Helius Medical Technologies Q2 2023 Earnings Call Transcript

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August 10, 2023

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Helius Medical Technologies Inc. Q2 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Michelle Bilski, Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Welcome to the Q2 2023 earnings conference call for Helius Medical Technologies. This is Michelle Bilsky of Incyte Communications, and Investor Relations for Helius. With me on today's call are Dane Andres, Helius Medical's President and Chief Executive Officer and Jeff McEachern, Chief Financial Officer. At this time, all participants have been placed in a listen only mode.

Speaker 1

Please note that this call is being recorded and access to the webcast can be obtained through the Investors section of the Helius website at www.heliusmedical.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 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 our 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 the call are as of August 10, 2023.

Speaker 1

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

Speaker 2

Thank you, Michelle. Welcome everyone to Helius Medical's Q2 2023 earnings conference call. I'm happy to report that we saw a significant increase in sales during the Q2 of 2023 with revenue up 115% compared to the prior year quarter and up 131% compared to the Q1 of 2023. Increased U. S.

Speaker 2

Sales of PON Systems under the favorable pricing offered through the PTAB program, which terminated on June 30, 2023, in part drove the higher revenues As did the ongoing addition of neurologists and trained PoNS certified therapists recommending PoNS to their patients. PoNS Therapy is a groundbreaking treatment for people suffering from balance and gait impairment. Since the beginning, our goal has been to get this important neurotechnology into the hands of many qualified patients as possible By eliminating barriers to use, we launched PTAAP 1 year ago to give qualified Americans Suffering from balance and gate impairment due to MS, the ability to purchase pawns at a significantly reduced price, lessening the cost burden while we initiated efforts to pursue reimbursement by 3rd party payers and CMS. PTAAP was initially scheduled to expire on December 31, 2022, But due to the program's popularity, we extended it to June 30. CTAP was a great success.

Speaker 2

By subsidizing PoNS Therapy for participants, we meaningfully reduced the major barrier to use and brought relief to a great number of patients than we otherwise would have. CTAP also enabled us to add to our MS patient registry and collect important health economic information to establish the value of PoNS on key clinical and therapeutic outcomes. This patient registry data is a key element to pursuing reimbursement. Going forward, sales of PON Systems will be on a cash basis as we continually to aggressively pursue coverage while also helping patients navigate the reimbursement pathway. As I mentioned before, we believe broad third party payer reimbursement is needed to achieve our full revenue potential, And we remain very optimistic about CMS' transitional coverage of Emerging Technologies Program or TSET, which is proposed accelerated coverage pathway for new and innovative medical devices.

Speaker 2

In June, the CMS announced its proposed TCEP pathway and provided greater clarification on its approach to coverage reviews and evidence development. The proposed TCEP pathway would expedite Medicare coverage of certain breakthrough devices by allowing manufacturers the opportunity for increased pre market engagement with CMS. Through pre market evaluation of technologies and identification of important evidence gaps, TSET aims to reduce uncertainty about coverage options. Under the new guidelines, qualifying breakthrough designations would have temporary coverage within 6 months after FDA market authorization, allowing companies greater time to gather the necessary clinical data to prove efficacy of their products and address any evidence gaps. This is great news for Healius as PoNS has breakthrough designations in both MF and stroke in the United States.

Speaker 2

In addition, pawns was recently awarded durable medical equipment, prosthetics, Orthotics and Supplies or DME POS accreditation by the compliance team, which is authorized by CMS to accredit all DME POS products and services. Organizations that wish to bill Medicare must have accreditation from an approved agency and this certification is a key component in achieving coverage under TCEP and if and when it's passed. As of now, we believe we are on a path toward Achieving coverage in mid-twenty 24 and we'll keep you updated on further developments. On our PoNS Therapeutic Experience Program, otherwise known as PoNS Step, is another way we're bringing our technology to a greater number of patients suffering from balancing gait impairment. As a reminder, POND Step is a company sponsored open label observational trial with a targeted enrollment of 50 to 60 patients that was designed to evaluate the impact of subjects adherence to PoNS therapy in patients with MS in a real world setting.

Speaker 2

Earlier this week, we announced the addition of Montefiore Medical Center in Nyack, New York to PonStep. Doctor. Christopher Langston, who is leading the trial is a renowned clinical researcher of current Advanced topics in MS Management and was one of the first PoNS prescribers. We expect Doctor. Langston and his team at Madeline Borrelli, Multiple Sclerosis Center to be great contributors to the program.

Speaker 2

We now have 6 centers of excellence participating in ONCEP with a goal of enrolling 5 to 10 patients per site. This is higher than the 5 patients per site we originally envisioned as several of our sites are fully enrolled and interested in adding more patients. Enrollment in PONCEP began during the Q4 of 2022 and will continue throughout 2023. We recently announced the expansion of our Medical University of South Carolina stroke trial from 12 to 60 patients. This investigator initiated study evaluates the effects of cranial nerve Non invasive neuromodulation delivered using PoNS therapy on gait and dynamic balancing chronic stroke survivors.

Speaker 2

In Canada, where PoNS is already authorized for stroke, we've seen significant improvement in gait and a Expanded study are significant steps forward in our efforts to leverage the breakthrough designation and pursue approval for stroke in the United States. As a reminder, we previously were able to use results from similar clinical studies and World War Data to receive authorization for MS in the United States. Turning now to our Canadian activities. The timing of some orders and activity originally anticipated in the first half of 2023 has slipped into the second half of twenty twenty three, resulting in lower than expected Canadian revenues during the 1st 6 months of 2023. Having said that, we believe this timing difference will result in a stronger third quarter, which typically experiences seasonal weakness and a strong finish to the year.

Speaker 2

Because PoNS is authorized Encanda for 3 indications, MS, stroke and TBI, the market could be much larger than the U. S. Market in the near term. Now let me turn the call over to Jeff to discuss our Q2 financial results in detail.

Speaker 3

Thanks Dane. It is a pleasure to be with you today. Total revenue for the Q2 of 2023 was $256,000 an increase of $137,000 compared due to the $119,000 in the Q2 of 2022, resulting from increased U. S. Sales of PON systems primarily due For the Q2 of 2023, cost of revenue was $184,000 compared to $88,000 for the prior year period, primarily attributable to the higher sales compared to the same period in the prior year.

Speaker 3

Selling, general and administrative expenses for the Q2 of 2023 of $2,600,000 were comparable to the $2,500,000 reported in the Q2 of 2022. Research and development expenses for the Q2 of 2023 decreased to $700,000 compared to $1,000,000 in the Q2 of 2022, driven primarily by a decrease in product development expenses and clinical trial activities as the company transitioned to U. S. Commercialization activities. Total operating expenses for the Q2 of 2023 decreased to $3,300,000 compared to $3,500,000 in the Q2 of 2022.

Speaker 3

Operating loss for the Q2 of 2023 was $3,200,000 compared to a loss of $3,400,000 for the prior year period. We reported a net loss for the Q2 of 20 $23,000,000 of $1,600,000 or a loss of $0.06 per basic and diluted common share compared to a net loss of $3,800,000 or a loss of $0.97 per basic and diluted common share for the same period last year. Our cash burn from operations for the Q2 of 2023 was $2,700,000 compared to $3,700,000 for the Q2 of 2022, reflecting the results of our focus on managing cash burn and extending our cash runway further into 2024. As of June 30, 2023, We had $8,600,000 in cash and no debt. On June 23, 2023, the company entered into an agreement to create an at the market offering program or ATM under which the company may offer and sell shares Having an aggregate offering price of up to $2,000,000 providing Helius the ability to access additional cash opportunistically or on an as needed basis.

Speaker 3

As of June 30, 2023, no issuances of securities have occurred in connection with the ATM. Turning now to our outlook. Management currently expects 3rd quarter and full year 2023 revenue to be above the comparable periods in the prior year, with the shift in sales mix to be more heavily weighted In Canada, offsetting an anticipated decrease in the U. S. Following the end of the PTAB.

Speaker 3

Future U. S. Sales of PoNS are expected to be at our cash pay price until we gain reimbursement by CMS and third party payers. With that, operator, let's now open the call for questions.

Operator

Thank you, Jeff. We will now conduct the question and answer session. Please standby while we compile the Q and A roster. Our first question is from Jonathan Aschoff with ROTH MKM, please proceed.

Speaker 4

Thank you. Good afternoon, guys. I was wondering, how exactly does receiving DME POS accreditation, alter your approach to seeking U. S. Reimbursement?

Speaker 4

I mean, you just mentioned it Or can you deal with payers in any materially different way?

Speaker 2

Hi, Jonathan. This is Dean. Thank you for the question. Right now, we're actually looking at multiple And just being DMA accredited and going towards CMS for coding and Eventual reimbursement is just one pathway using the DME approach. The other pathway, of course, which we mentioned, The TCEP pathway and we would also need the DME accreditation towards that.

Speaker 2

Regarding private payers, Right now, given that we are in the process of collecting our codes, we are And we'll be doing more of going down the reimbursement pathway for patients on a miscellaneous code.

Speaker 4

Okay. What can you say about the statistical power with 60 stroke patients in the stroke trial?

Speaker 2

So we have a data development plan in place. We're hopeful On increasing the number 60, we just haven't Talked through that yet, Jonathan, but we're happy where we are at 60 and hopefully we could move that number up With our data development plan with the FDA.

Speaker 4

Okay. And thank you. And lastly, how many more sites do you wish To add to POND step and when will we see any of those results given that the June corporate slide deck on your website looks to be out of date regarding timing for PoNSDAP as well as the stroke trial actually.

Speaker 2

Yes. We expect at least 1 to 2 more, Jonathan. And as you noted and we noted that we're increasing the enrollment at each site, Giving patients more than 5 devices per site now. And exchange. Yes.

Speaker 4

That sounds great. That's all for me. Thank you.

Speaker 2

Great. Thanks, Jonathan.

Operator

Thank you. Please standby for the next question. Our next question comes from Jeff Cohen with Ladenburg Thalmann and Co. Please proceed.

Speaker 5

Hi, Dane and Jeff. This is actually Destiny on for Jeff. Thank you for taking our questions. I guess I would like to kind of follow-up on the previous question. That's a big step up from 12 patients to Deanna, I'm wondering if you can just discuss a bit about the drivers of that increase.

Speaker 2

Well, I think the drivers are really Connected towards our breakthrough designation in stroke, that's our second one. We're definitely in the less than 1% Of the medical device companies that have a breakthrough to have 2 breakthroughs. And we believe this stroke Trial with Doctor. Steve Coats at the University of South Carolina could potentially become much larger. And if so, potentially, we will be able to use this data In other data, to go down our breakthrough designation pathway with the FDA seeking authorization In stroke.

Speaker 5

Okay. Got it. Got it. Okay. And then I'm curious, Jeff, maybe this one is for you.

Speaker 5

That revenue that was pushed into the second half of twenty twenty three, is that because of any Macroeconomic factors you can call out or is it simply just a timing of orders issue?

Speaker 3

It's more the timing of orders issue. There's some things that have been worked on in Canada that we had anticipated to play out earlier in the year That have slipped into the second half of the year, but they're still Very active and we still expect them to happen. And so as we had planned out our year, it was just something that ended up slipping into the second half That's all.

Speaker 5

Okay, perfect. Thank you. And then can you talk a little bit about how the funnel looks Currently, especially since you're moving away from kind of that subsidized price, any changes there?

Speaker 2

No changes. It's a very active funnel with our e commerce Site with partnered with Upscript. Folks are still coming in. There's multiple ways patients Interact with us, a lot of inquiries come right to Helius. And of course then With that interest in those questions answered for the U.

Speaker 2

S. Patients that are on label, They would be directed to the e commerce platform. And remember the e commerce platform does a number of things For the patient, it reduces the patient's time to get an appointment with their neurologist. That's a really big factor these days post COVID. What we understand the average time to get a Appointment with your neurologist is up to 3 months now, where having the telehealth, telemedicine site, e prescribing site, we're able to really allow the patient To get PoNS Therapy faster, quicker and start their treatment with their physical therapies.

Speaker 5

Okay, got it. Thank you. Couple more for me, if that's all right. Can you just remind me The timing on the TSET decision?

Speaker 2

So right now, we've got about 20 more days In the 60 day comment period, it's fast and furious. I've been on probably 2 calls a week With Wavius and also some of our congressmen and senators, It's with this comment period, this is where we're really allowed to change the policy, which was written at CMS and hopefully towards our favor, the medical device companies. Right now without T sat on average, It takes Scott Whitaker at AvaMed said it takes on average 5.7 years For a medical device company to get reimbursement through CMS.

Speaker 6

Wow. Okay.

Speaker 2

Excellent. Yes, that's a big number. Yes. So tSED is very important, not only for Commercializing in MS and our reimbursement. But if you think about it, our second breakthrough in stroke, About 90% of stroke patients are covered by Medicare, by CMS.

Speaker 5

Okay. All right. Got it. And then lastly, can you call out any scientific conferences you'll be attending in the second half of 20 3 and maybe the first half of twenty twenty four?

Speaker 2

Yes. We have one scheduled, but it's on the neurological Physical therapy side, we will not be presenting any data there, but we'll be in the right Place with neurologists and their neuro PTs.

Speaker 5

Excellent. Thank you so much for taking our questions.

Speaker 2

Great. Thank you, Destiny.

Speaker 3

Thanks so much.

Operator

Thank you. Please standby for our next question. Our final question comes from Anthony Vendetti with Maxim Group. Please proceed.

Speaker 6

Thanks. Hey, Dane and Jeff. Just in terms of Hey. Hey, how are you guys doing?

Speaker 3

Good.

Speaker 6

Good. Can you talk about the distribution agreement that you signed with HealthTechConnex? How is that going? Is that starting to bear fruit? Can you just talk about Where that's at, at this point?

Speaker 6

And then I have one follow-up.

Speaker 3

Sure. Sure. This is Jeff. I'll take That question. So again, it was a we had an agreement with them previously and we ended up entering into a new agreement that Place the previous one.

Speaker 3

And so that the agreement provides them the exclusive distribution in Western Canada area. And that is something that is going well. We've got a good relationship with them. And so under the agreement, there are purchase requirements that they have to make from us. And they also do a lot in working with us in promoting ponds.

Speaker 3

And as we're trying to Established other programs and reimbursement in Canada. We also are working with them to Yes, insurance companies interested in reimbursing pawns in Canada. So They're a very strong partner and that agreement is progressing well.

Speaker 6

Okay, great. And In terms of the e commerce platform, how do you track Or do you track the traffic that you see there? Obviously, that helps you a lot in terms of Reorders and so forth. Maybe just talk about what trends are you seeing On that platform?

Speaker 2

Yes. So in that funnel, there's about 12 steps that we track towards that funnel, Anthony. So, of course, We get a lot of inquiries. They come in. They fill out a questionnaire.

Speaker 2

Do they have MS? Yes. Do they have gate deficit? Yes. There's a large questionnaire before they go down the pathway towards A telemedicine appointment.

Speaker 2

Some of them already have prescriptions and we use our Online, e prescribing platform to Dispense the product to the patient if they have the prescription. And then if they ask for An appointment, if they qualify, the doctor Prescribes any prescription to them, they could have it filled that way. We ship out the product that day and they could Have the product at their home within 2 days from that. Right now, like Jeff said, we expect A slower second half until we get reimbursement, but that doesn't slow the inquiries. The inquiries are very steady, coming into not only our Helios website, Our phone number, inquiry, phone number, e mail inquiry, but we also get them to Upscripts, Our partnership with Upscripts, to fulfill an order as well.

Speaker 2

So we track everything, Anthony. We track our Google searches and awareness there, what our brand's doing, what people are looking for, Searching for and really the biggest thing they're searching for is a viable treatment for balance and gait deficit. It comes across as the most common symptom in neurological diseases like MS. But Helius Medical and PoNS Therapy gets picked up on Google searches now continuously and we continuously see Inquiries so that we could educate the patients.

Speaker 6

Okay. Okay. But the point being is Until there's reimbursement, you wouldn't be surprised If clicks to the site or visits to the site slowed a little bit in the second half?

Speaker 2

I would say it would be constantly growing through the second half, because you're talking about Really getting through the first part of the funnel. And once we collect that inquiry And whether they're willing to pay cash, of course, or go down the reimbursement pathway, Remember, the way we see it as we have that patient as a future pain a future PoNS patient. It just might be delayed 3 to 6 months. If there's unable to pay cash or go down the reimbursement pathway.

Speaker 6

Okay. So they'll still be coming to they'll still be visiting the site. It's just a matter or not whether the follow through happens depending on whether They elect to pay cash or they wait until the reimbursement. And at which point when that happens, the ones that are waiting, Because you're tracking so many different metrics, you'll be able to reach out to them at that point?

Speaker 3

Correct.

Speaker 2

That's correct.

Speaker 3

Yes. Okay. All right. Good.

Speaker 6

All right. Thanks very much. Appreciate that. I'll hop back in the queue.

Speaker 3

You bet.

Speaker 6

Anthony, I'd

Speaker 3

say one thing before you Lee, just getting back to your first question. I did want to point out as you look in the 10 Q and that sales breakdown, Canada for the We've talked about the fact that Canada was lighter than expected and you asked about the agreement with HTC. But I did want to point out that Canadian sales in the second Quarter were more than double the 1st quarter level and we're above the prior year comparable quarter level as well. We are seeing good activity there. We just had some other things that we hadn't planned on that have gone into the second quarter.

Operator

Thank you. At this time, I would now like to turn the conference back to Dane for closing remarks.

Speaker 2

Great. Thank you, Hope, and thank you everyone for following Helius Medical Technologies. We look forward to keeping you updated as we pursue coverage

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Have a great

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Helius Medical Technologies Q2 2023
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