This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1.
spk04: Good day, and thank you for standing by.
spk03: Welcome to the Helios Medical Technologies Q3 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Lisa Wilson, Investor Relations. Please go ahead.
spk02: Thank you, LaTanya. Welcome to the third quarter 2022 earnings conference call for Helios Medical Technologies. This is Lisa Wilson of Insight Communications, Investor Relations for Helios. With me on today are Dane Andres, Helios Medical's President and Chief Executive Officer, and Jeff Matteson, 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 investor section of the Helios website at heliosmedical.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 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 factor 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 November 14, 2022. who 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 Andreef, President and Chief Executive Officer of Helios.
spk01: Thank you, Lisa. Welcome, everyone, to Helios Medical's third quarter 2022 earnings conference call. The third quarter was our first full quarter of commercial sales of our portable neuromodulation stimulator or PONS device, which is indicated in the U.S. for short-term treatment of gait deficit due to mild to moderate symptoms of MS and is to be used in conjunction with a supervised therapeutic exercise program. Gait dysfunction is an extremely common symptom among the estimated 1 million people in the US suffering from MS. Over 70% of patients report difficulties walking, yet there remains a huge unmet need in this area. Until now, treatment options have been limited, but 14 weeks of PONS therapy has demonstrated significant gait improvement when compared to physical therapy alone. PONS therapy is the only available portable and readily accessible neurostimulation therapy that promotes neuromodulation and may lead to neuroplasticity, which is the brain's ability to modify change and adapt in response to modulation of brain activity. It is safe, effective, and offers patients hope and neurologists a new tool in their tool belt. We are gratified by the reception ponds is continuing to see in the marketplace. Total revenue grew 65% quarter over quarter, and it was driven primarily by sales of ponds in the U.S. During the quarter, we continued to see an upward trend in inquiries and prescriptions written and filled. As more and more PTs are trained on ponds and more doctors become available become aware of the benefits of PONS therapy, we believe this upward trend will continue through the rest of 2022 and throughout 2023. As mentioned last quarter, because interest in PONS therapy was high from the onset, we faced several challenges during the early weeks of commercialization. One of these was in training physical therapists who wished to treat MS patients experiencing gait impairment because therapists were previously trained through an in-person multi-day course with only five to 10 people able to participate at any one time. We simply could not train them fast enough to keep up with demand, leaving many physicians unable to find a trained physical therapist to fill a prescription. In July, we implemented a self-paced online training module allowing practitioners to be trained remotely at their own pace in three hours or less. This change has been widely embraced, and we currently have nearly 100 physical therapists already trained or registered in the U.S. Another move we made to facilitate more streamlined access to PONS in the development of PONStherapy.com our direct-to-consumer e-platform telehealth for physicians and patients. This powerful hub will go live in all 50 states by the end of 2022 and will include a network of fully licensed providers with e-prescribing capabilities. This will greatly reduce the amount of time it takes a patient to set up an appointment with their neurologist or primary care physician. allowing patients to match with practitioners, make appointments online, all in as little as 24 hours. They can also choose to have PONS device delivered directly to their door. Right now, all sales are on a cash pay basis, but we don't want cost to be a barrier to PONS use. While we pursue commercial and government reimbursement programs, we are offering PONS device at a discount to list price in the U.S. In addition, we implemented the Patient Therapy Access Program, or PTAP, earlier this year, which enables patients access to on-label PONS therapy at a nearly 85% discount to list price. Approximately 80% of PONS device prescriptions filled in the U.S. through the third quarter was filled through PTAP. Because our PONS device is to be used in conjunction with a supervised therapeutic exercise program, it is important to understand the extent to which patients' adherence to the PONS therapy regime can lead to meaningful therapeutic outcomes. To evaluate this relationship, we launched a therapeutic experience program, or TAP. Established one year ago, TEP 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. We have engaged four centers of excellence to date with MGH Institute of Health Professions and Oregon Health and Science University, our most recent additions, to NYU Langone and Shepherd Center already enrolling patients. We anticipate TEP will provide additional clinical evidence to support the long-term durability of PONS therapy for MS, and we hope to have the program fully enrolled by mid-2023. Turning to our Canadian activities. Since 2019, PONS has been authorized for sale in Canada for chronic balance deficit due to mild to moderate traumatic brain injury, and subsequently for the treatment of gait deficit to mild to moderate symptoms from MS. Though we've gained valuable data from our patients in Canada, some of it crucial in obtaining FDA authorization in the US. Sales have been weaker than expected. With that said, we do have some initiatives in the works in Canada, which we believe will lead to near-term and longer-term increases in sales. We look forward to the prospect of announcing additional details in the coming weeks. With that, let me turn the call over to Jeff to discuss our third quarter financial results in detail.
spk06: Thanks, Dane. Good morning, everyone. It is a pleasure to be with you today. Total revenue was $196,000 for the third quarter of 2022 compared to revenue of 109,000 in the third quarter of last year for an increase of 80%. Product sales in the U.S. during the third quarter totaling 139,000 more than doubled over the second quarter of 2022 levels. For the third quarter of 2022, our gross profit was $95,000 compared to $23,000 last year. Operating expenses for the third quarter were $4.9 million, compared to $4.4 million in the third quarter of last year, an increase of half a million dollars. The increase was primarily due to a net increase in non-cash stock-based compensation expense, including the one-time $1.2 million expense attributable to performance-based options that tested during the current year quarter. Lower research and development costs following the U.S. commercialization launch partially offset these increases. During the quarter, we recorded a one-time non-cash $757,000 goodwill impairment expense, resulting from the decrease in the company's market value. reducing the goodwill balance to zero. Operating loss for the third quarter of 2022 was $4.9 million compared to a loss of $4.4 million for the prior year period. The public warrants we issued in connection with the August 2022 financing were accounted for as a derivative liability instrument on the balance sheet. And as a result, the portion of the offering costs attributable to the warrants were recorded as interest expense, totaling $919,000 for the quarter. In addition, the decrease in the valuation of these derivative instruments from the date of the offering to the quarter end resulted in income totaling $5.5 million during the quarter. The warrants will require revaluation in future quarters tied to our share price, resulting in income or expense for each reporting period. We reported a net loss for the third quarter of 2022 of $1 million, or a loss of 12 cents per share, compared to a net loss of $4.7 million, or a loss of $2.01 per share for the same period last year. As of September 30th, 2022, we had $16.7 million of cash and no debt. We currently expect fourth quarter revenue to be modestly above the third quarter levels, factoring in the timing required to pair patients with trained physicians or physical therapists. In addition, as we near the end of the fourth quarter, we may experience some patients delaying PONS treatment until after the holidays, which could temper sales growth as we expand our U.S. market penetration. As we continue to build momentum and expand our sales coverage, we expect future quarterly revenue to continually increase sequentially quarter over quarter throughout 2023 as U.S. commercialization of ponds develops. The sales of ponds in the U.S. and the $18 million financing completed during the quarter We believe we have the cash reserves to take us through 2023. With that, operator, let's now open the call for questions.
spk03: Certainly. As a reminder, to ask the question, you will need to press star 11 on your telephone. Please stand by while we compile the Q&A roster. One moment. And our first question will come from Jeffrey Cohen of Lattenburg. Your line's open.
spk07: Hello, Dane and Jeff. How are you?
spk01: Good, Jeff. How are you? Good morning.
spk07: Good. So a few questions from our end. So firstly, can you give us a sense of number of patients out there and number of patient locations as far as the PTs and training and sites go?
spk06: Yeah, this is Jeff. I'll take that. You know, the PTs in the call, we said that we have nearly 100 PTs that have been trained. So, you know, a lot of those, you know, there are certainly going to be some that we have multiple PTs at a facility, but there are also many individual PTs spread around. So we haven't necessarily talked about, you know, the number of sites in the US where the PTs are located. And as far as the other question on the scripts, I think we're not in a position yet where we're going to be detailing a lot of that information until we better are able to correlate the trends that we're getting. But I think knowing that 80% of the sales in the US were done through the PTAP program, you can pretty much get a sense as to kind of the number of scripts being written based upon the revenue number.
spk07: Okay, got it. And could you give us any sense on progress that you're making with some of the payers out there and what we might anticipate over the coming quarters?
spk01: Yes, Jeff, I'll take this. So right now... Yeah, we're having preliminary conversation with the payers. Also remember the PTAP program does not allow, because of the significantly reduced price, allows the patient to file for reimbursement. So that's first and foremost. But second, with regarding our reimbursement pathway, given the emerging CMS platform, which is called T-SET, which allows for reimbursement under an emerging technology and also a breakthrough technology, since we have that for MS, but also our second one in stroke. We're expecting the rulemaking in early April from CMS, and that's exciting for us, given our two breakthroughs in MS and stroke as well. If we look at our pathway, that would be the quickest pathway towards reimbursement.
spk07: Got it. Okay. And then lastly, Dane, talk to us a little bit about stroke and progress there and what we might anticipate over the coming quarters in that area.
spk01: Yeah. So, again, we're finished with our data development plan with the FDA. We are starting soon the South Carolina pilot trial, and we're very excited about that. We put together our stroke scientific advisory board in this quarter, which I believe is very impressive. So going forward, we do need financing for an FDA trial. So you know, at the time, we're doing many things to get us ready for that trial.
spk07: Okay, perfect. Thanks for taking our questions. Thank you, Jeff. Thanks, Jeff.
spk03: One moment. And our next question will come from Jonathan Ashcock of Roth Capital Partners. Your line is open.
spk05: Thank you. Good morning, Dane and Jeff. My first question is, what caused the gross profit margin to improve so much in the third quarter?
spk06: Yeah, I think what you're seeing is a higher sales volume that is there that covers the fixed costs that go into overhead. So as sales continue to increase, that helps cover our fixed overhead costs.
spk05: Okay, thank you. And the SG&A expense run rate, it kind of popped up, but I have to lower it by about a million dollars a quarter for the cash runway math to work out. Does that sound reasonable?
spk06: Yeah, if you're looking strictly at the third quarter of 2022, correct, because we did have that that one-time charge come through there. So, on a normalized basis or a cash basis, yes, it would be, you know, the million dollars less.
spk05: Okay. And can you tell us how many patients you have participating in your, actually, you already said as an answer to the last questioner that you can just figure that out with the cost. So, I'll just do that. Actually, how many TEP patients are enrolled at the first two sites that enlisted? Can you tell us that?
spk01: Yeah. So, hey, Jonathan, this is Dane. So with the TEP sites, we're going to be averaging anywhere from three to seven per site. How many now are in? We haven't announced that. So that's ongoing as we speak.
spk05: Okay, and however, the average was three to seven, you said?
spk01: Yeah, but roughly three to seven. So we're in discussion with more sites as well. So we're very excited with the sites that have signed on so far.
spk05: Okay, thank you very much, guys.
spk01: Thanks, Jonathan.
spk03: One moment. And our next question will come from Jeffrey Cohen of Leidenberg for a follow-up. Jeffrey, your line is open.
spk07: Oh, hey, I wanted to jump back in and ask one more, if I may. Could you, Dan, talk about the customer journey as part of your new e-commerce platform that's out there, please?
spk01: Yep. So it's going to be very similar to the customer journey that we have internally with our own hub service. But when the patient comes to our pondtherapy.com page, they will have the opportunity to punch through that page. And if they do not have a prescription, they could basically schedule an appointment with a telemedicine doctor and to have a medical appointment and the ability to for that doctor to write a e-prescription that could be filled through the online hub services. And just like our hub services, the patient will have the PONS device shipped directly to their address. And then they could start their PT physical therapy scheduling of the first week or two.
spk07: Got it. Any early experience there? I know it just started up recently.
spk01: It's still early. We're expecting to launch it, so we're not just there yet, but we expect to launch it by the end of the fourth quarter.
spk07: Perfect. Got it. Thank you.
spk03: Thanks, Jeff. I will now turn the conference back to Dane Andrus for closing remarks.
spk01: Thank you, operator. For everyone, we're very excited about the momentum being generated with PONS and look forward to finishing the year strong. I just thank you for your time and interest in Helix Medical Technologies, and we will speak with you next quarter. Thank you very much.
spk03: Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.
Disclaimer