surgery, and the American Society for lasers, and medicine and surgery. This.

This physician led safety guidance demonstrates the motivation of aesthetic practices to maintain a safe and low risk environment, while responding to the pent up demand from their static patients who have been postponing procedures as they work at home.

This healthy demand is also evidenced by dermatologists seeing more emphasis from the patients for facial procedures due to the importance of looking professional while being on camera for work at home video meetings.

Its practices continued to schedule future appointments aesthetic dermatologist are also seeing a trend towards patients, making the most of each visit my scheduling multiple procedures in the same visit.

As a final note dermatology practice activity, we are encouraged by physicians reporting an upswing in the trend to resume in person interactions with industry representatives, such as our field sales team of course, taking place within proper safety guidelines. This ongoing trend of exits.

To physicians and their practice is an important assumption as we prepare for our sales teams role.

In managing the controlled launch in kilowatt practices with our dedicated clinical application specialty sales team that works with physicians and their staff as part of our ongoing educational best practices sell effects system launched programs.

While we continue to monitor trends and instead of procedure market and their adaptation to these efforts change in conditions. These recent insights and testimony represent a distinct sign the dermatologist earn recovery mode and maintain and enthusiasm to stay on top of the latest technologies.

Bridging this optimism about the future and Receptiveness to emerging technologies, we continue to see a growing acceptance among.

The broader scientific community of the NPS system, that's an important new technology in peer review meetings.

The post team remains highly engaged in supporting our clinical investigators and key opinion leaders, who continue to be invited to present, our clinical research findings results at scientific meetings.

Which are now being held online and being very well attended.

Our NPS clinical and scientific data continues to be published in leaving peer reviewed dermatology journalists.

Most recently the American Society for Dermatologic surgery, more SPF hosted their annual conference earlier this month as a virtual meeting.

We were pleased that NPS technology was highlighted in three different sessions and too.

The posters of particular note.

MPS technology was featured in a session courts entitled What's next.

The procedures that will change the way, we treat heart patients, which was moderated by Dr. method from the current president.

Yes.

Dr ever was joined by Dr., Victor Ross the past President of American Society for laser surgery and.

And medicine, and a current pulse scientific advisory Board member.

And Bob Pulse clinical investigator dr. weren't around us.

In this session, both Dr. Ros and Dr. dramas highlighted our self specific non thermal NPS technology as one innovation that will define the field the dermatology in the near future acknowledging the unmet need in addressing a wide variety of cellular base skin problems and high.

Moving successful clinical study results in sebaceous hyperplasia, cutaneous non genital warts and separate character office as well as our early findings with nodular basal cell carcinoma or BCC as we had reported on our last call in August.

With the international cache of the STS annual meeting dissemination of NPS clinical research provides global visibility and will help boost our international outreach efforts as we can confidently expect that any positive clinical research will be viewed in good favored by the international market.

In the area.

Peer reviewed research on MTS Tech technology published in prominent dermatology journals.

We were pleased to learn that our study evaluating the safety of NPS energy levels on facial skin was published in the journal of cosmetic and laser therapy by lead author Dr., James Newman and title a dose response study of nanosecond electrical pulses on facial skin there was.

Also this study demonstrate that NPS technology applied to facial skin is safe and effective for removing lesions residing in the epidermis of facial skin such as some basis hyperplasia.

The study also further demonstrating the cell specific effect of NPS technology in clearing the solar based structures in a targeted area, while sparing damage to the non cellular dermis low.

Looking forward, we plan on increased international presence and we'll continue to work with our esteemed clinical investigators on abstract and publication submissions have key international conferences and in their journals.

Has the energy and enthusiasm for MPS stack technology continues to Mount among aesthetic dermatologists.

Our optimism grows about the positive reception for the future commercial adoption of the cell effect system by the specialized audiences of physicians, who purchase can utilize medical devices for dermatologic applications.

Now I'll turn the call over to Sandy for the financial results.

Thank you Ed.

Third quarter of 2020 operating expenses were $12.9 million compared to $12 million for the prior year period increases in research and development costs until a lesser extent increases in general and administrative costs drove the increase in operating costs.

Operating expenses for the three months ended September 30, 2020 included $2.6 million of non cash stock based compensation versus $2.7 million in the prior year period.

General and administrative expenses consistent salary and related employee expenses for executive sales and marketing finance legal human resources information technology and administrative personnel as well as professional fees patent season car insurance costs and other.

General corporate expenses.

General and administrative expenses increased by approximately $165000 to $5.8 million for the three month period ended September 30, 20 $25.6 million during the same period in 2019, primarily related to increases in.

Personnel business insurance and facility expansion costs offset by a reduction in recruitment related costs from a year ago as well as a reduction in travel expenses primarily related to the 19.

Research and development expenses, consistent salaries and related expenses for manufacturing and research and development personnel as well as clinical trial and consulting costs related to the design development and enhancement of our potential future products.

Research and development expenses increased by approximately $800000 to $7 million for the three month period ended September 30, 20 $26.2 million. During the same period in 2019, primarily due to increases in personnel and an increase in cash.

Insulting and outside services related to our GLP preclinical study in support of our five 10-K submission offset by reduction in clinical trial expenses from a year ago.

Net loss for the first quarter ended September 32020 was $12.9 million compared to $11.7 million for the third quarter ended September Thirtyth 2019.

Cash and cash equivalents and investments totaled $29.6 million as of September Thirtyth 2020, compared to 37.8 million as of June Thirtyth 2020 cash utilized in the three months ended September Thirtyth 2020 was $8.2 million.

This compares with $7.9 million of cash utilized in the three months ended June Thirtyth 2020, excluding net proceeds received and the rights offering now.

Now I'll turn the call back to Darin.

Thank you Sandy.

To conclude we have maintained a focus on our core objectives throughout these challenging times and taken huge strides towards bringing nano post stimulation technology delivered by the cell effect system to clinicians and patients right.

Regulatory submissions to achieve FTC clearance CE, Mark approval and health, Canada medical device license could potentially all occur as early as the first quarter of 2021.

We completed enrollment of 60 patients in our first FDA approved pivotal study comparing the cell effect system to electrification just over five weeks and ahead of schedule. Our continued engagement with scientific community and a strategic commercial launch plan physician pulse bio sciences for success.

We're very excited about this pivotal time in the company's history and the momentum we are building towards commercial launch of the cell affects system.

We look forward to providing you updates in the future.

Joining me now for Q, and a or endeavors executive Vice President and General manager Dermatology and Sandy Gardner Executive Vice President and Chief Financial Officer, Operator, Please open the call for questions.

Thank you at this time, 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 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 Sean Kang with H.C. Wainwright. Please proceed with your question.

Hi, Thanks for taking my question.

So I have a question about the regulatory pathway strategy in ex us New region basically kind of Diana you.

So would you take a similar approach like spits that guidance mandatory strategy in those region as well.

Yes, Hi, Sean it's Darren Thanks for the question. So if I understood your question right.

Your your question is about the regulatory strategy in Canada in the E U yeah.

Yes, so basically it was yes.

Gena, indicating first and then add especially the indication later.

Similar to what sort of thing and yet I understand yeah I understand your question. Thank you.

So as I mentioned in the prepared remarks with regard to the CE Mark in the E U.

Part of our technical file we included the clinical evaluation report the clinical evaluation report included clinical data in support of Sebaceous hyper Big plays Cimbria carry ptosis and words and so it's.

It's actually.

Well beyond this sort of general indication.

More of a sort of a general indication plus.

Indications, including those three lesions that I, just mentioned spacious hyperplasia icebreaker ptosis in words so.

You know like I said, we're very hopeful that we're getting down to.

Kind of the final Q in a on our CE Mark with our notified body and when that comes in we have confidence that at that time, we will be able to to ship and commercialize in the E U and promote the cell effect system for those specific indications. So unlike the U.S. and I think we're in a.

A position to be able to add to market to those indications immediately as we receive the CE Mark.

As it relates to health, Canada, and the medical device license in Canada.

Our submission also included those three indications so it's it's a bit early in that process to be able to comment at all on what might what might come out of that approval through health Canada.

That's certainly our submission included those three indications.

I see.

And just a quick follow up question to that is.

Would you seek all comers your partners in Canada, and you or would you just subject to the market that your product over there.

Yes. This is Pat answering that question.

I would describe our model that's a hybrid direct and distributor model and it varies by market in country. In the instance of Canada, we will be hiring in our own direct salesforce.

Couple of Canada, and expand as the installed base justifies that expansion with direct employees.

In the instance stuff that you.

We are in the process of recruiting and hiring you bake sales and operations team to directly launch in the largest and most influential markets and specifically to provide the level of support for the controlled launch for you opinion leaders that matches our highest standards.

And then we will be looking at for other smaller markets closely managing distributors in those countries, where it make sense again with our own people directly involved with distributors to make sure the standards of training and education.

Meet that our direct sales team. So that's our distribution plan going forward.

That's very helpful. Thank you.

As a reminder, if you like to ask a question. Please press star one on your telephone keypad one moment, please while we poll for questions.

There are no further questions at this time at this point I'd like to turn the call back over to Darin you can for closing comments.

All right. Thank you operator, and thank you everybody for joining us on the call today and a last thank you for the pulse Bio sciences team and all of our partners, who have really helped us make tremendous progress over the last several quarters. During these challenging times. Thank.

Thank you very much we look forward to updating you very soon.

This concludes today's conference you may disconnect your lines at this time, we thank you for your participation.