Helius Medical Technologies Q1 2023 Earnings Call Transcript

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May 11, 2023

Key Takeaways

  • Q1 revenue of $111K fell short of expectations and down from $190K a year ago, driven by timing fluctuations, cannibalization from the therapeutic experience program, and e-commerce transition challenges.
  • Company reaffirms 2023 guidance to exceed 2022 revenues despite cash-pay sales, pursuing broad third-party payer coverage via the TSET pathway and potential Medicare breakthrough designation, while offering an 85% PTAP discount.
  • Launch of PONStherapy.com enables online health evaluations and direct-to-doorstep device delivery, streamlining patient onboarding and showing early strong adoption.
  • Real-world Canadian data show 70% of stroke patients achieved significant gait improvement (28% no longer at fall risk) and 74% of TBI patients saw balance gains, far exceeding standard rehab outcomes.
  • Q1 net loss narrowed to $2.5M (vs. $4.3M prior year), cash burn fell to $3.2M, with $11.3M in cash ending the quarter, extending runway beyond 2023.
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Earnings Conference Call
Helius Medical Technologies Q1 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Helius Medical Technologies Inc. Quarter 1 2023 Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session.

Operator

You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Balouski of Incyte Communications. The line is now yours.

Speaker 1

Thank you, Gerald. Welcome to the Q1 2023 earnings conference call for Helius Medical Technologies. This is Michelle Bilsky of Incyte Communications, Investor Relations for Helius. With me on today's call are Dane Andreef, Helius Medical's President and Chief Executive Officer and Jeff Matheson, Chief Financial Officer. At this time, all participants have been placed in a listen only mode.

Speaker 1

Please note that this call is 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 ks 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 May 11, 2023. 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.

Speaker 1

I would now like to turn the call over to Dave Andreeks, President and Chief Executive Officer of Helius.

Speaker 2

Thank you, Michelle. Welcome everyone to Helius Medical's Q1 2023 Earnings Conference Call. Klance Therapy has been commercially available in the United States for 1 year and in that time we've seen a steady increase In the number of Americans who've used PoNS to treat balance and gait impairment due to multiple sclerosis as well as in the number of registered POND therapists and physicians who have introduced POND into their day to day practice. The rollout continues and we've consistently seen new increase each week. PoNS is the only portable and readily accessible neurostim therapy with the potential to generate neuroplasticity, which makes PoNS Therapy a game changer for those affected by MS.

Speaker 2

PoNS devices are currently on a cash pay basis With the U. S. Cash price of $14,500 discounted substantially from our list price of $25,700 which is comprised of a one time cost of $17,800 for the controller, plus $7,900 As mentioned in last quarter's call, sales can be difficult to predict and are subject to quarterly fluctuations. Our Q1 revenue came in below expectations due to a combination of these timing differences as well as some cannibalization by our therapeutic experience program, otherwise known as POND STEP, at certain sites and the short term impact of refining Our processes as we transition to e commerce. With that said, we are excited about the potential of POND To continue gaining traction in the U.

Speaker 2

S. And our outlook for the year remains unchanged, we project 2023 revenues to exceed 2022, even as pawn sales in the U. S. Are expected to remain On a cash pay basis throughout the remainder of the year, we believe broad third party payer reimbursement if needed to achieve our full revenue potential and we are pleased with the progress we're seeing with the transitional coverage of Emerging Technology or the TSET program, which is CMS's proposed accelerated coverage Pathway for new and innovative medical devices. In March, a bipartisan breakthrough designation device bill was reintroduced to Congress and the OMB, which would allow companies with a breakthrough designation to be covered by Medicare for 4 years.

Speaker 2

PoNS has breakthrough designations in both MS and stroke in the U. S. And we are closely monitoring this legislation. While we actively pursue coverage, we are pleased to offer our Patient Therapy Access Program or PTAP, so that the cost doesn't have to be a barrier to treatment. In January, we announced the extension of PTAP through June of 2023, whereby qualifying patients can purchase on label PoNS Therapy at an 85% discount to list price.

Speaker 2

We want as many qualifying patients as possible to benefit from PoNS Therapy and cost is just one impediment We are trying to help patients overcome. For those suffering walking challenges, simply leaving the house can be a daunting task. To bring PoNS literally closer to the home, we recently launched pawntherapy.com, which allows people living with MS Who wish to seek PoNS treatment to conduct an online health evaluations with qualified medical providers, fulfill prescriptions and arrange for PoNS devices to be delivered directly to their doorstep. The first PoNS devices were delivered in January, Shortly after the site went live and we've already seen strong adoption, users appreciate the ability to shorten and Streamline the process and achieve quicker release. We continue to tweak the process And online experience for PoNS Therapy patients and believe this will be the predominant method for cash pay patients to accept PoNS Therapy in the U.

Speaker 2

S. PoNS devices must be used in conjunction with supervised therapeutic exercise program And quickly matching patients with trained physical therapists is an important part of the process. Since introducing an online training portal last year, we've been able to train physical therapists at a quicker pace, which means patients no longer need to wait months for a trained therapist to be available. Educating the broader community about The benefits of PoNS Therapy is another key part of reaching as many patients as possible. Last month at the American Academy of Neurology Annual Meeting in Boston, we exhibited PoNS for the first time since its commercial launch.

Speaker 2

Because of the broader set of indications across North America, we were able to present new real world efficacy and safety evidence Regarding the effects of PoNS Therapy with stroke, MS and mildamodrick TBI, traumatic brain injury for patients. For instance, data from Canada shows that at the end of a 14 week PoNS Therapy treatment period, Approximately 70% of stroke patients had a statistically significant improvement in their gait. And among them, 28% were no longer at risk of falling, a result of particular significance Since routine rehabilitation physical therapy only provides a meaningful shift in the risk of falling in the 1% to 3% of stroke patients. Furthermore, 74% of individuals with traumatic brain injury Experienced significant improvement in their balance. PoNS is authorizing U.

Speaker 2

S. For MS and has a breakthrough designation for stroke. But this evidence really sheds light on the ability of PoNS therapy to mitigate the impact Various life altering neurological conditions can have on gait imbalance. This is especially significant Since according to the CDC, dollars 50,000,000,000 is spent each year on medical costs related to non fatal falls And 1 out of 5 falls causes a serious injury. With that, I'll now turn to our Canadian activities.

Speaker 2

PoNS has been commercially available since 2019 for MS and TBI and was recently authorized for stroke. An estimated 878,000 Canadians are currently living with stroke, With more than 89,000 new strokes occurring each year and gait impairment is a major source of post stroke Not only was this a huge win for Canadians suffering balance and gait impairment due to stroke, But as I mentioned a moment ago, the broader set of authorizations highlights the therapeutic potential of PoNS. The real world data we've gathered makes it increasingly evident that PoNS Therapy can provide significant And clinically meaningful improvement in balance and or gait regardless of the underlying medical condition. In March, we extended our partnership with HealthTechConnect, a leading health technology company specializing In Neurotechnology Innovation, our new agreement grants HTC the exclusive right to purchase, market, sell and distribute ponds throughout the Metropolitan Vancouver area subject to certain minimums. HCC has been an important partner for Healius, and we're excited to deepen our presence in Vancouver Through HCC's network of leading edge neurorehabilitation clinics.

Speaker 2

With this partnership in place and the multiple indications of the Canadian market could be as large as the U. S. Market in the near term. Now let me turn the call over to Jeff to discuss our Q1 financial results in detail.

Speaker 3

Thanks Dane. It is a pleasure to be with all of you today. Our revenue for the Q1 of 2023 was $111,000 A decrease of $79,000 compared to $190,000 in the Q1 of 2022, primarily attributable to lower Canada product sales, partially offset by net product sales in the United States. Canada product sales for the prior year included approximately $120,000 of revenue recognized in connection with the sales of PoNS devices under our prior distribution agreement with HTC. For the Q1 of 2023, Cost of revenue was $122,000 compared to $124,000 for the prior year period, remaining relatively flat due to fixed overhead costs.

Speaker 3

Operating expenses for the Q1 of 2023 decreased by $3,800,000 compared to $4,600,000 in the Q1 of 2022 due primarily Our loss for the Q1 of 2023 was $3,800,000 compared to $4,600,000 in the prior year period. We reported a net loss for the Q1 of 2023 of $2,500,000 or a loss of $0.09 per basic and diluted common share compared to a net loss of $4,300,000 or a loss of 1.1 and $0.15 per basic and diluted common share for the same period last year. Our cash burn from operations for the Q1 of 2023 was $3,200,000 compared to $4,700,000 for the Q1 of 2022, reflecting our focus on reducing cash burn and extending our cash runway beyond 2023. As of March 31, 2023, we had $11,300,000,000 Turning now to our outlook. The company currently expects Q2 20 revenue to be above the prior year quarter and Q1 of 2023 levels, factoring in potential delays for some portion of U.

Speaker 3

S. Patients pursuing insurance coverage prior to filling their prescriptions. Company currently expects 2023 revenues to exceed prior year levels, but we may continue to experience additional quarterly fluctuations as we make refinements to our U. S. Commercial rollout of PoNS.

Speaker 3

With that, Gerald, let's now open the call for questions.

Operator

Thank you. At this time, we will conduct a question and answer session. Please standby while we compile the Q and A roster. One moment please. Our first question comes from Jonathan Ashcroft of ROTH MKM.

Operator

Your line is now open.

Speaker 4

Thank you. Good afternoon, guys. And I guess my first question is for Dane. What's the U. S.

Speaker 4

Reimbursement strategy Taking into consideration the importance of CMS's new T set pathway?

Speaker 2

Yes. So there are 2 pathways Jonathan and Hello and thank you for your questions. First is the old fashioned pathway of coding and receiving the economic benefits of your code. We are going for 2 codes, 1 for the controller and of course, 1 for the mouse keys. But what's transpiring right now?

Speaker 2

And it is becoming clear with the reintroduction of the bill To put the breakthrough designation back into T SEC, it would allow us Our first four years for MS to be reimbursed and that would be the fastest and quickest way For us to receive reimbursement under Medicare.

Speaker 4

Okay. Also, what's your reimbursement strategy In Canada for TBI and stroke.

Speaker 2

Yes. So right now, we are engaged with multiple, Not only provincial, but nationwide private insurers in the TBI area. We're very excited because we are have been doing payer trials with some of the Insurers in TDI and we are seeing some dramatic effects given that the data is very, very good. We're just waiting for them to finish their trial so that we'll be able to report on this. But my belief is, we should eventually start seeing reimbursement, not only in TBI, but also in stroke.

Speaker 2

Right now, because of how the TDI claims are set up, a lot of these long term disability claims Can average 500,000 to 600,000. And if we're successful in treating TBI in balance and gait, We can get a lot more people back to work and also closing out those claims for business earnings companies.

Speaker 4

Okay. What relevance, if any, does your stroke authorization in Canada mean for the pathway to U. S. FDA stroke approval?

Speaker 2

Well, 1st and foremost, the data that we and our application to Health Canada, We had some outstanding data, which I mentioned, a 28% reduction involved in stroke versus 1 to 3 of just rehab therapies by itself. We'll be Hopefully, soon here launching our MuSC, the University of South Carolina pilot trial. I mentioned that we have our 2nd breakthrough designation and it's in balance and gate due to a stroke and we're looking at not only the subacute, but Also the chronic indication as well. So with MS, the indication It is a 1,000,000 patients where roughly 700,000 have a very tough time walking, But in stroke, about 80% of the stroke patients in chronic stroke, which is 7,000,000 In chronic stroke, 80% of them go right into rehab because of their balance. So it's an exciting time for us to go down that path.

Speaker 2

So yes.

Speaker 4

Lastly, are there still 5 sites For POND STEP or are there more?

Speaker 2

There is 5 sets, 5 POND STEP. All of them are currently enrolling, which is very nice to see, and we look forward to Looking at the data, but also these key opinion leaders are getting great experience And we hope and look forward to them riding on What they've experienced with their MS patients' efficacy and safety due to PoNS Therapy.

Speaker 4

Actually, lastly, lastly, your quarterly R and D and SG and A, the way your cash would work, the way you say it is if those expenses or flat quarter over quarter, maybe even flat to down. Does that make sense to you?

Speaker 3

Yes, this is Jeff. So, yes, it does. 1st quarter typically tends to be a little bit stronger on the SG and A side because we have the Costs that go into doing the audit and getting ready for the annual meeting and kind of updating some of our registration filings and things like that. So Typically, it tends to be a little bit stronger. And as we go forward, we'll be again Really closely managing our cash to make sure that we have cash getting into next year.

Speaker 3

And then obviously a component of the expense Well, as non cash equity comp, so that always gets pulled out.

Speaker 4

Thank you, guys. That was very helpful.

Speaker 3

You bet. Thank you.

Operator

Thank you. Thank you. One moment please for our next participant. Our next question comes from Anthony Vendetti of Maxim Group. Your line is now open.

Speaker 5

Hi. This is Mick Sherwood speaking for Anthony Vendetti. Have you seen any sales or results from the HTC agreement?

Speaker 3

Yes. So, we again, we renewed that this quarter. We typically don't report sales by customer. Last year, we did have a big Revenue component that came out from that agreement, it was kind of more of A one time type of thing and we commented it on it last year. It had to do with the delivery of the remaining devices That had been part of the original agreement.

Speaker 3

And so those original devices were included in deferred revenue Since that agreement was initially put in place and so we would report on what came out And of the deferred revenue and into revenue each quarter, but we're not going to necessarily be reporting by customer on a go forward basis.

Speaker 5

Yes. Thank you for that detail. And do you have the number for how many physical therapists you trained in In the Q1 or the total number of physical therapists you've trained through the online training program?

Speaker 2

We haven't released those numbers. All I could say is that they're increasing every quarter since we started the new online POND's software to register physical therapists and that's not only in the U. S, But we have been offering and training up new therapists and new clinics in Canada as well.

Speaker 5

Okay, perfect. Those are all my questions. Thank you for your time and answering them.

Speaker 2

Thank you, Nick.

Operator

Thank you. One moment please. Our next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann. Your line is now open.

Speaker 6

Hey, thank you. This is actually Destiny on for Jeff. We appreciate you taking our questions. I guess I'd like to start with, I guess, what was some of the feedback you saw from the physicians and the key and all that from the presentations At the neurology meeting, if you could just give us an idea of the feedback that you received. I'm sure it was positive, but more detail would be great.

Speaker 2

Yes. 1st and foremost, thanks, Stephanie, and you sound so much better than Jeff. But 1st and foremost, at AAN, which was the last conference we attended, we had a full booth there, CMO was there, medical affairs, our sales team was there. The biggest response was We didn't know about you guys. We never heard about you guys.

Speaker 2

Matt, this is amazing. Look at we had our TV up at our booth and There is a wonderful video that was put together from our medical team, how we separate Ourselves from the rest of non implantable devices regarding our mechanism of action and how we Promote the potential of neuroplastic effects to your brain. So that was the first thing. And then The second thing was there was a little bit of misinformation that we corrected immediately. Some neurologists thought You would have to do 14 weeks all in a PT clinic and that is just not true.

Speaker 2

The 1st 2 weeks are done with your physical therapist And then the last 12 weeks, you take your device at home and complete your PoNS therapy, your physical exercise regime.

Speaker 6

Wow, very interesting. So broader awareness and then kind of, I want to call it, busting some myths. That's Really interesting. Okay. And then maybe I'll just pivot over to your e commerce strategy.

Speaker 6

How are you progressing with that? What are any updates you can give us, etcetera?

Speaker 2

Sure. So again, The Q1 was our full Q1. Definitely, the way I looked at it is, we launched it at year end And we knew that the first new inquiries coming in was a learning experience For us and our partner, we believe over the quarter, especially near the end of the quarter and even into April May, we're improving the site. We are doing a lot more for the people for the patients and the inquiries Starting at the top of the funnel and helping them explain how to get through to the bottom, meaning to where they actually check out and use their credit card. There's multiple steps.

Speaker 2

If you have a prescription, you've already gone to your neurologist, they were getting confused how to get through our funnel. We believe now that there is a much simpler way if you do have a prescription. If you don't have a prescription, then it's a standard way, Fill out your questionnaire, ask for your telehealth appointment, that usually gets set up within 24, 48 hours. And again, if you are an MS patient with Gait, you potentially could be Viable and be approved for the PTAP, the Patient Therapy Access Program. And also we offer on a volunteer basis to be a part of our registry.

Speaker 2

And our registered data is very important for us because it's a 3 year registry And we are collecting longer term data for our MS patients in the MS community, not only For the patient, but also the neurologists and hopefully the payers.

Speaker 6

Okay, got it. Thank you for all that. I appreciate it. I think that does it for us. I'll go ahead and jump back in queue.

Speaker 6

Thanks again.

Speaker 2

Great. Thanks, Destiny.

Operator

Thank you. At this time, I would now like to turn it back to Dane Undrieff, CEO for closing remarks.

Speaker 2

Thanks, Jared. Thank you everyone for following Helius Medical Technologies as we continue to bring POND therapy to the millions who need it. We're pleased so far. We've come in the past year and look forward to sharing our progress in the future quarters. Thank

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