Q2 2023 Pulse Biosciences Inc Earnings Call

Greetings and welcome to both a pulse Biosciences second quarter 2023 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

One 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 Philip Taylor. 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 management's views as of today August 10, 2023, only and will include forward looking statements and opinions statements, including predictions estimates plans and expectations.

<unk> and other similar information.

Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the U S Securities and Exchange Commission or SEC filings can be found on our website or the SEC's website.

Investors are cautioned not to place undue reliance on forward looking statements, we disclaim any obligation to update or revise these forward looking statements. We will also discuss certain non-GAAP financial measures disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures can be found in.

The press release.

Please note that this conference call will be available for audio replay on our website at pulse Biosciences Dot com on the news and events section on our Investor Relations page with that I would now like to turn the call over to President and Chief Executive Officer, Kevin Danaher.

Thank you trap good afternoon, everyone and thank you all for joining us on.

On today's call I'm excited to be joined by Darren Euchre, Chief Technology Officer, Mitch Levinson, Chief strategy Officer and me.

Clark, our vice President of finance.

The full breadth of our expert and experienced leadership team will be on display today to highlight the robust progress we are making.

In the second quarter, we were appropriately focused on the continued validation of nanosecond pulse failed ablation and we continue to build on the science behind sell up X technology.

Clearly differentiate and S. P F <unk>.

Second pulse field ablation from all current PFA technology, emphasizing the potential for meaningful improves safety and efficacy with N. S. P F.

First I would like to discuss our core opportunity and top priority.

I will hand, the call over to Darin yogurt to discuss specific cardiac device development and noteworthy performance achievements.

Then Mitch Levinson will describe our business development progress and provide exciting news on our first in human experience with benign thyroid nodules.

Our company's first surgical application for N S P up at.

Then my Koffler will review, our second quarter financial results before I conclude and open the call for a question and answer session.

As a reminder, our primary focus is on developing a cardiac ablation catheter and surgical ablation clan utilizing N S. P. F <unk> for the treatment of atrial fibrillation or a yeah.

Clamps will be used during open or minimally invasive heart surgery cardiac surgery, and the catheter will be navigated into the heart using extended minimally invasive catheter techniques through large blood vessels by Electrophysiologist and the EP lab.

There is a clear emerging consensus from treating physicians that PFA is safer and faster than our rapid cryo and we intend to take this a step further with N. S. P. F <unk> by creating a more advanced treatment that has the potential benefits for patients surgeons and clinician.

This is an amazing period in pulse Bioscience history.

And S. P. F. <unk> is establishing a new standard in efficacy and safety now being demonstrated in preclinical studies in our first in human surgical procedures.

These exciting results follow years visionary engineering and development.

As a reminder, pulse bioscience engineers have been designing and understanding N S. P. S.

2015, and investing and S. P a pay for cardiac applications since 2016.

We are unique in the pulse field ablation space, partially because of our development process.

We have built the sell off that system from the ground up.

Pulse Bioscience engineers first understood the science of N S. P F <unk>.

The basic electrophysiology level, then created the cell effects console degenerate and harness the energy of N. S. P. F <unk> and took that knowledge and designs electrode Endo factors purposely built to deliver N. S. P. F <unk> energy to create the appropriate tissue response across multiple therapeutic.

Areas.

I command a N S. P. F. <unk> is rooted in 15 years of research at academic and science tenants, followed by a half dozen years of advanced engineering, allowing pulse biosciences to move at an accelerated pace.

Preclinical cardiology studies.

First in human thyroid surgical cases.

The results to date are what we wanted to see I will let Darren and Mitch fill in the details.

As we accelerate our strategic vision in the cardiology device development. The company's focus has been on preclinical validation of our technology for the cardiac surgical clam and the catheter programs. We remain on track to file an FDA submission for the cardiac surgical clamp in the first half of 2024.

And to begin a feasibility study for the cardiac ablation catheter during the same time period.

As a supplemental point of validation of our engineering capabilities.

And to demonstrate our unique mechanism of action on internal organs. We approved formed feasibility work in the treatment of benign thyroid nodules and initiated first in human studies using novel proprietary N. S. P. S Endo factors.

This study was conducted to further validate the mechanism of action and tissue response of N S. K P F.

And internal organs, as we advance towards human cardiac tissue.

We view the safety and efficacy and demonstrated tissue response data from the thyroid nodule study as an important incremental validation of our product engineering thesis and as the first demonstration about potential of N. S. P. A pay to deliver otherwise not available safety and efficacy.

And human tissue ablation.

Based on these results, we see external interest in opportunities to further develop our technology platform beyond cardiology.

We are entertaining and evaluating inbound inquiries through partnerships or licensing agreements that align with our corporate goals.

I will now hand, the call off to Darren to discuss the progress we have made on our cardiology device development and their initial preclinical performance.

Thank you Kevin.

We have been very active in the lab over the last several months as we build a foundation of preclinical study data on the path towards potential human clinical use for both our cardiac surgical clamp and catheter devices.

I am pleased to report that our confidence in the performance capabilities of these devices has evolved with each step in the process.

The results of the preclinical studies, we are conducting have met our expectations as well as those of the physicians we are honored to work with.

By pairing our novel and proprietary and S. PFA energy with our custom and effector device designs that exploit the tissue ablation capabilities of N. S. P. F. A uniquely for each application we are achieving results that indicate potential market, leading safety and efficacy and prospective durability and the.

<unk> of atrial fibrillation.

Specifically in our recent preclinical studies using our N S. P. F. A cardiac ablation clamp, we're generating exceptional results relative to the energy modality is currently in use including radiofrequency or RF and cryo surgery ablation.

The goal of cardiac ablation is to consistently produce continuous full thickness also referred to as transmitter all ablation in cardiac muscle as quickly as possible.

With our N S PFA cardiac clam, we're consistently achieving transmitter elevations in 125 seconds independent of tissue thickness, even when treating tissue thicknesses up to approximately 25 millimeters.

This is compared to RF ablation, which requires approximately 10 to 40 seconds per ablation, depending on the tissue thickness, which is generally limited to 10 millimeters and to cryo ablation, which can require will require several minutes per ablation.

The ability of our N S. P F. A cardiac clam produced consistently transmittal oblations through tissue of varying thickness and 1.25 seconds is enabled by the NSP FAA mechanism of action are novel surgical clamped design and proprietary energy delivery algorithms that automatically.

Just the N S PFA pulse parameters based on tissue thickness.

Thermal modalities rely on thermal conduction through the tissue, which will inherently vary depending on the tissue thickness and collateral effects such as vessels.

Lack of predictability presents a multitude of challenges for treating physicians.

Optimum predictability supports ideal outcomes.

Dr. Gan Dunnington, our chief Medical officer of cardiac surgery is very busy bringing together a group of innovative thought leading cardiac surgeons from around the world to work with us as we bring N S PFA to cardiac surgery.

These cardiac surgeons have significant experience in cardiac ablation for the treatment of a F. Using currently available RF and cryo ablation technologies.

This group of surgeons have been extremely impressed at the treatment speed and consistency of outcome enabled buyer NSP FAA cardiac surgery clamp system.

And any type of surgery, but especially cardiac surgery every second counts while the patient is under general anesthesia and potentially on cardiopulmonary bypass so reducing the time to perform the multiple ablation is required in a procedure can translate to significantly reduce risk for the patient.

In addition, because of the pulse electric field is controlled between the claim jaws and is non thermal there is minimal risk of collateral tissue damage.

Thermal modalities, which generally require repeated longer treatments can cause thermal spread which in turn can cause unintended collateral damage to surrounding structures.

For these reasons and more we continue to believe our NSP F. A cardiac clam has the potential to provide a faster more effective and safer cardiac ablation than what is currently available with thermal modalities and we continue to be encouraged with our preclinical development progress.

On the regulatory front, we continue to be in communication with FDA regarding the requirements for a five 10-K clearance for the NSP Hefei clan.

We believe we are on track to file the submission in the first half of 'twenty 'twenty four.

Shifting the focus to our cardiac catheter ablation device, our preclinical studies to date indicate that our novel catheter design is able to deliver N S. PFA to circumferential ablation targeted pulmonary veins in a single shot and approximately five seconds.

In our preclinical studies the devices consistently achieving fast and effective ablation.

Without collateral tissue damage and without the need to perform multiple ablation at different orientations or positions of the catheter.

Which electrophysiologist often need to do when using RF or other traditional PFA systems with pivotal studies underway.

Similar to our cardiac clamp. We believe these benefits are enabled by the combination of N S. PFA and our novel catheter that was designed specifically for use with our N S PFA platform.

Yeah.

In may at the annual Heart Rhythm Society meeting three abstracts were presented by our physician collaborators from Mount Sinai Hospital in New York, which highlight the performance of our novel Circumferential catheter.

Across the three studies favorable safety and performance data were generated.

One study concluded our device can create clinically relevant circumferential wide lesions with minimal phrenic muscular stimulation.

The next study observed N S. PFA delivered by our catheter can create clinically relevant deep and wide lesions and ventricle tissue, which did not demonstrate any evidence of thermal injury.

Delivery was associated with only mild muscle and nerve stimulation.

Finally, the third abstract demonstrated the effects of N S. PFA on Cardiomyocyte muscle cells are the heart at acute time points using electron microscopy.

All three of these abstracts support our belief that NSP FAA can potentially eliminate the substantial trade off between safety and efficacy observed in traditional thermal ablation modalities and newer PFA technologies.

The data also have confirmed our belief that our catheter design will be suitable for first in human trials.

Each of these manuscripts are available at our website.

We have started the regulatory clinical process for a first in human feasibility study for the N S. PFA catheter ablation system as reported previously we expect the feasibility study to begin in the first half of 2024.

We are also making progress in determining the U S regulatory pathway for a cardiac catheter, we anticipate catheter product line will require an FDA pre market approval or PMA, we look forward to sharing updates on our progress along the way.

In summary, we are thrilled with the preclinical performance of our two cardiac ablation devices, and we look forward to providing surgeons and patients with improved treatment options.

I'll now turn the call over to Mitch to describe some exciting recent first in human feasibility clinical work that demonstrates the broad potential of N S. PFA and how we are reaping the benefits of our platform strategy and our team's expertise to validate and S PFA and surgery Mitch.

Mitch.

Thank you Darren I Echo your excitement about the recent preclinical work in cardiac ablation and I'm excited to share. The early results from our first clinical study in a surgical application.

The progress, we're making with our cardiac programs is a testament to the platform nature of N S PSA and ourselves <unk> system.

The <unk> system was developed with the vision of pursuing multiple applications across various medical specialties with cardiac ablation being our top priority today.

Since the company was founded we've continued to research and <unk> impact on different tissue types, and how best to deliver the N S PSA energy to tissue.

Today, we have an R&D team with expertise gained through experience and the use of N S. PSA and how to develop end effectors that leverage the novel therapeutic benefits of N S. PFA throughout the entire body.

Part of my role as Chief strategy Officer for Pulse Biosciences has been to lead the exploration and evaluation of applications across a wide range of clinical areas.

To determine where our platform technology can have the largest impact on patient care.

One result of this effort was our decision to prioritize significant resources on cardiac ablation and those efforts are now achieving great effects as Darin just explained.

Over the past couple of years, we have shared high level results from our feasibility work with stakeholders physicians and potential strategic partners in applications, including Gastroenterology gynecology urology cardiovascular pulmonology.

Oncology and otolaryngology medical specialty focused on the ears nose and throat.

Our feasibility demonstrations and the clinical value proposition of NSP assay in multiple applications have attracted external organizations, who have expressed interest in exploring opportunities of mutual interest.

While we are evaluating stakeholder value enhancing opportunities we will continue to remain acutely focused on our cardiac applications.

As a means to further understand the effects and broad potential of NSP MSA inside the human body, we recently initiated and NSP <unk> surgical procedure study.

All of this clinical feasibility study was to measure the patient tolerance safety and tissue response in the ablation of benign thyroid nodules using a custom proprietary into factor to deliver N S. Psa energy.

These fibroid nodules are common benign tumors located in the Nic near the trachea and voice box and can cause difficulties in swallowing breathing hoarseness of nicotine.

They are most commonly treated by open surgical resection to remove half or the entire thyroid, resulting in scarring and requiring lifelong hormone replacement.

Percutaneous ablation with RF and microwave modalities carries the risk of collateral thermal damage to critical nerves vessels trachea and other structures and they can create a significant scar inside the fibroid after the thermal injury has resolved.

<unk> unique mechanism of action offers the potential of a more effective and safer alternative to surgery or other ablation modalities.

These benign tumors can be accessed with our novel <unk> PSA electrode under ultrasound guidance, while the patients are conscious.

Under local anesthesia.

We treated 10 subjects and evaluated them immediately following the procedure and then at 30 days with plans for additional follow up at 90, 180, 360 days post treatment.

All patients tolerated the procedure very well with no reported pain or serious side effects.

Ultrasound imaging 30 days post procedure should be treated portions of the nodules had already been mostly or completely resort, which is very fast compared with other ablation modalities.

There was also no sign of scarring of fibrosis, which is another side effect of other ablation modalities.

This demonstrates the unusual benefits of our technology's unique mechanism of action.

Inducing regulated sell that well.

Boiling unwanted scarring and preserving the vasculature and lymphatic infrastructure to facilitate the body's own rapid natural clearing of the treated tissue.

Based on these positive initial results, we're preparing an amendment to the thyroid study protocol to expand enrollment in the next phase focused on optimizing treatment parameters and is anticipated to occur in the fourth quarter.

Our experience in this first human study in a surgical application suggests that NSP Fas well tolerated inside the human body and also demonstrates our skill in delivering energy to an internal human Oregon without pain or serious side effects.

Well, we remain focused on developing devices for the treatment of Aes.

It is clear that enis, PSA may will be safe and effective in treating many other conditions as well.

Now I'll turn the call over to Mike <unk> for an update on our financial results.

Thank you Mitch moving down the income statement I'll focus my comments on our non-GAAP results I encourage you to review today's earnings release for a detailed reconciliation of non-GAAP measures to the most comparable GAAP measures.

In the second quarter 2023, we reduced non-GAAP total costs and expenses by $3 4 million to $8 8 million compared to $12 2 million in the prior year period.

The decrease in operating expenses is driven by the prior head count reduction and restructuring.

non-GAAP net loss for the quarter ended June 32023 was $8 5 million compared to $11 9 million for the quarter ended June 32022.

Cash cash equivalents and investments totaled $58 7 million as of June 32023, compared to $54 1 million as of March 31 2023.

Cash used in the second quarter of 2023 totaled $10 million and was reduced compared to $12 8 million used in the same period in the prior year and increased compared to $7 2 million used in the first quarter of 2023.

We recognize the increase in our cash usage, largely resulting from the timing of certain nonrecurring payments, but maintain our expectation for quarterly cash burn to average approximately 9 million throughout 2023.

In April we entered into a stock purchase agreement with Robert Duggan, Our majority shareholder and executive Chairman for the purchase of $10 million 22937 shares of the company's common stock at a price of $6 51 per share a greater than 1% premium over the last reported sales.

Price of the Companys common stock on April 28, 2023, the immediately preceding trading day.

Yeah.

In May we successfully closed the private placement and sale of these securities effectively canceling all prior indebtedness earned by the company to Mr. Dugan, including the principal balance of $65 million and accrued and unpaid interest of approximately 250000.

At the time that Mr. Dugan as original loan to the company in September 2022, the company stock is trading under $1 50 per share.

Total transaction costs for this financing were less than $6000.

Also in May we delivered a notice of redemption to redeem all outstanding warrants to purchase shares of our common stock issued in connection with our June 19, 2022 rights offering.

Prior to the redemption date, approximately 99% of the warrants still outstanding were exercised to purchase approximately $7. One 4 million shares of the company's common stock at $2 five per share generating approximately $14 6 million in gross proceeds in the second quarter.

This brings total proceeds from the rights offering including $15 million received in 2022 to approximately $29 9 million with $14 9 million coming from the exercise of warrants in total.

In addition in July 2023, Robert Duggan exercise options to purchase an additional 133800 shares of the company's common stock at prices ranging from $2 14 to $5.95, adding an additional 299000 of cash the company's balance sheet.

We were pleased to see the continued support from our existing shareholders.

I will now turn the call back over to Kevin.

Thank you Mike now I will provide some closing remarks.

We are encouraged by our preclinical results, we have achieved in our cardiology devices.

Our novel devices combined with our unique mechanism of action are demonstrating the expected potential our engineers anticipated.

We are confident in the breadth and depth of our leadership team can propel N S. PFA technology to achieve a leadership position in this multibillion dollar atrial fibrillation market.

We look forward to providing a progress update on the next call joining me for question and answer session today.

Executive Chairman of the Board Robert Duggan Chief.

Chief Technology Officer Darin Newkirk.

<unk> strategy Officer, Mitch Levinson, and Vice President Finance, Mike cockpit, 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.

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 up for questions.

Rob This is Kevin we have a couple of questions that came in online. So I will read these questions first and you can put together the questions online. So the first question says congrats on your cardiac progress in both the clamp and catheter and Great News on your first inhuman cases, and the results considering the new focus and success in cardio.

And the time timelines why would you continue the thyroid study expansion. If you have the validation you need it.

Yeah, I'll take that one this is mitch.

Thanks for that question and yeah. The colors right. The first human study has helped us to validate the safety the patient tolerance. The tissue response of our NSP SA energy inside the body.

These preliminary results looks so promising because there's outside interest in this application and others. We decided it was worthwhile expanding the number of subjects and that will allow us to demonstrate our ability to optimize the treatment parameters.

Perfect.

Okay. The next question that came in is with regards to the clamp and catheter you feel like you can compete in these spaces.

I will take this one and kick it off with thank you for the question and absolutely. We think we can compete in these spaces. As we stated our command of NSP FAA is rooted in 15 years of research academic and science centers and our engineers have designed and understood and S. PFA since 2015 and have been investigating NSP.

Turning to capital occasion since 2016.

We first understood the basic electrophysiology level like we said and then we created the console to really generate and harness that energy of NSP.

And then took that knowledge and designed electro endo factors that we purposely built to have the appropriate tissue response.

These risks these results that we've talked and Darin section today shows our command of this energy and how we believe we can lead in the <unk> space.

Anything to add to that Darren Yes, I would just say.

Certainly what Kevin said is accurate and I think you know.

I talked about a lot of different numbers in terms of the speed and the other attributes of nanosecond PFA and our devices, but I think the real proof of how competitive and how differentiated our devices are will come from physicians and their patients and we spend a lot.

Time in the development process talking to physicians and getting physician feedback and we did that with Dr. Dunnington, who then decided he liked it. So much you wanted to become our CMO for cardiac devices. So I think the proof is really in the end customers and stakeholders by physicians and patients.

And so far I think the feedback that we've gotten from them is that we're highly differentiated and we're going to be very competitive in both of these spaces.

Thank you David.

Operator questions online.

Yes, we do have an audio question. Our first question comes from Stephen Hammer with H C. M. I <unk>. Please proceed with your question.

Yes. Thank you very much and we have been great supporters of a pulse from the from the start my question relates to the dermatological projects that Oh.

That's the firm.

And I'm curious, obviously I would think the technology was working was it or was this the decision to leave that market on the basis of.

Hum.

The.

Physicians and other people in the industry for the long.

Education cycle, it took to teach them how to use the equipment.

Bob do you want to jump in and then I'll come in and support.

Sure Kevin.

Steve I appreciate your question.

Or is it the devices not really difficult to use.

Any digital electronic device moderate in nature.

Take a half a dozen hours and Ken.

Yes it.

A dozen or two times.

In this case, it's a fraction of the challenge that was it.

Split the robotics.

Yes.

Affected.

Excellent outcomes and we were very pleased it exceeded all expectations in terms of ultimate patient benefit.

The challenge was that the <unk>.

Meeting.

Our product was really pennies on the dollar.

Well typically it requires.

Multiple and frequent revisits the clinic, which are in effect profitable for the clinic.

And that we didnt compete well with that so.

As we demonstrated safety on the on the tissue side, it became very very obvious reality and FDA clearance for soft tissue.

Beth.

It's a more challenging.

And opportunistic.

Our ability to go inside the body was staring us in the face we had looked at that years ago.

And.

But we felt we first needed to get the FDA approval that.

<unk> used as we do.

In the human body would be considered safe by them.

We've done a spectacular job we have an excellent relationship now going forward, we're very proactive.

The FDA. So we look forward to this journey.

Then we ran into preclinical studies and looked at similar tissues.

And the animal side.

With.

The who's who.

And the profession.

Cardiac and thyroid.

Fireeye.

Repair.

And frankly the results have been outstanding the surgeon response has been.

Somewhat one off.

We made a chip when surgeons get excited about something as they did with prostate surgery and robotics.

We think this is the match if not better than that so we personally.

I personally could not be more excited with the opportunity I think everything that the company has done is we've applied.

Ah patients.

Prior experience and the factors and.

In robotics prior communications with physicians and surgeons all the all of this business is very real to us.

Kevin spent years in training.

And also work in the robotics field.

Half a dozen of our people also.

I personally don't think this opportunity could be in better hands.

And I consider it to be.

Probably the most significant opportunity that I have been fortunate to work with and we look forward to.

The next half dozen years.

<unk> that we were.

Going to make a substantial difference for the betterment in the field or cardiac then and I think in the other areas are human body.

Because it's got such a broad opportunity, yes, the potential then to fund this business through.

Different relationships.

And we certainly don't lack for large companies talking to us and we're showing a real interest and we will diligently work our way through that.

Over the next period of time, and we will report back to our stakeholders as.

Progress is made and results occur so it's going to be an exciting 369 12 months and then the following years.

That addresses your question Steve.

It sure does Bob and Uh Huh, followed your career for quite a number of years and the first time I met you in Santa Barbara back in the computer motion days so thank.

Thank you for the support for this company and we're all very excited thank you very much.

It's been a journey has been a journey.

All is well that ends well.

Very very positive on where we're going with this but thanks for your patience.

Thank you.

And Steve I'll just add.

One of the things that I'm really impressed with is I know that we're talking about dermatology, but this the learnings that we had from that space and how we've developed the console going forward and what's really unique for US is when we will this console and and we're doing clamp cases are cardiac.

Work.

It's astonishing how people look at our console and see how polished it is and how well designed it is and that goes back to the history of evolution as we went through the dermatology space and we're proud of those milestones and those have gotten us to where we are today.

Alright.

Very good. Thank you so much I appreciate the answers.

Okay.

There are no further audio questions at this time.

Okay. Operator, thank you so much. Thank you everyone for joining this call. We are excited about the future. We have much more to report in the up in coming months and we will keep you all informed and thank you for your continued support and interest in pulse bioscience and the direction.

We're going.

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

Today's conference has ended please disconnect your lines at this time. Thank you.