Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q2 2024 Earnings Call Transcript August 12, 2024
Operator: Good day, and thank you for standing by. Welcome to the Helius Medical Technologies Second Quarter 2024 Earnings Conference Call [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Bilski, Investor Relations for Helius Medical. Please go ahead.
Michelle Bilski: Thank you, operator. Welcome to the Second Quarter 2024 Earnings Conference Call for Helius Medical Technologies. This is Michelle Bilski 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. 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 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 our most recent quarterly report 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 Web site. All statements made during this call are as of August 12, 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 Mr. Andreeff.
Dane Andreeff: Thanks, Michelle. And thank you, everyone, joining us today on Helius Medical’s second quarter 2024 earnings conference call. During 2024, our priority has been to get PoNS therapy to as many people suffering from MS as possible. We’ve seen firsthand how our innovative technology makes a meaningful difference in a patients fight against gait and balance deficit, a common but devastating symptom of MS. And I’m proud to say our efforts during the second quarter and recently have generated significant momentum toward greater access.
Jeff Mathiesen: Go ahead, Dane. I was going to step in. Go ahead.
Dane : Yes, I’m getting a lot of feedback. This line isn’t working properly. So Jeff, do you want to step in, please?
Jeff Mathiesen: I’ll keep going and why don’t you dial back in and give another shot. Specifically, in April, we partnered with Lovell Government Services, an SBA certified service disabled veterans owned small business to make PoNS therapy accessible to MS patients treated at the VA and through our other federal agencies. The VA is the largest integrated healthcare system in the United States and home to a network of multiple sclerosis centers of excellence. The VA estimates that between 65,000 and 70,000 veterans in the US live with MS. As the only portable and readily accessible therapy that may lead to neuroplasticity, PoNS is a potential game changer for these veterans and their families and we’re happy to be a preferred provider and help more service members access this treatment.
Shortly thereafter, in May, PoNS was approved for inclusion in Lovell’s VA federal supply schedule and the General Services Administration Advantage contracts at pricing of $23,843.72 and $7,344.97 for the PoNS device and the PoNs mouthpiece, respectively. Also in May, we received the first third party reimbursement of $23,900 from a major insurance carrier for a PoNS device. Then in July, PoNS was approved for inclusion in Lovell’s DAPA contract for the Department of Defense at $23,724.50 and $7,308.25 for the PoNS device and the PoNS mouthpiece respectively. These were all important accomplishments in establishing market pricing for PoNS as we pursue reimbursement at CMS and third party payers. Last quarter, CMS assigned HCPCS codes covering the PoNS controller and mouthpiece.
And in May, released its preliminary Medicare payment determinations for both. This was a significant reimbursement and access milestones for Helius and we were gratified to know that CMS understood the benefits of this innovative treatment. We were pleased with this development but believe there is a strong argument for higher reimbursement rates for both the mouthpiece and controller, which we presented at the CMS public meeting on May 29th, as well as in subsequent written communications. First, we argued that it was appropriate to categorize the mouthpiece as a supply item to be reimbursed on a lump sum payment structure. As a reminder, the mouthpiece has a 14 week life and involves application to a patient’s tongue. So therefore, we believe a 13 month cap rental structure is not appropriate.
Additionally, we provided recent contract pricing and invoices to support the market pricing at pricing levels I previously discussed to be used for setting of the reimbursement using the GAAP billing method. We also articulated how PoNS is not a neuromuscular peripheral stimulation therapy and therefore, it is not appropriate to map pricing to such devices. Instead, we argued reimbursement for the controller should be established using the GAAP billing methodology based on market pricing. CMS is expected to publish final reimbursement rates in the coming weeks. Once finalized, the payment rates will be effective October 1, 2024. We are also actively assisting several MS patients as they submit claims with other third party payers on a one-off basis when it comes to secure reimbursement.
Beginning in June, we began building out a sales rep organization to service the VA sites throughout the US. To date, we have established sales representatives covering 13 states, including Texas and Florida plus Puerto Rico. We believe having boots on the ground representatives focused on neurological disorders and that have established relationships with the individual VA sites will be critical to building out sales across the VA facilities in the US. I’ll pause for a second to see if Dane has rejoined.
Dane Andreeff: I have, Jeff, thank you. Let me continue. While much of our focus during the quarter was on removing barriers to access and secure and reimbursement, we also made meaningful progress toward our pursuit of stroke authorization in the US where over 5 million stroke survivors are affected by walking and balance disability. The registration program, which includes an investigator initiated placebo controlled study at the Medical University of South Carolina and Brooks Rehabilitation, and a company sponsored open label trial has been fully enrolled. In June, site participation enrollment of the open label study with the addition of top neuro rehabilitation centers, such as REHABOLOGYM, The Neurology Center of New England.
and MGH Institute of Health Professions have started enrolling. This groundbreaking registrational program, which also has the participation of Brooks Rehabilitation and Shepherd Center to the open label study is designed to establish the effects of cranial nerve noninvasive neuromodulation delivered using PoNS therapy on gait and balance in chronic stroke survivors. We will also establish PoNS therapeutic impact on the risk of falling in US patients. In addition to enrolling 60 participants to the MUSC study, we anticipate enrolling approximately 30 patients into the open label study across all sites and by the end of the third quarter expect that the results will significantly bolster our FDA submission when we submit for regulatory approval in 2025.
The stroke registrational program was established in part based on real world evidence from Canada where PoNS is already authorized for the treatment of stroke. To further strengthen the data package submission for FDA authorization and support national reimbursement in Canada, we’ve begun an additional Canadian study on the use of PoNS therapy to treat stroke with the goal of enrolling 40 to 60 subjects by the end of 2024 at three centers of excellence for stroke rehabilitation. The study, which has received approval by the institutional review board in June, has already started participants enrollment. A new research program to extend established evidence of the effect of on-label PoNS on risk of falling in stroke patients with gait and balance deficit in Canada has also begun enrolling patients with TBI and MS at three top Canadian neuro rehabilitation sites in May.
We’re excited about where we stand at the midyear of the year. We secured reimbursement with a major third party insurer and the expected Medicare price determination to be effective October 1st will enable us to further expand reimbursement across third party payers. The number of PoNS trained therapists in the field is growing and our FDA submission for stroke remains on track. Given all that we put into place, we see a clear path ahead toward achieving our main goal of removing barriers and helping more people benefit from PoNS. And with the $6.4 million of financing we announced in May, we extended our runway to cover the key 2024 milestones. I’ll now turn the call over to Jeff to discuss our second quarter financial results in more detail.
Jeff Mathiesen: Thanks, Dane. Again, it’s a pleasure to be with you today. Total revenue for the second quarter of 2024 was $182,000, a decrease of $74,000 compared to $256,000 in the second quarter of 2023 as a result of the termination of our Patient Therapy Access Program on June 30, 2023 and the termination of temporary cash pay pricing in May of 2024. Revenue for the quarter was up 35% compared to the first quarter of 2024 as a result of increased sales in both the US and Canada. For the second quarter of 2024, cost of revenue was $118,000 compared to $184,000 for the prior year period, primarily attributable to lower sales compared to the same period in the prior year. Selling, general and administrative expenses for the second quarter of 2024 were $2.5 million compared to remaining relatively flat when compared to the $2.6 million reported in the second quarter of 2023.
Research and development expenses for the second quarter of 2024 were $0.9 million compared to $0.7 million in the second quarter of 2023, driven primarily by an increase in clinical trial activities for stroke and risk of fall programs. Total expenses for the second quarter of 2024 were $3.3 million flat when compared to $3.3 million in the second quarter of 2023. Operating loss for the second quarter of 2024 was $3.2 million compared to a loss of $3.2 million for the prior year period. We reported a net loss for the second quarter of 2024 of $1.6 million or a loss of $0.64 per basic and diluted common share. We also had a net loss of $1.6 million in the prior year period or a loss of $2.92 per basic and diluted common share due to a higher number of weighted average shares outstanding.
Our cash burn from operations was flat at $5.9 million for the six months ended June 30, 2024 and June 30, 2023. As of June 30, 2024, we had $6.4 million in cash and no debt. In May, we closed on $6.4 million public offering and received net proceeds of $5.5 million, which will extend our cash runway into 2025. 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 final reimbursement determination for PoNS controller and mouthpiece by CMS. If the stock price trades at or above $2.25 per share for five consecutive days during that period, we expect the final determination will be announced in late summer and effective October 1st of this year.
If exercised, the additional proceeds from these warrants will fund our operations well into the second half of next year. Turning now to our outlook. To date, PoNS sales have been muted due to the fact that they have primarily been on a cash pay basis and has a price point that is not feasible for the vast majority of the patients in our addressable markets. However, with our recent inroads into the VA and the expected Medicare reimbursement to be effective October 1st of this year, we believe we are positioned to significantly boost our revenues beginning later this year, providing us a pathway to positive cash flow. With that, Daniel, let’s now open the call for questions.
Operator: [Operator Instructions] Our first question comes from Anthony Vendetti with Maxim Group.
Anthony Vendetti: So once the final price determination is received from CMS, do you have like a pipeline of patients? And how do you think that will — what would that impact be on initial sales? And then I have a follow-up on stroke.
Q&A Session
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Dane Andreeff: We have been keeping a long list of Medicare patients with their prescribers, of course, their insurance, which is Medicare because we cannot file one-off claims right now, waiting for CMS and Medicare reimbursement. So we do have a very strong list of built-up demand regarding Medicare.
Anthony Vendetti: And then just wondering where are you with patient enrollment for the stroke trial? And are you still on target for completing it and then submitting to the FDA in the first half of ’25?
Dane Andreeff: We are on track. Enrollment is on track as well as submitting in first half of 2025. And Anthony, if you remember, we’ll be using on top of that, our second FDA breakthrough designation, which truly gives us a wonderful pathway forward with a 150 day notice period.
Anthony Vendetti: And then I guess one last question. Where are you with potential studies or expansion for TBI?
Dane Andreeff: Right now, we’re still investigating that expansion into TBI. As you are aware, we had Pacific Blue Cross do their own study for back to work, which came out with the white paper late last year, where eight of the nine of their long term disability claims stated that balance and gait after using PoNS therapy for 14 weeks that eight of the nine of their long term disability patients and claimants had no longer balanc and gait issues to go back to work. Five out of the nine went back to work in PoNS therapy, saved Pacific Blue Cross approximately $1.6 million. So a significant cost benefit analysis that is heavily weighted towards in using PoNS therapy for traumatic brain injury patients.
Operator: [Operator Instructions] I’m showing no further questions at this time. I would now like to turn it back to Dane Andreeff for closing remarks.
Dane Andreeff: Great. Thank you, Daniel. My apologies again for the technical difficulties. But just thank you for following Helius Medical Technologies. As you’ve heard today, we’re excited about where we stand at this point in the year and truly look forward to keeping you updated as we pursue coverage in reimbursement and authorization for stroke. So thank you very much.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
