Helius Medical Technologies, Inc. (HSDT) Q1 2023 Earnings Call Transcript
Good day, and thank you for standing by. Welcome to the Helius Medical Technologies, Inc. Quarter One 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 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 of In-Site Communications. The line is now yours.
Thank you, Gerald. Welcome to the first quarter 2023 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 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-K 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.
I would now like to turn the call over to Dane Andreeff, President and Chief Executive Officer of Helius.
Thank you, Michelle. Welcome, everyone to Helius Medical’s first quarter 2023 earnings conference call. PoNS Therapy has been commercially available in the United States for one 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 PoNS therapists and physicians who’ve introduced PoNS into their day-to-day practice.
The rollout continues and we’ve consistently seen new inquiries each week. PoNS is the only portable and readily accessible neuro stem therapy with the potential to generate neuroplasticity, which makes PoNS Therapy a game changer for those affected by MS. PoNS devices are currently on a cash pay basis with a 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 for the mouthpiece.
As mentioned in last quarter’s call, sales can be difficult to predict and are subject to quarterly fluctuations. Our first quarter 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 PoNS steps 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 PoNS to continue gaining traction in the U.S. and our outlook for the year remains unchanged. We project 2023 revenue to exceed 2022, even as PoNS 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 is 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 TCET program, which is CMS’ 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 [ph], which would allow companies with a breakthrough designation to be covered by Medicare for four years. 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 announce the extension of PTAP through June of 2023 whereby qualifying patients can purchase on-label PoNS Therapy at an 85% discount to list price.
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 ponstherapy.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 doorsteps.
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 relief. 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 access PoNS Therapy in the U.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. 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 mild to moderate 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 the U.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, $50 billion is spent each year on medical costs related to non-fatal falls in one out of five falls causes a serious injury.
With that, I’ll now turn to our Canadian activities. PoNS have 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 disability. 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 conditions. In March, we extended our partnership with Health Tech Connex, a leading health technology company specialized in neurotechnology innovation.
Our new agreement grants HTC, the exclusive right to purchase, market, sell, and distribute PoNS throughout the metropolitan Vancouver area subject to certain minimums. HTC has been an important partner for Helius and we’re excited to deepen our presence in Vancouver through HTC’s network of leading edge neuro rehabilitation clinics. 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 first quarter financial results in detail.
Thanks, Dane. It is a pleasure to be with all of you today. Our revenue for the first quarter of 2023 was $111,000, a decrease of $79,000 compared to $190,000 in the first quarter 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 first quarter 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. Operating expenses for the first quarter of 2023 decreased by $3.8 million compared to $4.6 million in the first quarter of 2022, due primarily to lower product development expenses as we transitioned to U.S. commercialization activities. Our loss for the first quarter of 2023 was $3.8 million compared to $4.6 million in the prior year period.
We reported a net loss for the first quarter of 2023 of $2.5 million or a loss of $0.09 per basic and diluted common share compared to a net loss of $4.3 million or a loss of $1.15 per basic and diluted common share for the same period last year. Our cash burn from operations for the first quarter of 2023 was $3.2 million compared to $4.7 million for the first quarter of 2022, reflecting our focus on reducing cash burn and extending our cash runway beyond 2023. As of March 31, 2023, we had $11.3 billion of cash and no debt.
Turning now to our outlook. The company currently expects second quarter 2023 revenue to be above the prior year quarter, and first quarter of 2023 levels factoring in potential delays for some portion of U.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.
With that, Gerald, let’s now open the call for questions.
Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Jonathan Aschoff of ROTH MKM. Your line is now open.
Thank you. Good afternoon, guys. And I guess my first question’s for Dane, what’s the U.S. reimbursement strategy taking into consideration the importance of CMS’ new TCET pathway?
Yes. So there are two pathways, Jonathan, and hello, and thank you for your question. First is the old fashioned pathway of coding and receiving the economic benefit of your code. We are going for two codes, one for the controller and of course, one for the mouthpiece, but what’s transpiring right now and it is becoming clear with the reintroduction of the bill to put the breakthrough designation back into TCET. 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.
Okay. Also, what’s your reimbursement strategy in Canada for TBI and stroke?
Yes. And 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 TBI. And we are seeing some dramatic effects given that the data is very, very good.
We’re just waiting for them to finish their trials so that we’ll be able to report on those. But my belief is, we should eventually start seeing reimbursement not only in TBI but also in stroke. Right now because of how the TBI 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 those insurance companies.
Okay. What relevance, if any does your stroke authorization in Canada mean for the pathway to U.S. FDA stroke approval?
Well, first and foremost, the data that we – and our application to help Canada, we had some outstanding data, which I mentioned a 28% reduction in fall in stroke versus one to three 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 second breakthrough designation, and it’s in balance and gait due to a stroke, and we’re looking at not only the sub-acute, but also the chronic indication as well. So with MS, the indication is a million 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 million in chronic stroke, 80% of them go right into rehab because of their balance and gait. So it’s an exciting time for us to go down that path, so, yes.
Lastly, are there still five sites for PoNS step or are there more?
There is five steps, five PoNS steps. 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 writing on what they’ve experienced with their MS patients efficacy and safety due to PoNS Therapy.
Actually lastly, lastly, your quarterly R&D and SG&A the way your cash would work, the way you say it is if those expenses are flat quarter-over-quarter, maybe even flat to down. Does that make sense to you?
Yes. This is Jeff. So yes, it does. First quarter typically tends to be a little bit stronger on the SG&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 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. And then obviously a component of the expense as well is non-cash equity comp. So that always gets pulled out.
Thank you, guys. That was very helpful.
You bet. Thank you.
Thank you. [Operator Instructions] Our next question comes from Anthony Vendetti of Maxim Group. Your line is now open.
Hi, this is Nick Sherwood speaking for Anthony Vendetti. Have you seen any sales or results from the HTC agreement?
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.
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 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.
Yes. Thank you for that detail. And do you have the number for how many physical therapists you trained in the first quarter or the total number of physical therapists you’ve trained through the online training program?
We haven’t released those numbers. All I could say is that they’re increasing every quarter since we started the new online PoNS software for 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.
Okay. Perfect. Those are all my questions. Thank you for your time and answering them.
Thank you, Nick.
Thank you, Nick.
Thank you. [Operator Instructions] Our next question comes from the line of Jeffrey Cohen from Ladenburg Thalmann. Your line is now open.
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 is in 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.
Yes. Yes. First and foremost, thanks, Destiny, and you sound so much better than Jeff, but first and foremost, at AAN which was the last conference we attended, we had a full booth there. Our 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.
Matt [ph], 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, 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. The first two 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.
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. How are you progressing with that? What are any updates you can give us, et cetera?
Sure. So again the first quarter was our full first quarter. Destiny, the way I looked at it is, we launched it at year-end and we knew that the first few 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 and 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 explaining how to get through to the bottom meaning to where they actually check out and use their credit card.
There’s multiple steps. 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’s 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 a viable and be approved for the PTAP, Patient Therapy Access Program.
And also we offer on a volunteer basis to be a part of our registry. And our registered data is very important for us because it’s a three-year registry and we are collecting longer-term data for our MS patients and the MS community not only for the patient, but also the neurologist, and hopefully the payers.
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. Thanks again.
Great. Thanks, Destiny.
Thank you. At this time, I would now like to turn it back to Dane Andreeff, CEO for closing remarks.
Right. Thanks, Gerald. Thank you, everyone for following Helius Medical Technologies as we continue to bring PoNS 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 you.
Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.