electroCore, Inc.

Greetings and welcome to the ElectraCore Second Quarter 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. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hans Wittstum, with Lifestyle Advisors. Thank you. You may begin.

Thank you, Operator, and thank you all for participating in today's call. Joining me are Dan Goldberger, Chief Executive Officer, and Brian Posner, Chief Financial Officer. Dr. Peter Staats, ElectroCore's Chief Medical Officer, will be available for Q&A. Earlier today, ElectroCore released results for the quarter ended June 30, 2020. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, Our examination of operating trends and our future financial expectations are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. Electric Core disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, August 13, 2020. And with that, I'll turn the call over to Dan.

Thank you, Hans. Hello, everyone, and thank you for joining us today. I'll begin with an update before turning the call over to Brian to review our financial results. You will recall that Electric Core is in the early stages of commercialization of our proprietary gamma core therapy for various indications. I'd like to start with a review of our balance sheet. We ended the second quarter with cash and cash equivalents of $18.9 million. Subsequent to the end of the quarter, we raised an additional $10.3 million through an additional drawdown on our existing stock purchase agreement with Lincoln Park Capital. As a result, Our pro forma June 30th cash balance is $29.2 million. At the same time, we've made significant progress reducing our cash burn to $5.2 million in the second quarter of 2020 as compared to $8.4 million in the first quarter of 2020 and $11.2 million in the second quarter of 2019. Together, these actions provide us with a substantial cash runway that I believe is sufficient to achieve meaningful commercial milestones, both in our approved headache indications and existing revenue channels, as well as the emerging opportunity in COVID-19. Turning now to COVID-19, on July 13, 2020, we announced that FDA has issued an emergency use authorization for noninvasive vagus nerve stimulation therapy, GammaCore Sapphire CV, in known or suspected COVID patients who are experiencing an exacerbation of asthma-related symptoms and for whom currently available treatments cannot be tolerated or proved ineffective. Needless to say, we're thrilled that our EUA has been approved and we look forward to making NVNS therapy available to both the medical community and COVID patients. Gamma Core Sapphire CV is now one of a very small group of therapeutics to have received the EUA designation. The utility of NVNS in COVID-19 patients was initially highlighted in April 2020 through a paper published in the highly regarded peer-reviewed journal Neuromodulation Technology at the Neural Interface, the official journal of the International Neuromodulation Society. That paper was entitled Use of Noninvasive Vagus Nerve Stimulations to Treat Respiratory Symptoms Associated with COVID-19. a theoretical hypothesis and early clinical experience. This paper describes the mechanistic rationale for the use of NVNS in patients with COVID-19 and highlights two case reports from patients who experienced clinically meaningful benefits from NVNS therapy. In case one, the patient used NVNS to expedite symptomatic recovery at home after hospital discharge due to COVID-19 and was able to discontinue use of opioid and cough suppressant medications more rapidly than anticipated. In case two, the patient experienced immediate and consistent relief from symptoms of chest tightness, shortness of breath, as well as an improved ability to clear his lungs and did not require hospitalization. The paper concludes that, and I quote, preliminary observations and a strong scientific foundation suggest that NVNS might provide clinical benefits in patients with COVID-19 via multiple mechanisms. As a result of this evidence in combination with the early clinical trials that supported the issuance of our EUA, two investigator-initiated clinical trials are underway evaluating Gamma Core Sapphire CV in hospitalized COVID-19 patients. In Spain, Dr. Carlos Tornero of the Hospital Clínico Universitario de Valencia, conducting a study called SAVIOR-1, a study assessing vagus nerve stimulation in COVID-19 respiratory symptoms. This is a randomized open-label study that is targeting 90 hospitalized patients with a confirmed diagnosis of or presumed to be COVID-19 positive. In the United States, Dr. Tariq Chema of Allegheny General Hospital in Pittsburgh is conducting a study called SAVIOR-2 targeting 60 hospitalized patients with a confirmed diagnosis of or presumed to be COVID-19 positive. Both studies follow the recommendations outlined for clinical trials by the WHO in their COVID-19 R&D blueprint and will measure the safety and efficacy of Gamma Core Sapphire CV plus standard of care versus standard of care alone in patients hospitalized with COVID-19 across a broad range of clinical and laboratory endpoints. We are grateful to Drs. Tornero and Chema and their staff for taking the lead on these important studies, and we look forward to their results. We should note that it is difficult to predict when the studies will achieve full enrollment, as the number of hospitalized COVID patients tends to fluctuate from one country to the next and within different regions of a country. More recently, we've agreed to support a clinical trial within the Veterans Administration system of NVNS to treat COVID-19 patients in an outpatient setting prior to any hospital admission that will be coordinated by the Hampton, Virginia VA Medical Center. We will provide additional details on this study tentatively called Vanguard later in Q3. In terms of pricing and availability of GammaCore Sapphire CV, the list price of GammaCore Sapphire CV is $1,750. In light of the emergent pandemic, We are making the therapy available to all customers for $1,250, a 29% discount, until further notice. We have instituted what we believe to be a very simple process for hospitals, physicians, patients, and VA military treatment facilities to access GammaCore Sapphire's CV, and I refer you to the press release issued on July 30, 2020, for specific instructions. To further support these EUA distribution activities, We are planning to launch a telehealth option for Gamma Core Sapphire CV that will facilitate the immediate processing and fulfillment of prescriptions. Note that our specialty pharmacy partner has expressed confidence that Gamma Core Sapphire CV will be eligible for reimbursement. The Department of Veteran Affairs COVID-19 National Summary, available on the Internet, shows more than 4,000 active cases as of August 11th. You may recall that we have a small team of sales executives calling on the VA system and military treatment facilities. That team has been trained on GammaCore Sapphire CV and has started promoting our therapy for COVID patients in that channel. Since our July 30th, 2020 announcement, our team has reached out to almost 1,500 providers within the VA system, in addition to all of our legacy headache relationships. Operationally, The health and safety protocols that we put in place upon the emergence of the pandemic to protect our employees, customers, and suppliers remain in effect. We continue to manufacture and ship product on schedule and manage our inventory and supply chain with very few disruptions. Turning now to our results for the quarter ended June 30, 2020, we experienced softness in some of our key metrics, particularly paid months of therapy, Thank you for joining us. However, by the end of the second quarter, more than 2,890 physicians have written at least one Gamma-Core prescription as compared to 2,850 at the end of the first quarter. Total revenue for the quarter was $753,000, a modest increase from $734,000 in the first quarter, a result that we are pleased with given the logistical challenges posed by the pandemic. As with prior quarters, The Federal Supply Schedule and the United Kingdom's National Health Service contributed most of the revenue, and we recognized revenue in the commercial channel for the first time this year. I will now discuss each of our revenue channels in more detail, some of which we previewed in our business update press release for July 14, 2020. During the second quarter, 67 Department of Veterans Affairs, the VA, and Department of Defense, DOD, military treatment facilities purchased GammaCore products as compared to 64 during the first quarter of 2020 and 54 during the fourth quarter of 2019. Also, during the second quarter, the company shipped approximately 988 paid months of therapy pursuant to VA and DOD originating prescriptions compared to 1,084 paid months of therapy during the first quarter of 2020 and 829 during the fourth quarter of 2019. Revenue from the VA and DOD in the second quarter was $415,000 as compared to $454,000 in the first quarter and $378,000 in the fourth quarter of 2019. As we indicated during our first quarter conference call, in light of the ongoing pandemic, our ability to visit hospitals and doctors has been limited. And according to VA officials, Some 5.7 million appointments with VA providers were canceled between February and April. Partly offsetting this is the VA's advanced telehealth capabilities, which have increased almost tenfold from 2,500 daily sessions in early March to nearly 25,000 current daily sessions, according to the Federal News Network. As we've said before but bears repeating, GammaCore can be prescribed easily during a telehealth consult and delivered directly to the patient's home. and this has allowed us to navigate through the crisis with only a modest sequential reduction in paid months of therapy. We continue to see encouraging signs that certain VA hospitals are planning to host in-person meetings with our field staff and are starting to see patients in clinic. While the VA system is a long way from opening up, the current quarter is off to a good start. We shipped 435 paid months of therapy in July 2020, compared to an average of 329 Per Month in the second quarter. Outside the U.S., turning now to the United Kingdom and other OUS territories, the U.K. was particularly hard hit during the pandemic, and as a result, paid months of therapy decreased about 7% to 938, from 1,008 during the first quarter of 2020 and 961 during the fourth quarter of 2019. The modest sequential decline was also affected by a discontinuation of operations in Germany. Barring a second wave, COVID-related restrictions are loosening in the United Kingdom, and as a reminder, GammaCore is reimbursed through the Innovation Technology Payment Program. During the second quarter of 2020, total revenue generated outside the U.S. was $247,000 as compared to $277,000 in the first quarter of 2020. and $294,000 in the fourth quarter of 2019. New patient starts have been impacted by the COVID pandemic, but we are optimistic that we can return to growth in both revenue and months of therapy in the back half of the year. July was off to a good start with 368 paid months of therapy as compared to an average of 313 per month during the second quarter. Turning now to the U.S. commercial and pharmacy benefit managers, I've previously said that I did not expect to recognize any revenue from the commercial pharmacy benefit manager channel during 2020 because there appeared to be adequate inventory in that channel. It now appears that I was too conservative. Commercial pharmacies have been filling 300 to 500 paid months of therapy per quarter during the first two quarters of 2020. Those prescriptions have been delivered from inventory purchased by a distributor in 2019. During the second quarter of 2020, we successfully transitioned our business model in the commercial space to work directly with the specialty pharmacies. We exited our remaining distributor relationship as of May 31, 2020, and that distributor was able to dispense all of the inventory that they had originally purchased last year. We shipped a small replenishment order to pharmacies in June 2020, and we expect to ship at least 200 paid months of therapy per quarter going forward for the rest of the year. Now that we have streamlined our commercial channel, we will start to look at making selected investments to grow that business more aggressively once the COVID-related headwinds recede. Turning to our clinical programs beyond the COVID trials discussed earlier, The Premium 2 trial in migraine prevention was closed due to the pandemic in March 2020, and we expect to have more than 225 patients in the Intent to Treat group and more than 110 patients in the Modified Intent to Treat group. We look forward to analyzing the data from this study, and the data will be subsequently reported at upcoming medical meetings. I look forward to sharing that data with you. The company is aware of several other investigator-initiated trials and a variety of indications. Many of these are having difficulty recruiting patients in the short term as the world manages through the pandemic. We'll share updates as they become available. On July 28, 2020, we announced the publication of a clinical update paper in the peer-reviewed journal, Cephalalgia, the official journal of the International Headache Society. The paper is a narrative review of recent scientific and clinical research into the noninvasive vagus nerve stimulation for headaches, including findings from mechanistic studies and their possible relationships to the clinical effects of NVNS. The review concludes that scientific and clinical studies support the emergence of NVNS as an effective, safe, well-tolerated, and practical treatment for primary headache disorders and supports the consideration of NVNS as, number one, a first-line treatment for both acute and preventative treatment of cluster headaches, and number two, an effective option for acute treatment of migraine, and number three, a highly relevant practical option for migraine preventative therapy. The primary author of the paper is Dr. Steven Silberstein, past president of the American Headache Society. and Director of the Jefferson Headache Center at the Thomas Jefferson University Medical Center. It's publications such as this, together with support from influential opinion leaders, including all of the authors of that paper, that are core to our ongoing marketing efforts and represent a very powerful tool as we work to drive adoption of gamma core therapy in all of our channels. At this point, I'll turn the call over to Brian for a review of our financials and other guidance items.