BrainsWay Ltd.

Greetings and welcome to the BrainsWay fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. For anyone to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Chase Oswald of Lifestyle Advisors, Thank you, Chase.

You may begin. Thank you all, and welcome to BrainsWay's fourth quarter and full year 2020 Earnings Conference Call. With us today are BrainsWay's President and Chief Executive Officer, Christopher Vaniaco, and Senior Vice President and General Manager of North America and Interim Chief Financial Officer, Hadar Levy. The format for today's call will be a discussion of fourth quarter trends and business updates from Chris, followed by a detailed discussion of financials from Hadar. Then we will open up the call for your questions. Yesterday, BrainsWay released financial results for the fourth quarter and full year ended December 31, 2020. A copy of the press release is available on the company's investor relations website. Before I turn the call to Chris and Hadar, I would like to remind you that this conference call, including both management's prepared remarks and the question and answer session, may contain projections or other forward-looking statements regarding future events or the future performance of BrainsWay, including but not limited to any statements relating to commercial plans or activities, financial projections, clinical studies, R&D plans, and or anticipated timelines. These statements are only predictions, and BrainsWay cannot guarantee that they will, in fact, occur. BrainsWay does not assume any obligation to update that information. Investors are cautioned that all forward-looking statements involve risks and uncertainties, Such as reliance on third parties and shifting market conditions, particularly due to the COVID-19 pandemic, which may cause actual results to differ from those anticipated by BrainSway at this time. Additional risks concerning factors that could cause actual events, results, or achievements to materially differ from those contained in the forward-looking statements can be found in the company's registration statement on Form 20F and in its other filings with the Securities and Exchange Commission. I'd like to now turn the call over to Chris. Thank you, Chase.

Welcome, everyone, and thank you for joining us today. I'd like to begin by thanking the investors who participated in our recent successfully completed follow-on offering that generated approximately $45 million in gross proceeds for BrainsWay. We were grateful to have the support of many high-quality healthcare-focused institutional investors in this transaction. which we truly believe provides an important validation of BrainsWay's innovative technology and growing business. We were successful in attracting these top-tier investors because of both the strong performance of our existing business as well as our future prospects for significant growth. To this end, we achieved record quarterly revenues in the fourth quarter of 2020 of $7.1 million, representing a strong 17% increase over our third quarter and a 12% increase over the same period of last year, which of course was prior to the onset of COVID-19. We are thrilled that our business is now getting back to what we believe will be a significant growth trajectory as it was prior to COVID-19, when, as you may recall, we generated a robust growth of 41% in the full year 2019 over 2018. I would like to highlight that we generated these excellent top-tier results while also achieving positive cash flow from operations in the fourth quarter. While we are pleased with our performance in the fourth quarter and are confident that we will continue to operate on a cash flow positive basis going forward, we believe it's critical to continue investing in our business in order to drive further market penetration and accelerate growth. Therefore, we intend to utilize the proceeds from the financing primarily to expand our sales force, and to invest in various commercialization and marketing initiatives. I will review our specific objectives in the critical areas of sales and marketing shortly. First, though, I'd like to provide a brief update on the current operating environment. In the fourth quarter, a significant majority of clinics operated at or near normal levels, with some even experiencing patient treatment volumes above pre-COVID levels. Importantly, business conditions have remained stable at these levels during the early months of 2021, though not all clinics are operating at pre-COVID levels yet. Of course, we will continue to monitor the impact of the pandemic on our operations in 2021. With that said, based on the current operating environment, the ongoing vaccine rollout, and our general outlook for the year, we anticipate a steady progression of our business in the second half of 2021. While the pandemic continues to evolve and unfortunately persist, depression and OCD trends are likely to continue to increase as well. Accordingly, according to a recent journal article, one in three adults has been affected by the pandemic related to depression or anxiety. This was a comprehensive study in which researchers performed A meta-analysis of 68 studies conducted during the pandemic and included 288,000 participants from 19 countries. Moreover, in a recent JAMA open survey of over 6,500 patients before and after the pandemic, patients with depression symptoms more than tripled from 8.5% with depression symptoms before COVID-19 compared to 27.8% In OCD, an article published last September in the Journal of Psychiatry Research examined the difference in the gold standard OCD scoring scale among adult patients with a mean age of 43. The results of the study showed substantial worsening among OCD patients, with statistically significant changes in severity of total OCD symptoms, obsessions, and compulsions when comparing the pre-quarantine period versus during quarantine. Staying with OCD, our second major indication, we remain focused on securing reimbursement in this high-value area. After the publication of the Clinical TMS Society coverage guidance for OCD in late January 2021, we have made considerable progress with our OCD payer communications. Since that time, our market access and medical affairs leadership team has made presentations to a number of the largest healthcare plans in the country, including their behavioral health medical directors, as well as a majority of the Medicare administrative contractors, or MACs. In addition, we've sent a significant number of OCD coverage request letters containing the important clinical publications to commercial and Medicare payers. including many of the nation's largest private plans. Our clinical evidence includes post-marketing clinical data on 219 OCD patients at 22 deep TMS sites, which was published in the Peer Review Journal of Psychiatric Research. As a reminder, this study showed that 73% of patients reached an initial response at an early stage of deep TMS treatment. which was administered as an adjunct form of therapy. The data also revealed that the therapeutic effect can be maintained for weeks after the treatment. We hope to begin securing OCD reimbursement coverage over the coming months, though I should add that already about one-third of our total install base have opted to offer our OCD treatment, generally through an add-on helmet to their existing system. This is a clear-cut reflection that, even without reimbursement, our customers strongly believe in the benefit of DTMS for OCD. Regarding the question, with a robust U.S. reimbursement place, our technology allows for an easily understood and, more importantly, an excellent return on investment for our customers, which includes physician offices, clinics, networks, DMS providers, and hospitals. Importantly, 2020 saw several large payers relax their requirements for deep TMS reimbursement. This is a significant trend as it increases the already sizable total addressable market for depression. At the end of 2020, deep TMS for depression was covered by over 60 commercial insurers and all seven MACs providing nationwide Medicare coverage. These payers collectively represent more than 275 million covered lives. Also, our customers continue to enjoy steady reimbursement for deep TMS treatments of depression, which we view as a positive indicator for our business. Beyond seeking to secure reimbursement in OCD and continued favorable reimbursement trends in depression, an important catalyst for us, as I noted earlier, and the rationale for our Last month, we appointed Fran Hackett as Vice President of North American Sales. He brings more than 30 years of healthcare-focused sales experience, business development, and executive leadership to BrainsWay. Over the course of 2021, Mr. Hackett will lead our plan to increase the number of U.S. sales territories we cover from 13 to 18, a planned increase of nearly 40%. This Salesforce expansion will be especially critical as we execute on our controlled market release of Deep TMS for smoking addiction, which began recently. We intend to introduce this new commercial offering, the first of its kind, up to 12 customers initially. Several of these sites are already offering Deep TMS for smoking addiction patients, and I'm pleased to report Today, the first patients have now been treated. You will recall that smoking addiction represents our third FDA-cleared indication for deep TMS, making us the most versatile TMS platform by far. As a reminder, we received FDA clearance based on the data from our double-blind multi-center trial with 262 smokers. These smokers were highly addicted to cigarettes. with a long history of smoking and with 70% of them having failed three or more attempts to quit. Of their participants who completed a full course of deep TMS treatment, 28% achieved four consecutive weeks of abstinence from smoking. These data have us very excited about the large market opportunity among the 34 million adult smokers in the U.S. and the potential impact that deep TMS for smoking addiction can have on our business and revenues over time. As the controlled market release and smoking addiction continues, we also remain focused on increasing market penetration for deep TMS and depression and OCD, and we intend to expand our digital marketing strategy and other critical initiatives that will be supported by our recent financing. Specifically, we plan to execute campaigns aimed at enhancing website content, Search Engine Optimization, Increasing Social Media Advertising, and Enhancing the Utilization of Social Media Influencer Networks. An excellent example of this is our digital efforts around OCD Awareness Week, which took place in October and was highlighted on our last call. I would also like to note the impressive gains we have seen from the data we are tracking on our website user volume and patient education initiatives. For example, our new website, which serves as both a patient and provider resource, saw a massive 70% increase in organic users from 2019 to 2020. Turning to investor relations, I want to emphasize that we continue to remain dedicated to sharing BrainsWay's compelling growth story with both institutional and retail investors. We've met with a number of high-quality healthcare-focused U.S.-based institutional investors around our recent equity offering enjoy a very positive reception to the offering. Moreover, we hosted a well-attended key opinion leader virtual investor event last November. This informative event featured Dr. Owen Muir of Brooklyn Mines, who discussed the current treatment landscape and the unmet medical need in treating patients with depression and OCD. In addition, we'll be presenting at a number of healthcare investment conferences throughout 2021, and we plan to host an additional KOL event for investors and analysts this year. To put our competitive position in the TMS marketplace into perspective, our deep TMS system has been subject of no less than 32 completed randomized controlled clinical trials, which is more than any other company in our field. Furthermore, BrainsWay's deep TMS has been utilized to treat over 95,000 patients for depression and OCD, and this translates into over 2.5 million individual treatment sessions. As far as our positive safety profile, as you may know, our device is not associated with any systemic side effects. However, BrainWay has been diligently collecting comprehensive safety data to provide us with a better understanding of the risks of the treatment, and recently published analysis in the Journal of Brain Stimulation. Importantly, we now have the most comprehensive published clinical safety data by far of any TMS company and believe this suggests a safety profile that is second to none in the TMS industry. Finally, as always, I want to express my gratitude to our hardworking customers on the front line of this mental health crisis and to the entire BrainsWay team for their continued support and dedication in boldly advancing neuroscience to improve health and transform lives. These extraordinary efforts by our customers and employees produced significant achievements in 2020, positioning us well to complete our recent equity financing and has us poised to leverage the many key catalysts ahead of us.