Helius Medical Technologies, Inc.

Good day, and thank you for standing by. Welcome to the Helios Medical Technologies second quarter 2024 earnings conference 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. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Bilski, Investor Relations for Helios Medical. Please go ahead.

Thank you, Operator. Welcome to the second quarter 2024 Earnings Conference Call for Helios Medical Technologies. This is Michelle Bilski of Insight Communications, Investor Relations for Helios. With me on today's call are Dane Andreef, Helios Medical's President and Chief Executive Officer, and Jeff Mathieson, 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 www.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 the current expectations of management. These forward-looking statements, including statements regarding potential reimbursement pricing, 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 our most recent quarterly report on Form 10-Q. Risk 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 August 12, 2024. 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 Mr. Andrews.

Thanks, Michelle, and thank you, everyone, for joining us today on Helios Medical's second quarter 2024 earnings conference call. During 2024, our priority has been to get PONS therapy to as many people suffering from MS as possible. We've seen firsthand how our innovative technology makes a meaningful difference in a patient's fight against gait and balance deficit, a common but devastating symptom of MS. And I'm proud to say our efforts during the second quarter and recently have generated significant momentum toward greater access

Operator. All right.

Yeah. Go ahead, Dane. I was going to step in. Go ahead.

Yeah, I'm getting a lot of feedback. This line isn't working properly. So, Jeff, do you want to step in, please?

I'll keep going and why don't you dial back in and give another shot. Okay. Specifically, in April, we partnered with Lovell Government Services and SBA Certified Service Disabled Veterans Owned Small Business to make PONS therapy accessible to MS patients treated at the VA and through our other federal agencies. The VA is the largest integrated healthcare system in the United States and home to a network of multiple sclerosis centers of excellence. The VA estimates that between 55,000 and 70,000 veterans in the U.S. live with MS. As the only portable and readily accessible therapy that may lead to neuroplasticity, PONS is a potential game changer for these veterans and their families. and we're happy to be a preferred provider and help more service members access this treatment. Shortly thereafter, in May, PONS was approved for inclusion in Levels VA federal supply schedule and the General Services Administration Advantage contracts. At pricing of $23,843.72, and $7,344.97 for the PONS device and the PONS mouthpiece, respectively. Also in May, we received the first third-party reimbursement of $23,900 from a major insurance carrier for a PONS device. Then in July, PONS was approved for inclusion in Levels' DAPA contract for the Department of Defense at $23,724.50 and $7,308.25 for the PONS device and the PONS mouthpiece, respectively. These were all important accomplishments in establishing market pricing for PONS as we pursue reimbursement at CMS and third-party payers. Last quarter, CMS assigned HCPCS codes covering the PONS controller and mouthpiece, and in May released its preliminary Medicare payment determinations for both. This was a significant reimbursement and access milestone for Helios, and we were gratified to know that CMS understood the benefits of this innovative treatment. We were pleased with this development but believe there is a strong argument for higher reimbursement rates for both the mouthpiece and controller, which we presented at the CMS public meeting on May 29th, as well as in subsequent written communications. First, we argued that it was appropriate to categorize the mouthpiece as a supply item to be reimbursed on lump sum payment structure. As a reminder, the mouthpiece has a 14-week life and involves application to a patient's tongue. So therefore, we believe a 13-month cap rental structure is not appropriate. Additionally, we provided recent contract pricing and invoices to support the market pricing at pricing levels I previously discussed to be used for setting of the reimbursement using the gap-filling method. We also articulated how PONS is not a neuromuscular peripheral stimulation therapy, and therefore it is not appropriate to map pricing to such devices. Instead, we argued reimbursement for the controller should be established using the gap-pilling methodology based on market pricing. CMS is expected to publish final reimbursement rates in the coming weeks. Once finalized, the payment rates will be effective October 1, 2024. We are also actively assisting several MS patients as they submit claims with other third-party payers on a one-off basis in attempts to secure reimbursement. Beginning in June, we began building out a sales rep organization to service the VA sites throughout the U.S. To date, we have established sales representatives covering 13 states, including Texas and Florida, plus Puerto Rico. We believe having boots on the ground representatives focused on neurological disorders and that have established relationships with the individual VA sites will be critical to building out sales across the VA facilities in the U.S. I'll pause for a second and just see if Dane has rejoined.

I have. Jeff, thank you. Let me continue. While much of our focus during the quarter was on removing barriers to access and securing reimbursement, we also made meaningful progress toward our pursuit of stroke authorization in the U.S., where over 5 million stroke survivors are affected by walking and balance disability. The registration program, which includes an investigator-initiated placebo-controlled study at the Medical University of South Carolina and Brook Rehabilitation and a company-sponsored open-label trial, has been fully enrolled. In June, site participation enrollment of the open-label study with the addition of top neurorehabilitation centers, such as Rehabiligim, the Neurology Center of New England, and MGH Institute of Health Professions have started enrolling. This groundbreaking registrational program, which also has the participation of Brooks Rehabilitation, and Shepherd Center to the open label study is designed to establish the effects of cranial nerve non-invasive neuromodulation delivered using PONS therapy on gait imbalance in chronic stroke survivors. It will also establish PONS therapeutic impact on the risk of falling in U.S. patients. In addition to enrolling 60 participants to the MUSC study, we anticipate enrolling approximately 30 patients into the open label study across all sites. By the end of the third quarter, expect that the results will significantly bolster our FDA submission when we submit for regulatory approval in 2025. The Stroke Registrational Program was established in part based on real-world evidence from Canada. where PONDS is already authorized for the treatment of stroke. To further strengthen the data package submission for FDA authorization and support national reimbursement in Canada, we've begun an additional Canadian study on the use of PONDS therapy to treat stroke with the goal of enrolling 40 to 60 subjects by the end of 2024 at three centers of excellence for stroke rehabilitation. The study, which has received approval by the institutional review boards in June, has already started participants' enrollment. A new research program to extend established evidence of the effect of on-label ponds on risk of falling in stroke patients with gait and balance deficits in Canada has also begun enrolling patients with TBI and MS at three top Canadian neuro rehabilitation sites in May. We're excited about where we stand at the mid year of the year. We secured reimbursement with a major third party insurer and the expected Medicare price determination to be effective October 1st will enable us to further expand reimbursement across third party payers. The number of PONS trained therapists in the field is growing, and our FDA submission for stroke remains on track. Given all that we've put into place, we see a clear path ahead toward achieving our main goal of removing barriers and helping more people benefit from PONS. And with the $6.4 million of financing we announced in May, we extended our runway to cover the key 2024 milestones. I'll now turn the call over to Jeff to discuss our second quarter financial results in more detail.

Thanks, Dane. Again, it's a pleasure to be with you today. Total revenue for the second quarter of 2024 was 182,000, a decrease of 74,000 compared to 256,000 in the second quarter of 2023. As a result of the termination of our patient therapy access program on June 30, 2023, and the termination of temporary cash pay pricing in May of 2024. Revenue for the quarter was up 35% compared to the first quarter of 2024 as a result of increased sales in both the U.S. and Canada. For the second quarter of 2024, cost of revenue was $118,000, compared to $184,000 for the prior year period, primarily attributable to lower sales compared to the same period in the prior year. Selling general and administrative expenses for the second quarter of 2024 were $2.5 million compared to remaining relatively flat when compared to the $2.6 million reported in the second quarter of 2023. Research and development expenses for the second quarter of 2024 were $0.9 million compared to $0.7 million in the second quarter of 2023, driven primarily by an increase in clinical trial activities for stroke and risk-of-fall programs. Total expenses for the second quarter of 2024 were $3.3 million, flat when compared to $3.3 million in the second quarter of 2023. operating loss for the second quarter of 2024 was $3.2 million, compared to a loss of $3.2 million for the prior year period. We reported a net loss for the second quarter of 2024 of $1.6 million, or a loss of 64 cents per basic and diluted common share. We also had a net loss of $1.6 million in the prior year period or a loss of $2.92 per basic and diluted common share due to a higher number of weighted average shares outstanding. Our cash burn from operations was flat at $5.9 million, so the six months ended June 30, 2024 and June 30, 2023. As of June 30, 2024, we had $6.4 million in cash and no debt. In May, we closed on $6.4 million public offering and received net proceeds of $5.5 million, which will extend our cash runway into 2025. This financing also includes one-year warrants for an additional $6.4 million of gross proceeds that are callable by the company within 30 days of announcing the final reimbursement determination for Pons Controller and Mouthpiece by CMS. if the stock price trades at or above $2.25 per share for five consecutive days during that period. We expect a final determination will be announced in late summer and effective October 1st of this year. If exercised, the additional proceeds from these warrants will fund our operations well into the second half of next year. Turning now to our outlets, To date, PON sales have been muted due to the fact that they have primarily been on a cash pay basis and as a price point that is not feasible for the vast majority of the patients in our addressable markets. However, with our recent inroads into the VA and the expected Medicare reimbursement to be effective October 1st of this year, we believe we are positioned to significantly boost our revenues beginning later this year. providing us a pathway to positive cash flow. With that, Daniel, let's now open the call for questions.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Our first question comes from Anthony Vendetti with Maxim Group. Your line is open.

Thanks. So once the final price determination is received from CMS, do you have like a pipeline of patients and how do you think that will What would that impact be on initial sales? And then I have a follow-up on stroke.

Yeah. Hi, Anthony. It's Dane. Thanks for your question. We have been keeping a long list of Medicare patients with their prescribers, of course, their insurance, which is Medicare, because we cannot file one-off claims right now waiting for CMS and Medicare reimbursement. So we do have a very strong list of built-up demand regarding Medicare.

Okay, great. And then just wondering, where are you with patient enrollment for the stroke trial, and are you still on target for completing it and then submitting to the FDA in the first half of 25?

We are on track. Enrollment's on track, as well as submitting in first half of 2025. Okay, great. Anthony, if you remember, we'll be using on top of that our second FDA breakthrough designation, which truly gives us a wonderful pathway forward with 150-day notice period.

Okay, great. No, that's helpful. And then I guess one last question. Where are you with potential studies or expansion for TBI?

Right now, we're still investigating that expansion into TBI. As you are aware, we had Pacific Blue Cross do their own study for Back to Work, which came up with the white paper late last year, where Eight of the nine of their long-term disability claims stated that balancing aid after using PONS therapy for 14 weeks, that eight of the nine of their long-term disability patients and claimants had no longer balancing aid issues to go back to work. Five of the nine went back to work in PONS therapy, saved Pacific Blue Cross. approximately $1.6 million. So a significant cost-benefit analysis that is heavily weighted towards in using PONS therapy for traumatic brain injury patients.

Okay, you know, that's helpful. Thanks for that call, Dane. I'll hop back in the queue. Appreciate it.

Great. Thanks, Anthony.

Thank you. As a reminder, to ask a question, please press star 1-1. Again, that is star 11 to ask a question. I'm showing no further questions at this time. I'll now like to turn it back to Dane, Andrew for closing remarks.

Great. Thank you, Daniel. My apologies again for the technical difficulties, but just thank you for following Helios Medical Technologies As you've heard today, we're excited about where we stand at this point in the year and truly look forward to keeping you updated as we pursue coverage in reimbursement and authorization for stroke. So thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.