Pulse Biosciences, Inc. (NASDAQ:PLSE) Q3 2024 Earnings Call Transcript

Pulse Biosciences, Inc. (NASDAQ:PLSE) Q3 2024 Earnings Call Transcript October 30, 2024

Operator: Greetings, and welcome to the Pulse Biosciences’ Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Trip Taylor, Investor Relations. Thank you, sir. You may begin.

Trip Taylor: Thank you, operator. Before we begin, I would like to inform you that comments and responses to your questions during today’s call reflect management’s views as of today, October 30th, 2024 only and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other similar information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the U.S. Securities and Exchange Commission. Our SEC filings can be found on our website or on the SEC’s website. Investors are cautioned not to place undue reliance on forward-looking statements.

We disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures can be found in the press release. Please note that, this conference call will be available for audio replay on our website at pulsebiosciences.com in the News and Events section on our Investor Relations page. With that, I would now like to turn the call over to President and Chief Executive Officer, Burke T. Barrett.

Burke Barrett: Good afternoon. Thank you all for joining us. Today, I will start by providing updates on our business progress, and then Mike Koffler, Vice President of Finance, will review the third quarter 2024 financial results. Then we will be joined by Bob Duggan, Co-Chair of the Board; Darrin Uecker, Chief Technology Officer and Director; and Kevin Danahy, Chief Commercial Officer, for a question-and-answer session. By way of background, Pulse Biosciences is a novel medical company committed to health innovation using its patented Nano-Pulse Stimulation Technology or nano-PFA, a revolutionary energy modality that delivers nanosecond duration pulses of electrical energy, each less than 1 millionth of a second long to non-thermally destroy targeted cells, while sparing adjacent non-cellular structures and material.

Nano-PFA technology, when used to ablate cellular tissue, has the potential to treat a variety of medical conditions for which an optimal solution remains unfulfilled. The company developed its proprietary CellFX system, a novel nano-PFA delivery platform and commercialized the initial application to treat benign lesions of the skin. In parallel, the company has designed and developed a variety of disposables, sometimes called end effectors to explore the potential use of the platform to treat disorders and other medical specialties such as cardiology, gastroenterology, gynecology, and ears, nose and throat. These indications include devices for open surgical procedures, endoscopic, or minimally invasive procedures and endoluminal catheters, and each has been used in preclinical studies.

Q&A Session

Based on our preclinical experience and the potential to significantly improve outcomes for patients in large and growing markets, the company decided in 2022 to focus its primary efforts on the use of nano-PFA energy in the treatment of Atrial Fibrillation or AF, as well as in a select few other markets such as Soft Tissue Ablation, where it could have a profound positive impact on healthcare for both patients and providers. Our technology is different from the most commonly used microsecond PFA in that the pulse width is much shorter. This shorter pulse width, which is in the range of a million to a billion of a second and so up to 1,000 times shorter than micro PFA has the benefits of both allowing for unique product designs and the potential for a different and better method of ablation at the cellular level, the goal of which is to remove or destroy unwanted cells.

The third quarter was extremely productive for Pulse Biosciences. And here are a few highlights of our progress since the start of Q3. We treated the first patients with AF using our nano-PFA Cardiac Surgical System in Europe. The Cardiac Surgical System also received U.S. FDA breakthrough device designation for the treatment of AF and was enrolled in FDA’s TAP program, which is short for Total Product Life Cycle Advisory Program. TAP provides even more accelerated pathways than breakthrough. We also completed our rights offering, raising $60 million in gross proceeds with the potential to raise an additional $66 million through the exercise of warrants. Each warrant is exercisable for $11 per share, which equals 110% of the subscription price for the units.

Warrants are exercisable immediately. Half of the warrants are redeemable by the company if the company’s stock exceeds $16.50 for 20 consecutive trading days and the other half of the warrants are redeemable by the company, if its stock exceeds $22 for 20 consecutive trading days. Holders of the warrants have the right to exercise them at any time until they are redeemed or expired. Each of these accomplishments represents significant progress with our business that will support our mission to deliver nano-PFA technology to patients and providers around the world. Our early clinical work with the three different clinical indications or applications of nano-PFA confirms our strong belief that the technology has the potential to advance the standard-of-care for the treatment of multiple disease states across the human body.

The differentiated mechanism of action has demonstrated the unique potential to destroy cells in a better way than heat, cold, radiation and even currently available micro-PFA. Our products are protected with intellectual property and know-how, which we believe will assist in maintaining our competitive advantage. The Pulse team continued to make great strides advancing this technology in Q3 with our ablation applications across soft tissue, cardiac surgery for AF and Endocardial catheter ablation for AF. We are currently focused on developing the path to commercialization for each of these three applications or indications. At a high-level, our strategy is centered on producing compelling clinical data to demonstrate the safety and effectiveness profile for each application, attendant with unique and differentiated single-use disposable devices.

These clinical endeavors are occurring now and progressing well across each of the three applications and will ultimately involve hundreds of patients. Robust clinical data will enhance our understanding of nano-PFA-based treatments as well as enable us to clearly articulate these benefits to the market and subsequently raise awareness for nano-PFA technology. Compelling clinical data can differentiate our products and lead to competitive advantages from a marketing perspective, and also lead to stronger value propositions as evaluated by payers for reimbursement. From the U.S. regulatory perspective, we plan to seek specific indications for the use of our devices. These types of labels occur over time and follow a precise regulatory process, but hold the potential significant benefit of promoting marketing, selling and training users for a specific treatment indication.

We expect specific indications will help drive faster clinician adoption and market penetration once approved. Now I will provide updates on each of our individual products. Starting with our soft tissue ablation application. Today, I will dive deeper into this significant and promising opportunity to provide unique solutions for patients in need of better treatments. Earlier this year, our CellFX Percutaneous Electrode System received FDA 510(k) clearance for use in the ablation of soft tissue in percutaneous and intraoperative surgical procedures. Physicians utilize soft tissue ablation in a broad array of procedures, such as those involving the thyroid, liver, breast as well as many other parts of the body. Under the current so-called tool claim clearance we obtained from the FDA, we can launch our soft tissue ablation system in the U.S. for the use in a number of soft tissues.

So far, the clinicians testing our soft tissue ablation device are using it to treat patients with uncomfortable and debilitating benign nodules of the thyroid. The thyroid is a small butterfly shaped gland located at the front of the neck. It’s an important part of the endocrine system and controls many of the body’s functions by producing and releasing hormones. The thyroid’s main job is to control the speed of metabolism. When the thyroid isn’t working properly, it can impact the entire body. A benign thyroid nodule is a non-cancerous tumor within the thyroid gland that can be visualized distinctly from the surrounding thyroid, typically using ultrasound. Up to 60% of adults may develop at least benign thyroid nodule over their lifetime.

So it happens with great frequency. Many benign thyroid nodules remain undiagnosed and are asymptomatic. However, in the U.S., the incidence of palpable thyroid nodules is about 0.1% per year. 85% of which are benign, translating to an estimated 250,000 patients diagnosed each year in the U.S. with palpable benign thyroid nodules. We estimate that this incidence is growing about 5% per year. The incidence of these nodules increases with age and is about fourfold more prevalent in women. Today, the two main options for management of palpable benign thyroid nodules are either to monitor the nodules, which is sometimes called watchful waiting or to surgically remove a portion of or the entire thyroid, which is called thyroidectomy. There are about 800,000 thyroidectomies performed each year worldwide with about 150,000 of these performed in the US and the vast majority, about 70% to 80% are for benign disease.

Thyroidectomy reliably eliminates the nodules. However, removal of this critical organ comes with significant risks and the morbidities associated with any surgical procedure. Importantly, for patients in the healthcare system, removal of the thyroid may require chronic treatment with hormone replacement therapy. While there are some thermal-based needle ablation devices like RF and microwave available on the market, they do not have specific indications for this patient population in the US and have not gained widespread adoption. From speaking with clinicians, we believe this is mainly because of the risk of thermal damage to critical structures like a nerve called the recurrent laryngeal nerve and the esophagus from the inability to control thermal spread from these heat-based ablation devices.

This inability to precisely control thermal spread creates the risk of damage to these important nearby structures. The recurrent laryngeal nerves supply sensation to larynx below the vocal cords and damage to this nerve can cause vocal cord paresis and result in voice changes or [indiscernible]. The potential for thermal spread associated with these thermal ablation devices makes use of these devices a high skilled procedure and potentially risky. We believe the treatment of benign thyroid nodules represents a potential market in excess of $1 billion per year to pulse. As our entry point into this market, to-date, we have placed our system with seven sites in the US as part of a pilot program under no cost evaluation agreements. As part of the program, the clinicians are refining their procedural techniques and optimizing the therapy delivery for this novel nano-PFA procedure.

The initial clinical experiences with our nano-PFA needle ablation device in benign thyroid nodules continues to be positive. By placing the needle electrode into the benign thyroid nodule and delivering multiple relatively fast deliveries of nano-PFA energy covering the majority of the benign thyroid nodule, patients have typically experienced symptomatic relief from a reduction of the size of the nodule during the first month and continuing in subsequent months. The procedure does not require surgical removal of thyroid, and there is no permanent scarring of the neck. And so we see the cosmesis of the procedure is another potentially very positive factor. We expect to expand the pilot program into 2025. We also expect to support select sites to conduct their own clinical research protocols using our device on benign thyroid nodules.

We plan to work with these pioneering clinicians to develop a pivotal clinical study that we intend to use for submission to the FDA and other regulatory bodies for a specific indication for the use of our nano-PFA device in the treatment of benign thyroid nodules. We intend to initiate this pivotal clinical study in mid-2025. In summary, this market opportunity for the percutaneous electrode system is very compelling and well suited to the unique non-thermal properties of nano-PFA. The choice patients face today is primarily to continue to live with an often uncomfortable, debilitating and visible benign thyroid nodule or have a surgical resection of the organ. There is a need for a patient and physician-friendly minimally invasive organ-sparing non-thermal ablation alternative.

We’re excited to work with leading clinicians that specialize in this area and pioneer a novel treatment modality for patients. We also expect that during the coming quarters, the majority of these clinical users will convert from conducting clinical assessments to using our Nano-PFA percutaneous needle device on a commercial basis. Looking further out into the future, we intend to explore other clinical indications for the use of our novel needle ablation device in soft tissues beyond the thyroid. That leads us to our surgical ablation application. Here, our first-in-human feasibility study is underway in the Netherlands. During the past quarter, we opened a second study site in the Netherlands. We’ve now treated nine patients at two clinical study sites.

We are encouraged by the acute performance our cardiac surgical ablation device has demonstrated. The procedures were completed efficiently. As a reminder, this multicenter feasibility study is designed to enroll up to 30 patients. We believe we will be in a position to share preliminary results of this study at a medical congress late in 2025. In the US, the unique differentiation of Nano-PFA was validated by the FDA in its award of breakthrough device designation for the cardiac surgical ablation device. Also, we were able to enroll the device in FDA’s TAP program. TAP’s primary goal is to expedite patient access to innovative medical devices by providing early, frequent and strategic communications with the FDA and by facilitating engagement with other key parties for devices that are of public health importance.

This status will provide increased engagement with the agency and prioritize review of our future planned pre-market approval application, or PMA. We have been actively engaged with the FDA regarding the design of our IDE pivotal clinical study and plan to submit a formal IDE to the FDA for this study. This should enable us to commence a pivotal clinical trial in mid-2025. Now moving on to our catheter-based endocardial AF ablation application. Our third product currently under development is also for the treatment of atrial fibrillation. Our 360 cardiac catheter is designed to deliver Nano-PFA technology and endocardial applications inside of the heart to treat AF. Our first in-human feasibility study is well underway in Prague, where we are investigating the efficiency, safety and efficacy of our catheters clinical performance.

We’re pleased to report we have now successfully treated over 50 patients. The catheter’s usability, ability to acutely isolate the pulmonary veins and quick case times continue to show the great promise of the device. The electrophysiologists using our 360 catheter in Prague are highly impressed with its performance. And I will add that having spent two decades working in AF ablation, including the development of a unique AF ablation device in my past, my view of the 360 catheter’s performance after observing several cases firsthand is that its ability to acutely isolate pulmonary veins efficiently and quickly is unparalleled. Its potential is truly that of a third-generation PFA ablation device for AF. We understand that to fully establish the clinical performance of the device, including demonstrating chronic efficacy will require clinical studies with more users, more patients treated and the conduct of a high-quality pivotal clinical study.

We’re also pleased to be engaged with two additional EU clinical study sites that are scheduled to perform procedures by year-end. Additional users and sites will provide valuable information on the device, its learning curve, ease of use and performance in different workflows during AF ablation procedures. Leveraging the current understanding of the 360 catheter’s clinical performance, we are designing a pivotal clinical study. We continue to expect to begin the US IDE pivotal clinical study in the middle of next year. Successful pivotal clinical study results will support an FDA PMA submission for the 360 catheter. To further support our AF ablation product strategy, we are pleased to have recently announced Dr. David Kenningsberg has joined us as Chief Medical Officer for electrophysiology.

David is an accomplished electrophysiologist with a thriving private practice. I have known David for many years, and I am confident he will make significant contributions to the product and clinical development of our AF ablation catheters. Additionally, world-renowned electrophysiologist, Dr. Andrea Natale of Austin, Texas, is also joining our efforts as a key medical adviser. We’re thankful to have both of these thought-leading EPs join our team and believe this is a strong testament to the transformative potential of NanoPFA and our 360 catheter. Their insightful input and guidance will be invaluable as we advance this technology to maximize the positive impact for patients and providers. They join our existing EP advisers, Drs. Vivek Reddy and Jacob Koruth, who have been instrumental in the evaluations of the 360 catheter.

Now, I’ll pass the call over to Mike Koffler to provide some financial results for the third quarter 2024.

Mike Koffler: Thank you, Burke. Today, I will highlight our GAAP and non-GAAP financial results. I encourage you to review today’s earnings release for a detailed reconciliation of non-GAAP measures to the most comparable GAAP measures. In the third quarter of 2024, total GAAP costs and expenses increased by $2.4 million to $13.7 million compared to $11.3 million in the prior year period. The increase in GAAP costs and expenses was primarily driven by an increase in non-cash stock-based compensation expense, which was $3 million in the third quarter of 2024 compared to $1.8 million in the prior year period and also driven by other compensation and administrative expenses to support the expanding organization and the advancement of our NanoPFA devices.

To remind everyone, non-GAAP costs and expenses exclude stock-based compensation, depreciation and amortization. Total non-GAAP costs and expenses in the third quarter of 2024 increased by $1.2 million to $10.4 million compared to $9.2 million in the prior year period. GAAP net loss in the third quarter of 2024 was $12.7 million compared to $10.6 million in the prior year period. Non-GAAP net loss in the third quarter of 2024 was $9.4 million compared to $8.5 million in the prior year period. In the third quarter, we strengthened the balance sheet considerably through the completion of the rights offering in July, raising $60 million in gross proceeds with the potential to raise an additional $66 million through the exercise of the associated warrants.

As of September 30, 2024, cash and cash equivalents totaled $79 million compared to $44.4 million as of December 31, 2023. Cash used in the third quarter of 2024, excluding financing activity, totaled $8.5 million compared to $8.7 million used in the same period in the prior year and $8.7 million used in the second quarter of 2024. I will now turn the call back over to Burke.

Burke Barrett: Thank you, Mike. As we look forward, we are excited to continue our initial clinical experiences with our three products throughout the remainder of 2024 and into 2025. The focus at Pulse right now is to continue to treat patients in each of our three active indications, advance our clinical understanding of the performance of each device and move forward in the regulatory processes towards approved devices that maybe commercialized. To support our anticipated growth, we are building our team and the infrastructure required to conduct three pivotal clinical studies with these three products beginning in 2025. We strengthened our team with the additions of a new Co-Chair of the Board, a Vice President of Marketing, a Vice President of Clinical Engineering and a Chief Medical Officer of Electrophysiology.

Now, joining us for the question-and-answer session today are Bob Duggan, Co-Chairman of the Board; Darrin Uecker, Chief Technology Officer and Director; and Kevin Danahy, Chief Commercial Officer. Operator, please open the call for questions.

Operator: It appears that there are no questions at this time. I would now like to turn the floor back over to Burke Barrett for closing comments.

Burke Barrett: Thank you, operator. I want to thank the Pulse team for another strong quarter. We continue to make great progress with all three of our applications and indications. And we look very much forward to providing updates again next quarter and in the future as information becomes available. Thank you all.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.