Q3 2022 Helius Medical Technologies Inc Earnings Call

Good day, and thank you for standing by.

Welcome to the Helios Medical technologies Q3, 2022 earnings call at this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now.

I'd like to hand, the conference over to Lisa Wilson Investor Relations. Please go ahead.

Thank you Latanya welcome to the third quarter 2022 earnings conference call for helium medical technologies.

This is Lisa Wilson of insight Communications Investor Relations for Helios.

With me on.

Dale Andres Chiliast, Medical's, President and Chief Executive Officer.

And Jeff Macpherson Chief Financial Officer.

At this time, all participants have been placed in a listen only mode.

Please note that this call is being recorded and access to the webcast can be obtained through the investors section of the Helios website at Helios medical Dot com.

Before we begin I would like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements that are based on current expectations of management.

These forward looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including those identified in the risks factors section of our most recent annual report on Form 10-K.

And quarterly reports on Form 10-Q.

Such factors may be updated from time to time in our other filings with the SEC, which are available on our website.

All statements made during this call are as of November 14th 2022.

When you take no obligation to publicly update or.

Our forward looking statements as a result of new information future events or otherwise, except as required by law.

I would now like to turn the call over to Damian injuries, President and Chief Executive Officer of Gilead.

Thank you Lisa.

Welcome everyone to Helios Medicals third quarter 2022 earnings conference call.

The third quarter was our first full quarter of commercial sales about portable neuromodulation stimulator or pawns goodbyes, which is indicated in the U S for short term treatment of gait deficit due to mild to moderate symptoms of M. S.

It has to be used in conjunction with a supervised therapeutic exercise program.

Gate dysfunction is an extremely common symptom among the estimated 1 million people in the U S suffering from MFS.

Over 70% of patients report difficulties walking yet there remains a huge unmet need in this area.

Until now treatment options have been limited, but 14 weeks upon therapy has demonstrated significant gate improvement when compared to physical therapy alone.

Pardon therapy as the only available portable and readily accessible neuro stimulation therapy that promotes neuromodulation and may lead to neuroplasticity, which is the brain's ability to modify change and adapt in response to modulation of brain.

<unk>.

It is safe effective and offers patients hope and neurologists, a new tool in their tool belt.

We are gratified by the reception pond is continuing to see in the marketplace.

Total revenue grew 65% quarter over quarter and it was driven primarily by sales of ponds in the U S.

During the quarter, we continued to see an upward trend in inquiries and prescription is written and filled.

As more and more P. Ts are trained on ponds and more doctors become become aware of the benefits Pons therapy. We believe this upward trend will continue through the rest of 2022 and throughout 'twenty 'twenty three.

As mentioned last quarter, because interest in PON therapy was high from the onset we faced several challenges during the early weeks of commercialization.

One of these was in training physical therapists, who wish to treat Ms patients experiencing gate impairment.

Because therapists were previously trained through an in person multi day course with only five to 10 people able to participate at any one time, we simply cannot train them fast enough to keep up with demand, leaving many physicians unable to find a trained physical therapists.

To fill a prescription.

In July we implemented self paced online training module, allowing practitioners to be trained remotely at their own pace and three hours or less.

This change has been widely embraced and we currently have nearly 100 physical therapist already trained are registered in the U S.

Another move we made to facilitate more streamlined access to PON and the development of Pons therapy Dot com, our direct to consumer E platform telehealth for physicians and patients. This powerful how hub will go live in all 50 states by the end of 2022.

And will include a network a fully licensed.

Riders with E prescribing capabilities.

This will greatly reduce the amount of time it takes for a patient to set up an appointment with their neurologists or primary care physician, allowing patients to match with practitioners make appointments online all in as little as 24 hours.

They can also choose to have pons device delivered directly to their door.

Right now all sales are on a cash pay basis, but we don't want cost to be a barrier to pons use.

While we pursue commercial and government reimbursement programs, we are offering pons device at a discount to list price in the U S.

In addition, we implemented the patient therapy access program or P. Tap earlier, this year, which enables patients access to on label plan therapy at a nearly 85% discount to list price.

Approximately 80% of Pons device prescriptions filled in the U S through the third quarter was felt through P. Tap.

Because our pons device is to be used in conjunction with a supervised therapeutic exercise program. It.

It is important to understand the extent to which piece since adherence to the PON therapy regime can be two meaningful therapeutic outcome.

To evaluate this relationship we launched a therapeutic experience program or Tac.

Established one year ago tap is an open label observational trial that allows us to partner with some of the nation's premier academic medical centers to observe ponds therapy in a real world setting.

We have engaged four centers of excellence to date with MGH Institute of Health professions, and Oregon Health and Science University are most of the most recent additions to NYU Langone and Shepherd center already enrolling patients we.

We anticipate tap will provide additional clinical evidence to support the long term durability upon therapy for MFS and we hope to have the program fully enrolled by mid 2023.

Turning to our Canadian activities since 2019 Pons has been authorized for sale in Canada for chronic balance deficit due to mild to moderate traumatic brain injury and subsequently for the treatment of gait deficit to mild to moderate symptoms from en masse.

So we've gained valuable data from our patients in Canada. Some of it crucial in obtaining FDA authorization in U S sales have been weaker than expected with that said, we do have some initiatives in the works in Canada, which we believe will lead to near term and longer term increases.

In sales, we look forward to the prospect of announcing additional details in the coming weeks.

With that let me turn the call over to Jeff to discuss our third quarter financial results in detail.

Thanks, Dan.

Good morning, everyone. It is a pleasure to be with you today.

Total revenue was $196000 for the third quarter of 2022 compared to revenue of 109000 in the third quarter of last year for an increase of 80%.

Product sales in the U S. During the third quarter totaling 139000.

More than doubled over the second quarter 2022 levels.

For the third quarter of 2022, our gross profit was $95000 compared to $23000 last year.

Operating expenses for the third quarter were $4 9 million compared to $4 4 million in the third quarter of last year, an increase of half a million dollars.

The increase was primarily due to a net increase in noncash stock based compensation expense, including the one time $1 2 million dollar expense attributable to performance based options that vested during the current year quarter.

Lower research and development costs.

The U S commercialization launch partially offset these increases.

During the quarter, we recorded a one time noncash $757000 goodwill impairment expense.

Resulting from the decrease in the company's market value.

Reducing the goodwill balance to zero.

Operating loss for the third quarter of 2022 was $4 9 million compared to a loss of four point.

$4 million for the prior year period.

The public warrants we issued in connection with the August 2022 financing were accounted for as a derivative liability instrument on the balance sheet.

And as a result, the portion of the offering costs attributable to the warrants were recorded as interest expense totaling $919000 for the quarter.

In addition, the decrease in the valuation of these derivative instruments from the date of the offering to the quarter end resulted in income totaling $5 $5 million during the quarter.

The warrants will require reevaluation in future quarters.

Our share price, resulting in income or expense for each reporting period.

We reported a net loss for the third quarter of 2020 to a $1 million or a loss of <unk> 12 per share.

<unk> to a net loss of $4 $7 million or a loss of $2.01 per share for the same period last year.

As of September 30th 'twenty, 'twenty, two we had $16 $7 million of cash and no debt.

We currently expect fourth quarter revenue to be modestly above the third quarter levels factoring in the timing required to pair patients with trained physicians.

Physical therapist and.

In addition, as we near the end of the fourth quarter, we may experience some patients delaying pons treatment until after the holidays, which could temper sales growth as we expand our U S market penetration.

As we continue to build momentum and expand our sales coverage, we expect future quarterly revenue to continually increase sequentially quarter over quarter throughout 2023.

As the U S commercialization of Ponce develops.

The sales of ponds in the U S and the $18 million financing completed during the quarter. We believe we have the cash reserves to take us through 2023.

With that operator, let's.

Now open the call for questions.

Certainly as a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.

One moment.

Okay.

And our first question will come from Jeffrey Cohen of Ladenburg. Your line is open.

Hello, James and Jeff how are you.

Jeff how are you good morning.

Good so a few questions from Aaron So firstly can you give us a sense of.

Number of patients out there and number of patient locations as far as the <unk> and training and sorry, it's true.

Yeah, Jeff I'll take that.

The Pts.

And in the call, we said that we have nearly 100 Pts.

<unk> been trained.

So.

A lot of those yeah, there are certainly going to be something that we have multiple.

<unk> at a facility, but there are also many.

Many individual <unk> spread around so we havent necessarily talked about.

The number of sites in the U S where the Pts are located.

And as far as the.

The other question on the scripts I think.

We're not in a position yet where we're going to be detailing a lot of that information until we better are able to.

Correlate the trends that we're getting.

I think knowing that 80% of the of the sales in the U S.

Done through the.

P tap program pretty much get a senses.

Hey, Matt.

The number of scripts being written based upon the revenue number.

Okay got it and could you give us any sense on progress you're making with.

Some of the payers out there and what we might anticipate over the coming quarters.

Yes, Jeff I'll take this so so right now.

Yes, we're having preliminary conversations with the payers.

Also remember the tap program.

It does not allow because of the significant reduced price.

Allows the patient to file for reimbursement.

So that's first and foremost.

Second with regard to our reimbursement pathway.

Given the emerging.

CMS.

Platform, which is called T set.

Which allows for reimbursement under an emerging technology.

And also a breakthrough technology since we have that for MFS, but also our second one in stroke were expecting the rulemaking.

In early April from CMS.

And.

That's exciting for us given our two breakthroughs in MFS and stroke as well so if we look at our pathway.

That would be the quickest pathway towards reimbursement.

Got it Okay, and then lastly, Dana talk to us a little bit about stroke and <unk>.

Progress there and what we might anticipate.

Over the coming quarters in that area.

Yeah. So again, we're finished with our data development plan with the FDA.

We are starting.

Soon the South Carolina.

<unk> trial.

And we're very excited about that.

We put together our stroke scientific advisory board in this quarter, which.

I believe is very impressive so going forward.

We do need financing for an FDA.

Ah trial.

So you know at the time, we're doing many things to get us ready for that trial.

Okay perfect. Thanks for taking our questions.

Thank you Jeff.

Thanks, Jeff.

One moment.

And our next question will come from Jonathan Aschoff of Roth Capital Partners. Your line is open.

Thank you good morning, James and Jeff. My first question is what causes what caused the gross profit margin to improve so much in the third quarter.

Yes, I think what Youre seeing is a higher sales volume.

Is there that covers the.

The fixed costs that go into overhead so.

As sales continue to increase that.

Helps.

Cover our fixed overhead costs.

Okay. Thank you and the SG&A expense run rate of kind of popped up but I have to lower it by about.

$1 million a quarter for the cash runway math to work out does that sound reasonable.

Yes, if youre looking strictly at the <unk>.

Third quarter of 2022, correct, because we did have that that one time charge come through there. So.

On a go forward on a normalized basis.

On a cash basis, yes, it would be.

So the $1 million for us.

Okay and can you tell us how many patients.

You have participating in your actually your you've already said as an answer to the last questioner that that you can just figure that out with the cost. So I'll just do that.

Actually how many patients are enrolled at the we're at the first two sites at Analyst day can you tell us that.

Yeah, So hey, Jonathan this is Dave so with the tap sites.

We're going to be averaging anywhere from three to seven.

Per site.

And we actually how many now are in.

We haven't announced that.

So that's ongoing as we speak.

Okay.

However, the average was 3% to 77.

Yes, roughly 3% to 7%.

Okay.

In discussion with more sites as well.

So we're very excited with the sites that have signed on so far.

Okay. Thank you very much guys.

Thanks, Jonathan.

One moment.

And our next question will come from Jeffrey Cohen of Ladenburg, Our follow up John Your line is open.

Go ahead I wanted to jump back here and ask one more if I may could you.

Can you talk about the customer journey.

As part of your New E Commerce platform that's out there. Please.

Yes, so it's going to be very similar to two the customer journey that we have internally with our own <unk> service, but when the patient comes through our Pons therapy Dot Com page they will have the opportunity to punch through that page.

And if they do not have a prescription.

They could.

Basically.

<unk>, an appointment with the telemedicine doctor and to have a medical appointment and and the ability.

That doctor to write a prescription that can be felt.

Through the online hub services, and just like our hub services the patient.

The pons device shipped directly to their address.

And then they could start there.

PT physical therapy scheduling the first week or two.

Got it any early experience for I know it just started up recently.

It's still.

Early we're expecting to launch it so we're not just there yet.

We expect to launch it by the end of the fourth quarter.

Perfect got it thank you.

Thanks, Jeff.

Okay.

I will now turn the conference back to Dan Andrews for closing remarks.

Thank you operator.

For everyone. We're very excited about the momentum being generated with ponds and look forward to finishing the year strong I'd. Just thank you for your time and interest in <unk> Medical technologies, and we will speak with you next quarter. Thank you very much.

Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.

The conference will begin shortly to raise Johan during Q&A, you can dial star one one.

Yes.

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Okay.

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Yes.

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