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Operator
Greetings, and welcome to the HeartBeam First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to hand the call over to Larry Holub, Director at MZ Group. Larry?
Larry Holub
Good afternoon and welcome to HeartBeam's financial results call. Today's conference call is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results crossed the wire this afternoon at 4.01 p.m. Eastern Time and is available in the Investor Relations section of our company's website, heartbeam.com. Your host today, Branislav Vodic. Chief Executive Officer and Founder, John Hunt, Chief Business Officer, and Rick Brownstein, Chief Financial Officer, will present results of operations for the first quarter ended March 31st, 2022. At this time, I will turn the call over to Harpy Chief Executive Officer, Branislav Vaid.
Form 10 - Q
Thank you, Larry, and good afternoon, everyone. I'm pleased to welcome you to today's first quarter 2022 financial results conference call. Our first quarter was highlighted by continued momentum in our product development timeline, empowered by multiple strategic partnerships to advance commercialization. During the quarter, we established our scientific advisory board with appointment of world-renowned cardiologist, Dr. Mike Gibson, as chairman to drive success in the use of our technologies. And we have further rounded out our capabilities with additional staff in sales, IT and cybersecurity, QA, document control, support in electronic UMS, technical support, customer support, and accounting. We have also signed agreements with Livemore and Triple Ring Technologies that will help bring our technologies to commercialization. Our commercial team has identified key target accounts for both the HeartBeam ED and telehealth product and have engaged in a number of productive discussions on partnering with these key institutions. The target accounts include large academic institutions, regional healthcare systems in the Southeast, Mid-Atlantic, and regional community systems in the Western U.S. Some of these include Piedmont, Health, Wellstar, Emory, Atrium Wake Forest, WellSpan Health, UCLA, Harborview, and Centura. Overall, there has been a very positive response to our technology, and several systems are willing to conduct pilot evaluations of our ED software solution as soon as we receive FDA clearance for the product. Goal for the commercial team is to transition the participating centers to a revenue account at the conclusion of the pilot evaluation. We look forward to ongoing conversations with these healthcare leaders moving forward. By developing our proprietary 3D vector signal-based technology, we have addressed a huge unmet need and an enormous market opportunity. Most of you are familiar with the market for atrial fibrillation or AFib detection and key players in that space. That market size is defined by the prevalence of AFib patients in the U.S. There are about 3 million AFib patients in the United States. It is estimated to be a $2 billion market. AFib detection space has many players, and some of the leaders are AliveCore and Apple with their Apple Watch. The market for heart attack detection outside of medical facility is much larger. It is determined by about 18 million people in the United States that are at high risk for a heart attack. That is, in our estimate, a market that exceeds $10 billion in the U.S. only. Of particular interest to us, and we believe the early adopters will be individuals that are survivors of a heart attack. There are about 8 million people in the U.S. that fall into this category. They are at super high risk for another heart attack, and indeed, we believe that these individuals and their cardiologists will be leading the adoption of our telehealth technologies. The telehealth space is a rapidly emerging solution that has dramatically increased with the onset of COVID-19 and is being driven by government policies to promote its use, along with the rise of chronic conditions and an aging population. Indeed, we are seeing at so many levels that patient care is moving to the patients and outside of the four walls of a medical institution. We believe that this trend will only accelerate. Again, bringing our telehealth product to cardiac patients and their physicians will present a major advancement for cardiovascular patient care. Cardiovascular illnesses remain number one cause of death in the U.S. and present a huge telehealth market opportunity. I would now like to turn the call over to John Hunt, our Chief Business Officer, to further discuss our products and commercialization plans. John.
Larry
Thank you, Branislav. Turning to our product timelines and updates, we had several key developments and strategic partnership agreements related to our ED heart attack software product and telehealth solutions. We partnered with Livemore, a digital health solutions company, to develop a HeartBeam branded version of Livemore's Halo Plus FDA cleared turnkey solution for remote patient monitoring to connect physicians and patients. We're collaborating closely with the Livemore team to ready our software on schedule for submission to the FDA in the second quarter. We continue to expect a limited market release by the end of the year and launch in Q1 of 2023. Recently, we've engaged multiple partner health systems to provide ECG data to complete our clinical trial for FDA submission of our ED-MI software product this quarter. After this, we have plans for additional pilot studies for our end-to-end prescription-only telehealth system for remote heart attack detection in at-risk patients, as well as other future scientific and commercial collaborations with these health systems. ED product is software as a medical device. It is a 510 regulatory pathway and the heart beam algorithm used in an ED setting slots into the existing workflow in the emergency department. And it leverages existing 12 lead ECG hardware and provides the attending physician with an instant comparison of the patient's baseline and symptomatic ECGs for their consideration in the patient's diagnosis. quickly determining if a patient needs intervention or can be discharged helps EDs manage throughput. Revenue will be via subscription model and for high volume EDs, it averages about $3 per patient. Briefly, the total addressable market for the ED software solution we estimate for the 5,000 emergency departments in the country is about 500 million. But for telehealth, it dwarfs it. It is about an estimated $10 billion market. And these numbers are for the US only. Turning to our telehealth product, we recently engaged with Triple Ring Technologies, a co-development company, to assist in the design and development of our telehealth complete solution 3D vector ECG collection device for remote heart attack monitoring. Triple Ring has a long history of designing a wide variety of innovative medical devices and underlying technologies. And we're now working closely with its medical device team to rapidly build and test our 3D ECG device. This joint partnership is a five-phase expedited device development project scheduled to be completed in the fourth quarter of 2022 in time for our 510K submission to the FDA. Alan Baumel, HeartBeam's COO, is managing the relationship with both TripleRing and LiveMore. The telehealth product incorporates the hardware design and development efforts of TripleRing and the software, firmware, and RPM platform development efforts of LiveMore. Engaging TripleRing for the hardware development of the 3D ECG device to plug into LiveMore's FDA-registered remote patient monitoring platform allows HeartBeam to provide an end-to-end telehealth solution for patients and physicians. By engaging experienced development partners like TripleRing and LiveMore, and based on our strong working relationships with both partners, HeartBeam management is confident we'll meet our project timelines for Q4 2022 FDA submission. An added benefit of the partnership with TripleRing is that they have had they have an established relationship with an OEM manufacturer able to manufacture the HeartBeam 3D ECG device at scale. In addition, the OEM manufacturer is capable of handling logistics and distribution for their customers. HeartBeam is in active discussions with Triple Ring's manufacturing partner to support market release of the telehealth product in Q2 of 2023. The telehealth product is a 510 regulatory pathway. We've already identified a predicate device to demonstrate substantial equivalence with a simple clinical validation study. And the clearance of the Gen 1 device allows HeartBeam to collect 3D ECG data and use these data to develop advanced features for the Gen 2 product. HeartBeam Telehealth can use a clear reimbursement pathway with existing CPT codes. We plan on using a subscription model where HeartBeam builds the practice on a per patient per month basis. And in our discussions with cardiology practices indicate this is an attractive business model for the practice and provides an enhanced level of care for at-risk patients. This slide shows several companies in the cardiac monitoring market And while each product offers some of the capabilities of the HeartBeam telehealth product, the 12-lead ECG capability, integration of patient history and symptoms, and presentation of comparative ECGs, both a baseline and symptomatic ECG for the physician to differentiate from other products on the market. And note here, while the AliveCore recently introduced its CardioMobile card shown on this slide, It is only a single lead ECG recording. It does not contain the vector information recorded by the HeartBeam device. As we move towards commercialization, we have also continued to build a substantial mode of protection that will provide a distinct competitive advantage for our products. To date, we now have a fortified intellectual property portfolio of three issued US patents and six patent applications, in advance of our near-term commercialization initiatives. We believe our products offer substantial capabilities beyond existing offerings, and we continue to engage with potential customers and partners in anticipation of FDA clearance and commercial launch for our products. I'll now turn the call over to Rick Brownstein, Chief Financial Officer, to discuss operational updates and financials.
Branislav
Thank you, John. I'd like to briefly discuss our sample financial model at scale for our ED and telehealth solutions, which shows that capturing even a modest percentage of our total addressable market results in a significant recurring revenue base. I'd like to highlight that our solutions also generate high gross margins under either base case assumptions, with gross margins above 80%. And finally, as the company scales, operating margins can be in excess of 30%, even as we increase investment in R&D. Telehealth is a much larger market opportunity compared to the size of the ED market, and over time we expect that telehealth will be the primary source of revenue. Turning now to our financials, I will now give a succinct review of our financial results. A full breakdown is available in our regulatory filings and the press release that just crossed the wire after the market closed today. Research and development expenses for the first quarter of 2022 were $734,000 compared to $29,000 for the first quarter of 2021. Our focus on R&D consisted largely of our partnership with Live More to build a HeartBeam branded version of their FDA cleared platform for remote patient monitoring. To kick off of our professional services agreement with Triple Ring Technologies to assist in the hardware of our telehealth system and other consultants associated with the development of our ED and telehealth solutions. General and administrative expenses for the first quarter of 2022 were $1.4 million compared to $134,000 for the first quarter of 2021, reflecting the growth in our team and other costs in support of our being a public company. Interest expense during the three months ended March 31, 2021, last year, of 69,000 is related to the 2015 convertible notes, which were converted and added to common stock at the IPO last November. That loss for the first quarter of 2022 was 2.1 million compared to a net loss of 210,000 for the first quarter of 2021. With the successful completion of our IPO in November, we ended the first quarter of 2022 with over $11.2 million in cash and cash equivalents compared to $13.2 million as of December 31st last year, 2021, and $84,000 as of March 31st, 2021. We expect our cash position to provide sufficient runway into 2023. With the planned 2022 release of our EV product, we continue to believe we have sufficient cash to meet our development, regulatory, and commercialization milestones without the need to raise additional cash funds, at least through the achievement of FDA clearance of our telehealth product in 2023. I'll now turn the call back over to Branislav for his closing thoughts.
Form 10 - Q
Thank you, Rick. In summary, we are well-positioned to create long-term value for our shareholders. During the first quarter, we continued to operate from a position of strength, equipped with multiple strategic partnerships, to advance product development near-term milestones and cash runway into 2023. Looking ahead with our transition to a public company and the addition of new capital to accelerate our commercialization path, we remain confident in our anticipated upcoming product milestones. By the end of 2022, we expect to be in the marketplace post the FDA clearance with our ED product, emergency room product, and we plan to have our telehealth solution submitted to the FDA for the clearance. We approach these milestones from a position of strength with an experienced team and the new partnerships to support our goals. I look forward to providing our shareholders with further updates in the near term as we move forward with our commercialization. I thank you all for attending. And now, Harvey's team would like to answer your questions. Operator.
Operator
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation turn will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using the speaker equipment, it may be necessary to pick up your handset before pressing the star keys. For the participants on the webcast, you may submit your questions via the webcast interface. One moment please while we poll for questions.
spk03
Our first question is from Bill Sutherland of the Benchmark Company. Please go ahead.
Bill Sutherland
Thank you. Good afternoon, everybody. Congrats on another solid set of achievements here. So I'm thinking about the ED market because there's just been an announcement. I know you're in touch with Ascension's, apparently, getting hitched with the Charlotte based system that Rick, I know, I mean, sorry, that John, I know that you're familiar with. Do you, did you already have an entry into extension or is this going to be an additional market opportunity for you?
Form 10 - Q
John, please go ahead.
Larry
No, I was notified of the, the acquisition yesterday or the, merger with Atrium. But it's with Atrium, which is the Charlotte-based entity that I'm very familiar with. And I got pinged by a cardiologist friend of mine and the chief innovation officer for Atrium, who is the architect of that deal. So it offers us another opportunity, Bill, in addition to the Atrium-Wake Forest integration that's currently in process.
Bill Sutherland
That's great. The plans with the Live More technology, is there anything still to be done at their end, or is it just a matter of taking the Halo Plus right off the shelf practically?
Form 10 - Q
We are using their platform. for both of our products, the ED product and the telehealth product. And it plays a central role as a FDA cleared platform in hosting our algorithms for both of these products and also connecting us with the electronic medical records. So for the ED product, the development is substantially done. There is not much left. We need to do the validation study that's just around the corner, but the development is pretty much finished. When it comes to the telehealth application and use of their platform, yeah, there is additional algorithms that need to be implemented and additional work to be done in terms of application to a patient and indeed the physician and their connectivity. In that sense, there is quite a bit of work left for the telehealth product and Live More platform, but at this time it's all on schedule for both products with the ED product being fairly much done. Great, that's good.
Bill Sutherland
The market is obviously huge for you in terms of just heart attack survivors, much less the entire at-risk population. But I'm curious, given the fact that there's just been an update from one of the MACs in the arrhythmia marketplace for the extended Holter vaccine, rates that are very generous in comparison to what had been said by the FDA. I'm just curious if that's going to be something that potentially you think about down the road, or does that make it more interesting to you nearer term?
ED
John, please.
Larry
As you know, Bill, the MACs have whipsawed the reimbursement for extended halters over the last couple of years. Good to see now that they're back to probably where they were a couple of years ago in the mid-300 range, I think. So, yes, that does make it more attractive, but we're laser-focused initially on getting these products through the FDA submission process and taking on this unmet need in the ischemic patient population. And I think, obviously, because we record ECGs, actually looking at arrhythmias subsequently makes a lot of sense, especially if it's, again, another attractive market, as we know it is. Sure.
Bill Sutherland
Okay. Those are my questions.
ED
Thanks very much, guys. Thank you, Bill.
Operator
Ladies and gentlemen, just another reminder, if anyone else would like to ask a question, welcome to press star and then one. I would now like to hand over to Larry for webcast questions. Please go ahead.
Larry Holub
Our first question from the webcast asks, net cash used during the quarter was elevated versus prior Q4. Can you walk us through future quarterly cash burn and cash duration?
Form 10 - Q
Rick, please.
Branislav
Sure. That's a good question. Spending is actually on our plan. We're using the IPO funding to get our ED product into the market and our telehealth product through FDA clearance in 2023. You have to be a little bit careful when you look at the cash flow. It's in the press release or in the 10Q because it compares from the same quarter a year ago when we were private. This quarter, We spent about $2.3 million, and in the fourth quarter, our first public quarter, we spent about $2.7 million. So we're actually down a little bit. Our burn rate is probably running right now about $400,000 a month, plus what we're spending with Livermore and Purple Ring. If you look at the Q and the liquidity, we've gone out a year. We believe we have cash that gets us through a little bit longer than we were predicting. So well into the second quarter of spring, let's say, of next year. So we're feeling pretty good as to where we're standing now. Good question. Thank you.
Larry Holub
Our next question asks, I'm a shareholder and former MI survivor. How can I get a preview of the device for testing?
Form 10 - Q
At this point, we are not FDA cleared. So All use of the device needs to be under an independent review board scrutiny and within a medical facility. So we are equally eager to put this technology into patients' hands and working very hard for that clearance to happen. As soon as that happens, we will be in the position to meet the needs of the patients.
Larry Holub
Our next question from the webcast, can you talk about the size and scope of additional healthcare system partners for ECG data sets related to your ED product? Is this a KPI we should track for successful FDA submission?
ED
John, please go ahead.
Larry
Yeah, I mean, we've obviously... identified a few key partners that are providing us ECG data sets or ECG paired data sets if you like because we're asking them to provide a patient's baseline ECG and if they've come in through the emergency department they're symptomatic ECG as well and my goal is to always collect more data so we're engaging additional healthcare systems and most recently it was Jefferson Art Institute in Philadelphia, and they're already actively screening ECG data sets, and they will provide us their first data this week, I believe. And the scope of them are, to me, it's unbounded. We will continue to collect data, obviously, as we commercialize the products as well, and that will be an ongoing effort on our part as we start to scale commercially as well.
ED
Our next webcast question asks, can you expand on the importance of Live More with your two products?
Form 10 - Q
Yes, the Live More platform is central to both ED and telehealth products. It holds all our algorithms and provides the critical interface with the electronic medical records. It is of utmost importance to us that all our products actually use the same platform, regardless of their application or intended use. Our partnership with Livemore is on a very solid ground and provides us with an FDA-cleared solution that effectively cuts down the time to market and minimizes, actually, our development costs.
Larry Holub
Next question asks, what is your initial experience with Triple Ring? And the ask is also, are you still on schedule?
Form 10 - Q
Let me answer that question as well. We are very pleased with how Triple Ring has been performing on our project so far. It is obvious to us that they have all the experience and knowledge, actually, needed to turn our prototype devices into a manufacturable product. Overall, they have met all our expectations and actually exceeded many of them. Our chief operating officer, Alan Bumel, is working very closely, almost on a daily basis, with TripleRing, and this is truly a joint development project. Because of that, we have excellent visibility into the progress and schedule. And so far, we are on schedule for our Q4 FDA 510 clearance submission.
Larry Holub
The next question asks, Q2 and Q3 of 2022 seem to be an inflection point for ER CD software tool. If everything goes well, when can we expect initial revenues?
ED
John?
Larry
Yeah, assuming obviously once we get the FDA submission into, or the regulatory submission for the ED product into the FDA, we've allocated a 90-day review cycle to clearance. Assuming that stays in place, it is indeed a Q3 clearance, at which point many of the accounts we've been speaking to already are ready, willing, and able to conduct pilot studies We'd anticipate that each of those centers will probably want to conduct a pilot for 30 days. And then post that 30-day pilot, we'd look to turn that into a revenue-bearing account. So maybe late Q4, for sure, Q1 2023. Okay.
ED
I think we have one more question.
Larry Holub
What are your partner healthcare systems saying about your products? If they're excited, optimistic, and do you see any other competitors in the marketplace as an impediment to upcoming product launches?
Form 10 - Q
Again, John has been leading that activity. John, please go ahead.
Larry
Yeah, actually, the cardiologist groups that... my team and I have engaged with are extremely excited about the possibility of having a credit card-sized device that records 3D cardiac activity. It's a more data-rich recording than a standard 2D recording, and they're very excited that it is designed specifically to look for ischemia, whereas most products on the market are ambulatory cardiac monitors used for arrhythmia monitoring, which is substantially not an at-risk patient population. So whereas post-MI patients and patients with coronary artery disease are the ones most susceptible to an MI, and so they're very, very excited about it and eager to get it in their hands and prescribe it to their at-risk patients.
ED
That concludes our webcast questions.
Operator
Ladies and gentlemen, that concludes the Q&A session. I would like to turn the call back over to Mr. Vaishik for his closing remarks. Please go ahead, sir.
Form 10 - Q
Thank you, operator. I would like to thank each one of you for joining our earnings conference call today. and look forward to continuing to update you on our ongoing progress and growth. We were unable to answer any of your questions. Please reach out to our IR firm, MZ Group, who would be more than happy to assist.
ED
Thank you again, and all the best.
spk03
That concludes today's conference. Thank you for joining us. You may now disconnect your lines.
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