Solana Company - Q4 2022
March 9, 2023
Transcript
Operator (participant)
Good day. Thank you for standing by. Welcome to the Helius Medical Technologies fourth quarter and year-end 2022 earnings conference call. At this time, all participants are on listen only mode. After the speaker's presentation, there'll be a question and answer session. Instructions will be given at that time. As a reminder, today's conference may be recorded. I'd now like to hand the call over to your speaker, Michelle Bilski, Investor Relations. Please go ahead.
Michelle Bilski (Investor Relations)
Thank you, operator. Welcome to the fourth quarter and year-end 2022 earnings conference call for Helius Medical Technologies. This is Michelle Bilski of Insight Communications and 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. Also on the call today is Dr. Antonella Favit-Van Pelt, Helius Medical's Chief Medical Officer, who will be available as needed during Q&A. 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 investor 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-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 March 9, 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.
Dane Andreeff (President and CEO)
Thank you, Michelle. Welcome everyone. It was another strong quarter for Helius and our Portable Neuromodulation Stimulator or PoNS device, which is indicated in North America for treatment of gait deficit due to mild to moderate symptoms of MS when used in conjunction with a supervised therapeutic exercise program. PoNS is also authorized in Canada for the treatment of chronic balance deficit due to mild to moderate traumatic brain injury or TBI, and just announced this morning for stroke. In the U.S., PoNS also has an FDA breakthrough designation for stroke in addition to the breakthrough designation for MS, which we believe will be a significant benefit as we seek reimbursement in the United States. During the fourth quarter, the benefits of PoNS therapy continued to resonate with healthcare providers, physical therapists and patients in the U.S. as we added prescribers and trained PTs.
PoNS is the only available portable and readily accessible neurostimulation therapy with the potential to generate neuroplasticity, essentially rewiring parts of the brain, it is a potential game changer for people suffering from gait imbalance impairment. Our mission is to make this important and innovative technology available to as many qualified patients as possible, and we are working to improve access on multiple fronts. Physical therapists play a key role in PoNS treatment and training them quickly enough to meet demand was a bottleneck we faced early in the U.S. launch. To standardize the process and reduce training time, we introduced an online training module which allows practitioners who wish to treat MS-related balance and gait deficit to learn remotely at their own pace in 3 hours or less instead of through an in-person multi-day course.
It has quickly become the primary method for training therapists, which means faster relief for patients. Another way we've improved access is through our recent partnership with UpScript, a leading telehealth company focused on providing medications and devices direct to the consumer. Through ponstherapy.com, Americans with gait and balance deficits can now access online health evaluations to fill PoNS therapy prescriptions through a network of fully licensed providers with e-prescribing capabilities and obtain PoNS through home delivery. The initial response has been overwhelmingly positive and the first devices were shipped in January 2023. Patients who are motivated to improve their walking can now take the fight against MS into their own hands. We don't want cost to be an impediment to use.
In June 2022, we launched our Patient Therapy Access Program or PTAP, which provides patients access to on-label PoNS therapy at a nearly 85% discount to list price. PTAP was scheduled to expire at the end of 2022. We're pleased to announce that we're extending this program through June of 2023. The vast majority of U.S. PoNS device prescriptions in the fourth quarter were through the PTAP program. The Neurology Center of New England has been an important contributor to our PTAP program. We were thrilled to add the institution to our PoNS Therapeutic Experience Program. PoNSTEP is an open-label observational trial that allows us to partner with some of the nation's premier academic medical centers to observe PoNS therapy in a real-world setting while enabling the key opinion leaders in MS management to build their knowledge and advise the broader medical community.
During the fourth quarter, we also added MGH Institute of Health Professions and Oregon Health & Science University to the program, bringing the total number of PoNSTEP centers of excellence to five as of today. To most effectively help those suffering from balance and gait impairment, it's critical that we engage not only the patients, but also the two other PoNS therapy stakeholders, the neurologists who prescribe PoNS and the physical therapists who oversee the treatment. You've already heard how we've improved and streamlined the training process for physical therapists. We continue to maintain an active dialogue with the group in order to best serve them and their patients. We just returned from the American Physical Therapy Association's conference for physical therapists, national regional PT clinics, and neuro rehab specialists, and have well over 200 leads to follow up on.
Interacting with the broader neurology community, as we have with PoNSTEP, is another key to properly educating patients and providers about the mechanism of action and benefits of PoNS. In April, we will be attending the American Academy of Neurology annual meeting in Boston, and at the end of May, we'll be at the Consortium of Multiple Sclerosis Centers annual meeting in Denver, which is attended by the MS Centers of Excellence focused on MS neurologists. Turning to our Canadian activities, at the end of 2022, PoNS was authorized for sale in Canada for chronic balance deficit due to mild to moderate traumatic brain injury, as well as mild to moderate symptoms of MS. Yesterday, we learned that Health Canada extended PoNS indication to include use as a short-term treatment of gait deficit to mild to moderate symptoms from stroke.
An estimated 878,000 Canadians are currently living with stroke, with more than 89,000 new strokes occurring every year. Gait impairment is a major source of post-stroke disability. A real-world evidence database analysis showed that mild and moderate stroke patients using PoNS therapy experience an average 6 to 7 point improvement in their Functional Gait Assessment score over the 14-week treatment period, which far exceeds the 4.2 minimal detectable change usually seen in stroke patients. Before starting treatment, most patients were considered at risk of falling. After 14 weeks of PoNS therapy, 28% of the patients were no longer at risk of falling. Routine rehabilitation physical therapy does not usually provide a meaningful reduction in this risk, usually in the 1%-3% range. This is a significant improvement.
PoNS has been commercially available in Canada since 2019 for MS and TBI, and we're happy that Health Canada authorized PoNS for stroke, enabling Helius to deliver clinically meaningful benefits for stroke patients as well. This was a huge win for Helius and for Canadians suffering balance and gait impairment, as it's become evident that PoNS therapy employs a shared mechanism of action and provides a significant and clinically meaningful improvement in balance and gait regardless of the underlying medical condition. We also recently extended our partnership agreement with Canada's Health Tech Connect, a leading health technology company specializing in neurotechnology innovations. This agreement grants HTC the exclusive right to purchase, market, and sell, and distribute PoNS through the metropolitan Vancouver area, subject to certain minimums. The initial term is for 5 years with the possibility to extend it to 10 years.
HTC has been an instrumental partner for Helius, and we're excited to strengthen our relationship and expand our presence across Vancouver through HTC's network of leading-edge neuro rehabilitation clinics. Other exciting developments are underway in Canada, and we hope to share them very soon. Though it is currently a smaller market for us, we believe Canada's growth potential parallels the U.S. market in the near term due to the multiple indications, in particular TBI and now stroke. With that, let me turn the call over to Jeff to discuss our fourth quarter financial results in detail.
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
Thanks, Dane. It is a pleasure to be with you today. Total revenue was $282,000 for the fourth quarter of 2022, compared to $258,000 in the fourth quarter of last year, an increase of 9% comprised primarily of product sales in both periods. Full year 2022 revenue was $787,000, an increase of 51% over 2021, reflecting the impact of the U.S. commercial launch of PoNS for MS in April 2022, partially offset by a small decrease in revenue in Canada that resulted from exchange rate changes. For the fourth quarter of 2022, our gross profit was $132,000 compared to $129,000 in the prior year.
Operating expenses for the fourth quarter of 2022 were $2.8 million compared to $4.2 million in the fourth quarter of 2021, a decrease of $1.4 million. The decrease was primarily the result of lower product development and clinical trial activity following the U.S. commercial launch of PoNS. Operating loss for the fourth quarter of 2022 was $2.7 million, compared to a loss of $4.1 million for the prior year period. The public warrants we issued in connection with the August 2022 financing are accounted for as a derivative liability instrument on the balance sheet. The increase in the valuation of these derivative instruments from the date of the offering to the quarter or year-end resulted in a expense of $2.5 million during the quarter.
The warrants will require revaluation in future quarters tied to our share price, resulting in non-cash income or expense for each recording period. We reported a net loss for the fourth quarter of 2022 of $4.9 million, or a loss of $0.17 per share, compared to a net loss of $4.1 million, or a loss of $1.31 per share for the same period last year. Our cash burn from operations for the fourth quarter of 2022 was $2.1 million, a significant decrease from the average quarterly run rate of approximately $4.1 million over the previous 3 quarters of 2022, reflecting the results of our focus on reducing cash burn and extending our cash runway beyond 2023.
As of December 31, 2022, we had $14.5 million of cash and no debt. Turning now to our outlook. We currently expect 2023 revenues to exceed prior year levels and to increase throughout the year as the U.S. commercialization of PoNS continues to develop, though we may experience quarterly fluctuations as we make refinements to our U.S. commercial rollout of PoNS. We believe broad third-party payer reimbursement will be needed to achieve our full revenue potential. Our 2023 quarterly cash burn is also expected to be below comparable quarters in 2022, reflecting the results of our actions in 2022, while recognizing that the first quarter cash burn is typically the higher quarter as a result of the concentration of cash payments for such things as bonus payments, audit fees, and public company-related expenses.
With the projected increase in sales of PoNS in the U.S. and Canada, the $14.5 million of cash on hand at year-end and our reduced cash burn, we believe we have the cash runway to take us through 2023. With that, operator, let's now open the call for questions.
Operator (participant)
Thank you. If you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Jonathan Aschoff with ROTH MKM. Your line is open.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Thank you. Good afternoon, guys. Congrats on the progress. I'm curious, you know, the PTAP extension, is that, you know, driven, overwhelmingly by, you know, the price, the cash price being, you know, prohibitive, let's say?
Dane Andreeff (President and CEO)
Hi, Jonathan, it's Dane. The answer, yes, first and foremost, because it is cash pay and we're implementing our reimbursement strategy. We also wanna, you know, have, we wanna share the adoption and increase awareness to the PTs that we're training up to the neurologists, so that they all get more and more experience with PoNS therapy.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Okay. How about the TEP traction? You know, what can you tell me about people in TEP?
Dane Andreeff (President and CEO)
Right currently, we are enrolling into our five sites at the moment. We're pleased with the five sites that have signed up so far. We're looking to hopefully get to the 10-12 level by year-end.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Okay. How's about trial enrollment for stroke?
Dane Andreeff (President and CEO)
At this time, we have not enrolled into our stroke trial.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Okay. Then lastly, when do you think, you know, and this is obviously taking some estimation, and I'm not gonna hold you to it, but when do you think you might have data, ready to submit or, you know, to talk about that would be the data you'd want to, underpin, you know, insurance reimbursement?
Dane Andreeff (President and CEO)
Well, if you recall, there is 2 ways that we're approaching our reimbursement in the United States for MS and gait deficit. First and foremost, we're looking through CMS right now and looking to meet with them over the next three to six months regarding our coding, first and foremost. Second, also remember that the TCET program will go live, and that's for emerging technology. What we understand right now, the law will come down, the rulemaking will come down in April. There will be a 60-day notice period of questioning regarding that TCET emerging technology program. What we understand right now, it's already scheduled for the White House in September.
If you look at the programs that we're implementing, one, to generate evidence for insurance, would be our PoNSTEP program, which we just spoke to, but also our registry under MS right now. We are collecting data, medical records and so forth under our registry. Antonella, would you like to just add to that as well?
Antonella Favit-Van Pelt (Chief Medical Officer)
Yes, absolutely. Thank you, Dane. Right now we have, as is mentioned, the program, the PoNSTEP program, which aims to provide data regarding the utilization, the real-world utilization of PoNS and the ability of PoNS therapy to be effective under different conditions of adherence to physical therapy. The other program is the registry program, which aims to collect not only information about therapeutic outcomes of PoNS, but most importantly, therapeutic outcomes as it relates to the overall management of MS patients. Therefore, we have what we call soft outcomes that we are prepared to collect and present to both CMS and the insurance partners to show cost effectiveness in management of patients with MS.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Okay. Thank you. TCET is still $3,895, and the cash is still around $17,000-$18,000?
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
Hey, this is Jeff. The TCET is $3,895. The cash pay pricing is around $1,450.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Okay. Thank you very much, guys.
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
Yep.
Dane Andreeff (President and CEO)
Thanks, Jonathan.
Operator (participant)
Thank you. Our next question comes from Jeffrey Cohen with Ladenburg Thalmann. Your line is open.
Destiny Hance (Associate Director of Research)
Hey, this is actually Destiny on for Jeff. Thank you for taking our question. I just have a couple around, well, a couple around a bunch of the things you talked about. Can we start with how many PTs you've trained today, to date through, your, you know, online training program?
Dane Andreeff (President and CEO)
We haven't announced that, but it's well over 100 right now. If you look at just the ATPA follow-ups, which we have well over 200 follow-ups with PTs, with neuro PT centers and some of the bigger national chains like ATI, like PT Solutions, and also Physical Balance Centers.
Destiny Hance (Associate Director of Research)
Got it. Okay. Thank you. I'm wondering around TCET. You said it was extended until June 2023. What kind of access strategy for patients that is, are you thinking about implementing or leveraging beyond June 2023? Is there the opportunity for it to be extended again, or would you have something a little different? Just high level, what are you thinking in terms of that?
Dane Andreeff (President and CEO)
You know, at the moment, we haven't decided.
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
This is Jeff.
Dane Andreeff (President and CEO)
Okay, go ahead, Jeff.
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
Yeah. Yep. Yep, sorry. Yeah, you know, I think at the end of the day, we're going to be focused on, you know, making sure that there's access to PoNS therapy. We're also very much interested in making sure that we're gathering data that allows for reimbursement. I think that, you know, we will continue to look at ways to make sure that there's access to PoNS, but also pushing towards getting reimbursement, you know, because ultimately, reimbursement is gonna be key. You know, I think we've announced it till June 30th and as June 30th approaches, you know, we'll look to see what makes sense on a go forward basis at that point.
Destiny Hance (Associate Director of Research)
Perfect. Yes, I know you guys have been very diligent in trying to make this accessible. Awesome. Last one for us. You mentioned about 200 leads that you're going to follow up with. Can you just walk us through what that follow-up process looks like? Can you assign any, like, timing to any of those leads, or is it still a bit too early to tell?
Dane Andreeff (President and CEO)
You know, we've actually had a number of PTs access our PoNS Therapy online training already. Before the conference, we actually did a teach-in. Our Director of Physical Therapy at Helius, Whitney, did a great job, so she actually trained PTs live right there and then at our booth after hours. We're getting actually a great response. Really, Destiny, a bigger movement would be going after the super-regional PT clinics, like Physical, like ATI, like PT Solutions, and a few others that we would like to be able to just roll it out at a national or a corporate level, the PoNS training. Because it's so easy, it's free to the PT and to the clinic.
They could do it in 3 hours or less at their own time. They could break it up. It's actually a wonderful resource for them, but also for the patient.
Destiny Hance (Associate Director of Research)
Got it. Okay, that's great. Really great. All right. That does it for us. Thank you so much.
Dane Andreeff (President and CEO)
Thank you, Destiny.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one one. Our next question comes from Anthony Vendetti with Maxim Group. Your line is open.
Anthony Vendetti (Executive Managing Director of Research)
Thanks. Good to see you, Dane, out at the PT conference in San Diego.
Dane Andreeff (President and CEO)
No, that was a wonderful meeting. Thank you, Anthony, for spending time with me.
Anthony Vendetti (Executive Managing Director of Research)
Absolutely. Most of my questions were answered, but can you talk a little bit about your operations in Australia? I know it's approved or authorized for sale for short-term use. Is that still early stages or just an update on what status there?
Dane Andreeff (President and CEO)
Sure. you know, again, just to remind everyone on this call, our investor base, the TGA, which is the regulatory body, approved Helius for balance and gait deficits with no indication. If you think about that, it really puts the PoNS device, PoNS therapy back into the practitioner's hands. If they have a stroke patient, in one corner with gait deficit or an MS patient with gait deficit or a TBI you know, across the room with balance deficit, they're able to treat the patient. That is a very exciting potential for us. We are talking to consultants and looking at distribution partners for Australia, no news yet at the moment.
Anthony Vendetti (Executive Managing Director of Research)
Okay. Okay. That broad sort of indication seems like a, you know, a significant market opportunity potentially in Australia.
Dane Andreeff (President and CEO)
very much so. Even though it's a smaller country than Canada's 40 million people, I think Australia has 26. Like you said, you know, PoNS therapy or PoNS device could be treated for any of their balance and gait deficits across any neurological indication or traumatic brain injury.
Anthony Vendetti (Executive Managing Director of Research)
Okay, great. Great. Just remind us. You mentioned that there's another conference upcoming, a neurology conference you're gonna be attending. When is that, and what's the goal, what's the goal when you attend that?
Dane Andreeff (President and CEO)
Yeah. That's the in April, it's gonna be in Boston. It's the American Academy of Neurology, that's for general neurologists. Remember, all neurologists and prescribers can prescribe for MS, for gait deficit due to MS. We definitely wanna be there. We have a booth there, and really provide our clinical data, our real-world data in MS, but also talk to them about our platform right now in the U.S., how easy it is for any rehab hospital or clinic for their PTs to get trained up and really, you know, educate them, you know, so that they understand that PoNS is an effective treatment, you know, for gait deficit due to MS. Then the one in Denver is the MS Centers of Excellence.
That's [MSCoE], and that is solely focused on MS neurology. Remember, we have three stakeholders that we have to educate. The patient, the neurologists, both general and the MS specialists, and the physical therapists and/or the rehab hospital.
Anthony Vendetti (Executive Managing Director of Research)
Okay, great. Maybe more for Jeff. I guess the guidance of revenues to exceed what they were in 2022, in 2023. At this stage, obviously, there could be a lot of quarterly fluctuation. Should we expect that fluctuation to be similar to, or trend according to the cadence that it was in 2021 and 2022, or literally it could be up and down every quarter just because of the stage of growth you're at?
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
You know, I think it's more of the latter. You know, we're doing a number of things, getting the rollout happening here in the U.S., so I think that there's going to, you know, just be fluctuations in how things the uptake occurs here in the U.S. You know, having said that, there always is in, you know, in the Canada side, third quarter's always the soft quarter in Canada, and that's because with the weather, that's when people are vacationing and so that's typically the softest quarter there.
But really the biggest factor for us is we don't really have any history yet to really understand what the trends are gonna be like, and so don't wanna be committing to anything until we see things play out here for a bit.
Anthony Vendetti (Executive Managing Director of Research)
Sure. That makes sense. All right, thanks so much. Thanks, Dane. Thanks, Jeff. Appreciate it.
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
Thanks, Anthony.
Jonathan Aschoff (Managing Director and Senior Research Analyst)
Yep, thanks a lot.
Operator (participant)
Thank you. There are no further questions at this time. I'd like to turn the call back over to Dane Andreeff for closing remarks.
Jeff Mathiesen (CFO, Treasurer, Secretary, and Director)
Great. Thank you, everyone. We at Helius continue to be gratified by the marketplace's perception to PoNS and are very proud of the foundation we've built. PoNS is an important therapy that has the potential to improve the lives of millions, and we remain committed to bringing this innovative technology to all those who can benefit. Thank you for your time and interest in Helius Medical Technologies, and we'll speak again next quarter. Thank you.
Operator (participant)
This concludes today's conference. Thank you for participating. You may now disconnect. Everyone, have a great day.