HSDT Q3 2021 Earnings Call
Operator: 00:06 Thank you all for standing by. And welcome to the Helius Medical Technologies Q3 twenty twenty one Earnings Conference Call and Webcast. Please note that all lines will be in listen-only mode until the question-and-answer session of today's conference. Please also note that today's call is being recorded. 00:24 I'll now turn the call over to your host . Ma'am, you may now begin.
Unidentified Company Representative: 00:32 Thank you, Jesse. Welcome to the Q3 twenty twenty one earnings conference call for Helius Medical Technologies. This is of Insight Communications, Investor Relations for Helius. With me on today's call, are Dane Andreeff, Helius Medical’s President and Chief Executive Officer and Jeff Mathiesen, Chief Financial Officer. 00:59 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 to the Investors section of the Helius website at www.heliusmedical.com. 01:15 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 the 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 Risk Factors section of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. 01:44 Such factors may be updated from time to time and our other filings with the SEC, which are available on our website. All statements made during this call are as of November tenth, twenty twenty one. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise except as required by law. 02:07 I would now like to turn the call over to Dane Andreeff, President and Chief Executive Officer of Helius. Dane?
Dane Andreeff: 02:15 Thanks, Judy and welcome everyone to the Helius Medical’s third quarter twenty twenty one earnings conference call. It's an exciting time for the company as we head toward Q1 twenty twenty two commercial launch of our PoNS therapy for gait deficit due to mild-to-moderate symptoms of multiple sclerosis. With approximately one million Americans suffering with MS, there is a high unmet need and PoNS is the only medical device for this indication approved in the United States. 02:53 A few days ago, we received market authorization from the Australian Therapeutic Goods Administration or the TGA for the sale of PoNS as a Class IIa medical device. We have since confirmed the authorization is for short term use by healthcare professionals as an adjunct to a therapeutic exercise program to improve balance and gait, and this is the broadest possible scope. We are thrilled that we will be able to introduce this ground breaking therapy to patients in Australia who need to improve their balancing gait. 03:33 We'll now begin pursuing the pathway toward commercialization in Australia with the objective of leveraging unit it to help fund our U.S. Commercialization launch. Earlier this week, we announced the launch of our Therapeutic Experience Program or TEP with NYU – Langone Health as the first of ten to twelve planned centers of excellence. The TEP study is designed to assess adherence to the portable neuromodulation simulator PoNS therapy in patients with multiple sclerosis and will go a long way toward helping Helius and clinicians assess patients adherence to the PoNS therapy in advance of commercialization. We also expect these centers to be among the first commercial sites to offer PoNS. 04:35 For those who may be new to Helius, let me provide some background on this innovative therapy that we believe has the potential to improve dynamic gait imbalance deficits across a variety of indications. First, PoNS stands for Portable Neuromodulation Stimulator. It is the first and only patented therapy combining trigeminal nerve neuro stimulation via the tongue with physical therapy to reduce symptoms of neurological disease or trauma. 05:10 The PoNS mouthpiece electrodes stimulate the tongue surface, sending signals to the brain. This stimulation is believed to help strengthen the neuro connections associated with balanced and walking when combined with physical rehabilitation. The mechanism of action works through neuromodulation or the modification of the nervous system by targeted stimuli. PoNS is designed to induce translingual neuro stimulation that is trigeminal nerve neuromodulation via the tongue. The device delivers twenty five million pulses per twenty minute session. To the patient it feels like champagne or carbonate water bubbles. 06:03 Another advantage is that there's no procedure or implant involved with PoNS. It simply sits on your time. Gait deficit is disabling conditions, impacting the function, independence and quality of life for people with MS and until now non-pharmaceutical interventions have had limitations. 06:27 In subjects with gait deficit due to mild-to-moderate symptoms of MS, fourteen weeks of PoNS therapy has shown significant gait improvement compared to physical therapy alone, meaning it's both safe and effective. You could see why we're excited about this ground breaking therapy. 06:49 I'll provide more color about our pre-launch strategy, including TEP in a moment, but first I want to share another piece of exciting news. In August, PoNS was granted a second FDA breakthrough designation this time for the treatment of dynamic gait imbalance deficits resulting from a stroke. This is a significant milestone for Helius as an estimated seven million American suffer from stroke complications, and that's seven times the number of afflicted with MS. 07:24 Let's take a minute to cover these highlights in more detail. As I mentioned, we plan to bring PoNS therapy for treatment of MS related gait deficits to the market during first quarter twenty twenty two. Our commercial efforts in the U.S. will focus on raising awareness of PoNS therapy by engaging three primary audiences: first, neurologists and other physicians, who may prescribe our therapy; second, personnel at key neurorehabilitation centers where likely patients will be treated; and third, MS patients themselves through information campaigns and social media. 08:09 An important launching TEP for commercialization is our Therapeutic Experience Program or TEP, which I mentioned at the start of this call. TEP is an open label, interventional, observational outcome research study, which will be conducted at ten to twelve centers of excellence beginning with NYU Langone Health, one of the nation's premier academic medical centers and Dr. . 08:38 In addition to NYU, we plan to partner with neurologists and neurorehab centers which identified as having the greatest potential to be early adopters of our technology and initial efforts will focus on the ten states that comprise more than fifty percent of the targeted MS patients. 09:01 Through TEP, we can establish the relationship between patients adherence to PoNS therapy program, which combines the PoNS device with a fourteen week physical therapy program and functional improvement. In addition to informing the commercial launch, TEP will enable key opinion leaders in the management of the MS to build their knowledge of PoNS therapy. We expect to treat fifty to sixty patients in our study. 09:34 Our other pre-commercial activities including building inventory, finalizing our distribution model, identifying an onboarding neurorehab clinics currently treating MS patients, creating patient access programs and engaging with KOLs and potential strategic partners. During the quarter, we introduced U.S. PoNS treatment website, ponstreatment.com to expand our online resources for U.S. based clinicians and patients. 10:07 We'll also be presenting at several conferences including , which is the America's Committee for treatment and research and multiple sclerosis in February twenty twenty two and which is the American Academy of Neurology in April. And then finally, the CMSC, the consortium of multiple sclerosis centers in March. We will launch in the U.S. with cash pay customers first, while actively pursuing coverage under commercial and government reimbursement programs. 10:43 Last quarter, we mentioned that we hope to obtain Medicare coverage for our PoNS therapy in the United States through the proposed Medicare coverage of the innovative technology or the M-set rule, which was due to go into effect in December, and had the potential to provide FDA designated breakthrough medical devices and expedited pathway to obtaining nationwide Medicare coverage. 11:11 On September fifteen, CMS published a proposal that would repeal the M-set pathway. A thirty day common period was part of the proposal and while we will continue to monitor this, we also remain focused on building out our reimbursement strategy for both commercial and government payers. We are also engaging with commercial payers to establish PoNS pricing in line with pricing for comparable devices used in the neurorehabilitation space. 11:50 Turning now to a brief update on our commercial activities in Canada. Following a period of increased restrictions due to a spike in COVID cases, we are pleased to see Canada making progress toward recovery. An important market in its own right, commercial activities in Canada greatly informed our U.S. Commercial launch providing valuable insight about the PoNS therapy. 12:17 In Canada, PoNS is authorized for the treatment of gait deficits due to symptoms of MS and chronic balanced deficit due to traumatic brain injury. We have now established thirty six clinics throughout the country of Canada. As excited as we are about the commercialization of PoNS, for MS in the U.S. and Canadian markets, we see an even bigger opportunity for stroke patients. Of the estimated seven million Americans who suffer from the physical effects of stroke, eighty percent experienced gait impairment. 12:56 With breakthrough designation now granted, a pivotal trial of PoNS therapy in stroke patients is planned for second quarter twenty twenty two with the aim of obtaining clearance and the second indication. If approved, we are targeting launch commercially during the first half of twenty twenty four. 13:21 With that, let me turn the call over to Jeff to discuss our third quarter financial results.
Jeff Mathiesen: 13:28 Thanks, Dane. It is a pleasure to be with you today. Total revenue was one hundred and nine thousand dollars for the third quarter of twenty twenty one compared to one hundred and thirty one thousand dollars in the third quarter of last year. Product sales in the third quarter of twenty twenty one, however, increased sequentially by thirty nine thousand dollars from the second quarter of this year. 13:53 Revenue in both periods was driven by sales to neuro therapy clinics in Canada that have been authorized to provide our PoNS therapy and remain impacted by this significant business disruption in Canada related to the COVID-19pandemic, as well as temporarily reduced COVID pricing. 14:15 For the third quarter of twenty twenty one, our gross profit decreased to twenty three thousand versus one hundred and nine thousand dollars in the prior year, driven primarily by overhead costs, including wages and salaries of employees involved in the management of supply chain. 14:35 Operating expenses in the third quarter of twenty twenty one increased by zero point six million dollars or seventeen percent year-over-year to four point four million dollars. Expenses during the quarter of the current year included nine hundred thousand dollars of one-time severance costs related to our former Chief Operating officer, including five hundred thousand dollars of non-cash expenses related to the acceleration investing and the extension on the exercise period of options outstanding. 15:10 Operating expenses other than these one-time charges were three point five million dollars during the current quarter. Operating loss for the third quarter of twenty twenty one was four point four million dollars compared to three point seven million for the prior year period. We reported net loss for the third quarter of twenty twenty one of four point seven million dollars or a loss of two point zero one dollars per share basic and diluted, compared to net loss of three point five million dollars or a loss of two point seventy dollars per basic and diluted common share for the same period last year. 15:52 Turning to a discussion of our balance sheet, condition and recent financing activities. Our cash burn from operations for the first nine months of twenty twenty one was approximately nine point nine million dollars compared to nine point -- nine point six million dollars during the first nine months of twenty twenty. Current year cash burn added three point two million dollars during the third quarter. 16:22 As of September thirty, twenty twenty one, we had four point seven million dollars of cash compared to three point three million dollars as of December thirty one, of twenty twenty. We also had fourteen point four million dollars available under our equity line of credit with Lincoln Park Capital, subject to terms and conditions therein, ensuring a source of equity capital if then as needed, which could greatly extend our cash runway. We had no outstanding debt obligations in either period. 16:58 This morning, the company announced the pricing of a nine point six million dollars underwritten registered public offering, which is scheduled to close this Friday subject to customary closing conditions. Shortly before this call, we received notice of the underwriters intend to exercise the over allotment option in full, which will add another one point four million dollars in gross proceeds. 17:26 Following the closing, the spring are September thirty, twenty twenty one pro forma cash balance to fourteen point five million dollars. Looking ahead, while we expect our Q4 expenses to sequentially increase in connection with our pre-commercialization activities, we will continue to maintain a disciplined approach to spending, while evaluating actions to strengthen our balance sheet and support our operations, including our U.S. commercialization efforts. 18:01 Turning to our outlook, until we are able to better assess the impact of the recent COVID restrictions in Canada, we are not currently anticipating fourth quarter revenues to be significantly different from third quarter levels. As Dane mentioned, we expect to begin our commercialization in the U.S. during the first quarter of twenty twenty two and therefore do not anticipate any revenue from sales of PoNS in the U.S. during twenty twenty one. 18:33 In terms of operating expenses, we expect fourth quarter twenty twenty one to reflect the incremental investment related to our pre-commercialization activities as we prepare for U.S. Commercialization. 18:46 With that, operator, let's now open the call for questions.
Operator: 18:51 Participants, we will now begin the question-and-answer session. Speakers, our first question is from Joe Gomes of Noble Capital. Your line is now open.
Joe Gomes: 19:18 Good evening, Dane and Jeff?
Dane Andreeff: 19:21 Good evening, Joe.
Joe Gomes: 19:25 So wanted to start out here, maybe Dane try a little more color. You talked about the therapeutic experience that you're just starting up here, going to be at ten to twelve, you've got the one Langone. Do you going to begin enrollment late in the fourth quarter. I think you said fifty to sixty people. But you're still looking at a first quarter twenty two commercial launch. And I just wonder if you can kind of walk us through the process of why you still think the 1Q twenty two commercial launch will occur if the study really is not going to start and until some time in the first quarter?
Dane Andreeff: 20:08 Yes. So, again, the TEP experience program is there to really expand mind share with these MS experts like Dr. at NYU. It's there to not only expand mind share, but to educate them on the PoNS therapy. So what we'd like to do is start these patients in the sites, these centers of excellence. And our team is preparing and we've always stated that we would launch in the first quarter. So with this new program, it really is an adoption study that we're offering to these MS experts to bring them along to show them how great our PoNS therapy is for their MS patients. And we really are confident that commercialization in the sites and in these centers of excellence will progress not only in the first quarter, but for the full year. So, it is a very targeted launch that we're starting out with.
Joe Gomes: 21:35 Okay. And it sounds on the call, I don’t want to put words in your mouth that the Medicare coverage under the M-set rule is really looking like it's not going to happen. So how far advanced are you with other ways of getting insurance coverage, who you talking to for insurance coverage for the product?
Dane Andreeff: 22:04 I'm going to hand that one over to Jeff at the moment.
Jeff Mathiesen: 22:10 Yes, hi. So as far as you're saying targeting the insurance companies to pay for it? Is that, right? That's question total. Go ahead.
Joe Gomes: 22:24 I was going to say, just it looks like getting coverage under M-set is not going to happen here from what I'm reading. And so just trying to figure out where are you guys in the process, who you are talking to, how far along are you? What do you need to do are proved to the insurance companies in order for some of them to give you coverage?
Jeff Mathiesen: 22:47 Yeah. Okay. Thank you. So it be basically, we'll be going out on a cash pay basis. And with the experience that we get from both the TEP program and with those patients that are on cash pay, it will be kind of case by case basis going to carriers third-party carriers looking for reimbursement and we'll initially target regional third-party payers and then looking to expand from there. And so as we go out through the year, it’s going to take some time to build the data that we can bring to those payers to get reimbursement. And it's just a process that plays out over time. And so we're expecting by the end of the year to have some regionals and signed up and then into next year, giving national payers and by then also looking to get CMS to reimburse for Medicare patients.
Joe Gomes: 23:55 Okay. Thanks for that. And maybe if you could give us a little more color on the Australian market, can you size it for us, again, cash paid first same model, cash pay first insurance later and what's kind of the timing there in terms of getting a commercial launch there?
Dane Andreeff: 24:24 Yes. So, Joe, it's early. We just received authorization. It's the broadest label you could receive. It's for balancing gait deficit, there's no indication attached. So, you could basically use this. It will be up the neurologists, the caregiver, the neuro physical therapist. So there's thirty million people that live roughly thirty million people live in Australia and about thirty five million dollars in Canada. So in Canada, we have two indications both MS and traumatic brain injury. But if you think about this label, it's not only for MS patients with gait deficit or traumatic brain injury with balancing gait deficit. It's also for strokes, cerebral palsy, potentially Parkinson's disease and the like. So, it's actually a much larger market than Canada because of the label that we did received from the TGA.
Joe Gomes: 25:33 Okay. And one more if I may, today's announcement about the raise, I was just wondering if you could kind of walk me through your thought process and looking at a chart of the company on a price chart and the stocks never traded as low as eight dollars and we were middle of last week, it was at fourteen, started slide back some and then they got priced at eight, which just seems to be fairly significant discount to where the stock was trading. So I was wondering if you could kind of walk us through your thought process as to why that price was chosen.
Dane Andreeff: 26:19 Yes. Go ahead Jeff. You could start.
Jeff Mathiesen: 26:24 Right. So as you're probably well aware the price that was chosen is dictated by the investors coming into it. As you said, it's traded pretty nicely over the last year been fairly steady, but we have very little liquidity. And so as we look to bring in institutional investors, named institutional investors, fundamental ones, we wanted to have a straight stack offering. And so we went out to basically looking at the future, making sure that we have a cash runway that allows us to go through commercialization. And at the end of the day when you're doing a financing like this, it's our investors that set the price and we needed to consider what we need from a cash standpoint, and we see a huge opportunity out there and this is a price of giving from here to there.
Dane Andreeff: 27:44 Yes. And just to continue that, this was our first clean just stock only deal after the last three deals had either a half warrant or a full warrant attached. Second, we feel -- we brought in a whole new group of healthcare institutional investors into this deal as well. So the investor group we believe was much stronger. Third, again, like the last two financing rounds, I personally invested in this round as I also bought stock in September in the open market at a much higher price up in the fourteen range. So, as you could see, Joe, I'm a big believer in keeping our head down, keep hitting our milestones and I believe our launch into the next year in our pivotal trial into stroke will provide investors optimal value for their stock.
Joe Gomes: 29:03 Thanks for that insight. Much appreciated.
Jeff Mathiesen: 29:05 And Joe, just if I may go back to your first question, and one thing I didn't mention in there is that we obviously, as we go out, there's no really no other device out there like ours. And so initially, we'll have a generic code, but we are looking at getting fixed code set up as well and that's something that's been in process and we've got some activities around that setup here in the fourth quarter. And if all goes as expected, April first shortly thereafter we'll have fixed code that we'll be using until we get something approved beyond that.
Joe Gomes: 29:57 Thank you.
Operator: 30:03 Thank you participants. I'll now turn it back over to Dane Andreeff for closing remarks.
Dane Andreeff: 30:09 Thank you, operator and thank you, everyone. Receiving our second breakthrough through designation from the FDA for PoNS is a significant accomplishment for Helius, our team and our stakeholders as was the market authorization from the TGA the Australian and therapeutic goods administration. With multiple validation of our innovative technology, we are looking forward to the U.S. Commercial launch and furthering our studies of PoNS therapy and stroke patients. 30:42 Internally, we have strengthened our leadership team and are well positioned to execute our plans. Our platform technology has the potential to help a large population across a variety of indications, including MS, stroke, Parkinson's disease, cerebral palsy, and traumatic brain injury. We continue to believe in our ability to unlock the full potential of neuromodulation and become the standard of care for gait deficit in the U.S. and Canada while bringing value to our shareholders. 31:19 Again, thank you for your time today and for your interest in Helius Medical Technologies.
Operator: 31:29 That concludes today's conference call. Thank you all for joining. You may now disconnect.