Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q1 2024 Earnings Call Transcript

Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q1 2024 Earnings Call Transcript May 13, 2024

Operator: Good day, and thank you for standing by. Welcome to the Helius Medical Technologies First Quarter 2024 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 session. [Operator Instructions]. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Bilski with In-Site Communications. Please go ahead.

Michelle Bilski: Thank you, Kevin. Welcome to the first quarter 2024 earnings conference call for Helius Medical Technologies. This is Michelle Bilski of In-Site 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. At this time all participants have been placed in a listen-only mode. Please note that this call is being recorded and access to the webcast can be obtained through the Investors section of the 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, including statements regarding potential reimbursement pricing, 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. 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 13, 2024. 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.

Dane Andreeff: Great. Thanks, Michelle, and thank you to everyone joining us today on Helius Medical’s first quarter 2024 conference call. In 2024, our focus remains on two things, securing widespread reimbursement for PoNS and achieving FDA approval for stroke. We made progress on both fronts and are confident these milestones are just around the corner. The $6.4 million financing we just announced last week, which extends our cash runway into 2025 will help get us there. I’ll start with our pursuit of widespread reimbursement for PoNS. We are pleased that CMS Medicare understood the benefits of this innovative treatment and establish HCPCS codes for both the PoNS mouthpiece and controller, which went into effect on April 1st.

This was a critical reimbursement and access milestone and the unique HCPCS codes give us the ability to begin negotiating reimbursement with third-party payers. As a reminder, the list price for the PoNS device in North America where it’s indicated is $25,700 comprised of $17,800 for the controller and $7,900 for the mouthpiece. Earlier this month, we were pleased to learn that CMS had released its preliminary Medicare payment determinations for the PoNS controller and mouthpiece and placed Helius on the agenda for the public meeting with CMS on May 29th. As the preliminary payment determination is subject to change, we are looking forward to presenting arguments at the meeting on 29th to support higher reimbursement rates. PoNS is different from any neuromuscular peripheral stimulation therapy.

And so, for the controller, we’ll advocate using the gap-filling methodology based on our list price versus mapping it out to other not comparable neuromuscular stimulation devices. For the mouthpiece, we will argue that is actually a supply that is applied to an individual’s tongue and therefore, the lump sum payment structure is more appropriate than the cap rental structure set in the preliminary determination. And therefore, the gap-filling should be done using the list price. We believe we are in a good position to secure higher rates than those established in the preliminary determination. Once finalized, the payment rates are expected to be effective October 1, 2024. We believe the final determination of these rates will make it easier to expand reimbursement across third-party payers, creating a pathway to positive cash flow as we continue working to secure FDA authorization under PoNS breakthrough designation for stroke.

We look forward to keeping you updated on our evolving discussions with CMS. Turning now toward our pursuit of stroke authorization in the United States. We made several important strides towards this objective during the quarter by adding six more sites to the stroke pathway in both the U.S. and Canada. Based on encouraging results from an earlier trial as well as real world evidence from Canada where PoNS is already authorized for treatment of stroke, the clinical program aims at establishing the effects of cranial nerve non-invasive neuromodulation using PoNS therapy on gait and dynamic balance in chronic stroke survivors. Since gait and balance deficit is a medical condition that almost inevitably leads to falling and increases the healthcare cost burden for these patients.

The stroke registrational program also aims at confirming our real-world evidence that PoNS therapy significantly reduces the risk of falling in at least 28% of stroke patients with gait and balanced deficit as compared to the average 1% to 3% from physical therapy alone. In January, we announced the addition of Brooks Rehabilitation Hospital to our stroke clinical program and it is the first site to have started enrolling patients in the open-label study, which is an integral part of our stroke registrational program because it brings the PoNS clinical experience to additional sites in the United States. Last month, we announced the participation of Shepherd Center in our registrational program. Recruitment for the single-arm study begins this month with a goal of enrolling eight to 10 participants by the end of the year.

Shepherd Center has already been a valuable partner for Helius as part of our PoNS therapeutic experience program, which was designed to evaluate the impact of subject adherence to PoNS Therapy in people with multiple sclerosis MS. In addition to adding more sites to our stroke pathway during the quarter, we aligned with the FDA on our development plan to significantly streamline the size, timeline and the cost of the registrational program. We are targeting regulatory submission by early 2025 with the goal of receiving marketing authorization utilizing PoNS breakthrough designation in stroke later in the year. Well over 5 million stroke survivors in the United States are affected by walking and balance disability, and we are excited for this groundbreaking treatment to reach those who need it.

As we continue to pursue stroke approval, we remain committed to getting PoNS Therapy into the hands of more people suffering gait imbalance impairment due to MS. Those efforts include ongoing engagement with the physical community and when we now have PoNS trained therapists located nationwide. We attended recently the American Physical Therapy Association combined sections meeting, where we had the opportunity to further highlight PoNS therapeutic benefits. PTs are critical to patient success with PoNS and we’re always eager to engage with this important group. Last quarter, I mentioned our efforts to target the Department of Veterans Affairs, which is the largest integrated healthcare system in the United States and sees more than 28,000 cases of multiple sclerosis annually.

I’m pleased to report that we’re officially partnered with Global Government Services and approved supplier to the VA and DoD to make PoNS available to federal healthcare systems. We’ve seen firsthand how PoNS therapy has improved the lives of veterans suffering from MS and we’re thrilled that more service members will have access to this treatment. Turning now to our Canadian activities. In Canada, where PoNS is already authorized for stroke, we are currently working to establish sites in five separate administration regions as parts of a government-funded initiative designed to further validate the effectiveness of PoNS therapy when used by patients suffering the effects of stroke. We believe this initiative will not only accelerate adoption in Canada, but also benefit our pursuit of market access and third-party coverage here in the United States.

Moving into the rest of 2024, achieving reimbursement and making progress on our stroke registrational program remain our top priorities and both sites, both goals are in sight. We could achieve CMS reimbursement as early as October 1st, which would enable us to expand reimbursement across third-party payers, significantly boosting our revenues and giving us a pathway to positive cash flow as we pursue authorization for stroke. With that, let me turn the call over to Jeff to discuss our first quarter financial results in more detail.

Jeff Mathiesen: Thanks Dane. It is a pleasure to be with you today. Total revenue for the first quarter of 2024 was $135,000 an increase of $24,000 compared to $111,000 in the first quarter of 2023, reflecting increased product sales in both the U.S. and Canada. For the first quarter of 2024, cost of revenue was $123,000 compared to $122,000 for the prior year period, remaining relatively flat due to fixed overhead costs. Selling, general and administrative expenses for the first quarter of 2024 decreased to $2.6 million, compared to $2.9 million in the first quarter of 2023, due primarily to a decrease in professional fees and payroll-related expenses, partially offset by an increase in contract manufacturer expense associated with the transition to the new contract manufacturer during the current year period.

Research and development expense for the first quarter of 2024 decreased to $0.8 million, compared to $0.9 million in the first quarter of 2023, driven primarily by a decrease in product development expenses and clinical trial activities as we transitioned our focus to U.S. Commercialization activities. Operating loss for the first quarter of 2024 was $3.4 million, compared to a loss of $3.8 million in the prior year period. We reported a net loss for the first quarter of 2024 of $2.5 million or a loss of $3.08 per basic and diluted common share. We also had a net loss of $2.5 million in the prior year period or a loss of $4.42 per basic and diluted common share. Our cash burn from operations for the first quarter of 2024 decreased to $3 million, compared to $3.2 million in the first quarter of 2023.

As of March 30, 2024, we had $3.6 million in cash and no debt. Last Thursday, we closed on a $6.4 million public offering and received net proceeds of approximately $5.6 million, which will extend our cash runway into 2025. Importantly, this financing also includes one-year warrants for an additional $6.4 million of gross proceeds that are callable by the company within 30 days of announcing the first excuse me, the final reimbursement determination for the PoNS controller on the mouthpiece by CMS. If the stock price at that time is at or above $2.25 per share. We expect final determination to be announced in late summer to be effective October 1st this year. If exercised, the additional proceeds from the exercise of these warrants will fund our operations well into the second half of next year and helps to keep take financing risk off the table.

Turning now to our outlook. While PoNS sales remain on a cash-pay basis and at a price point that is not feasible for the vast majority of patients in our addressable markets, we will expect revenues will continue to be muted. However, as we have discussed, our recent access to VA patients through level government services and the expectation of CMS reimbursement by October 1st, which will facilitate our efforts to expand reimbursement across third-party payers, we believe will position us to significantly boost our revenues beginning later this year and provide us a pathway to positive cash flow. With that, Kevin, let’s now turn the call over for questions.

Operator: [Operator Instructions] Our first question comes from Nicholas Sherwood with Maxim Group. Your line is open.

Q&A Session

Nicholas Sherwood: Can you just go into a little bit more on the timeline with the Lovel Government Services agreement that you signed, kind of like where are you at with that agreement and get like build out a sales team with them or just kind of get some more color on it?

Dane Andreeff: So, we’re in the process right now of having our PoNS Therapy be on contract with the FSS and the GSA contracts, the General Service Administration. This should go public very soon, in the next days, weeks. And then by January 1st, our team and their team will be all trained up internally, and we could start receiving prescriptions, invoices and training VA rehab experts on PoNS Therapy, so that they could start treating their patients.

Jeff Mathiesen: Dane, I think you misspoke, you said January 1st.

Dane Andreeff: I’m sorry. I mean June 1.

Jeff Mathiesen: We’d be trying.

Nicholas Sherwood: So, June 1st, you expect to start receiving prescriptions?

Dane Andreeff: Sometime in, hopefully early June. There’s some training on both sides. But we do have a couple of the VA’s looking at PoNS Therapy for their MS patients right now. So, it’s very exciting. They’ve already targeted at least, we know one VA of 25% of their MS population at that VA.

Nicholas Sherwood: Understood. And then kind of…

Jeff Mathiesen: I was just going to say, so there’s a little bit of an order process. So, as they are looking to write a prescription, they would need to make sure that they’ve got someone trained there before the order could get placed with us. So, there’s a little bit of a order process that plays out as we’re developing these new relationships.

Dane Andreeff: And if you say remember…

Nicholas Sherwood: Do you mean a PTE?

Jeff Mathiesen: Correct. Yes. Physical therapist that would be the one to administer or help with the treatment.

Dane Andreeff: And just to follow on that, yes. So, if you remember, we modulized our PT training. So, once they receive access to the modularized software, they could do it within three hours or less.

Nicholas Sherwood: That kind of leads into my next question. What demand have you seen from new physical therapists taking the training program for the PoNS Therapy?

Dane Andreeff: Yes. It’s been steady and upwards, Nick, on both sides of the border. What we’re seeing, let’s start in Canada. We’re seeing this because the commercial payers want to see more of the map filled in. So, we’ve really pushed into British Columbia, because of what we’re doing there. If you remember the Pacific Blue Cross study and back to work for traumatic brain injury, we had a very successful study that was performed by Pacific Blue Cross, 8 out of the 9 had no longer an issue with balancing key and returning back to work. And of course, we they closed out 5 of their long-term disability claims to save $1.6 million. So that is really an exciting time for us. The payers do want to see us fill in the map with registered PoNS trainers in Canada.

And in the United States, we believe that is what will be part of the process as well. And remember, most patients don’t want to be driving more than 30 minutes to and from their PT, because the 1st two weeks are PoNS performed in clinic. So, the closer we can get registered PoNS trainers to the patients, it makes it much easier for the patient to meet their PT.

Nicholas Sherwood: Are you targeting specific like physical therapists to make sure that you have that geographic coverage in the United States, if and when the CMS codes like that reimbursement is approved?

Dane Andreeff: So actually, what we’re seeing Nick is, we’re seeing a lot of patients wanting to file claims that are coming from existing registered PoNS trainers, which is a good thing. And these are one off claims for MS, for their gait deficit. And we could be helpful there. We’re excited to help them with the commercial payers and start their PoNS therapy as soon as possible. But our goal with reimbursement is also be able to sit down with some of the regional super-regional physical therapy chains. We’d like to partner with them to quickly fill in the map once reimbursement goes effective, hopefully on October 1st this year.

Operator: [Operator Instructions]. And I’m not showing any further questions at this time. I’d like to turn the call back over to Dane for any closing remarks.

Dane Andreeff: Thanks, Kevin. And thank you everyone for following Helius Medical Technologies. Before we go, I just want to thank the team at Helius for their hard work and dedication to bringing PoNS Therapy to the millions who need it. We’re right on the cusp. We’re excited about our upcoming milestones and look forward to keeping you updated as we pursue coverage and reimbursement and authorization in stroke. Thank you again.

Operator: Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect, and have a wonderful day.