ENDRA Life Sciences Inc.

Good day and welcome to the Endura Life Sciences third quarter 2021 financial results conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Yvonne Briggs at LHA. Please go ahead.

Thank you, operator. This is Yvonne Briggs with LHA, an Endra Life Sciences investor relations firm. Good afternoon and welcome to Endra's third quarter 2021 business update and financial results conference call. Earlier today, Indra issued a press release on this topic, and for those of you that don't have a copy, you can access it in the investor section of Indra's website at indrainc.com. Before we begin, please note that today's discussion will include forward-looking statements, all statements other than statements of historical facts, including statements regarding the company's strategies, financial condition, operations, costs, plans, and objectives, as well as anticipated results of development and commercialization efforts, the timing of clinical studies, potential partnership opportunities, and expectations regarding regulatory processes, receipt of required regulatory clearances, and product launches are forward-looking statements. Except as otherwise required by federal securities laws, the company disclaims any obligation to update or revise any forward-looking statements. Please refer to the company's 2020 Form 10-K, and subsequent SEC filings for more information about risks and uncertainties related to forward-looking statements. In terms of the structure of today's call, Francois Michelon, Chairman and Chief Executive Officer, will begin the prepared remarks, followed by Renaud Malaberti, ENDRA's Chief Commercial Officer, and then Irina Pestrikova, Senior Director of Finance. With that said, I will now turn the call over to Francois Michelin. Francois?

Thank you, Yvonne. Good afternoon, everyone, and thanks for joining us today to discuss Endra's third quarter 2021 financial results and business update. While I'd hope to have additional clarity from our discussions with the FDA on our definitive path forward, I am pleased with the progress on the activities within our control, which include accelerating our commercial channel and marketing activities despite an uptick in COVID-19 cases in Europe, expanding our data set of clinical evidence with evaluation partners to support global commercialization efforts, securing pharmaceutical partnerships to facilitate adoption of TEIS beyond the clinical end user market, and bolstering our intellectual property portfolio to protect our technology and enhance out-licensing opportunities. And finally, as a company, Endra remains well capitalized as we continue to leverage our asset light operating model. I'll elaborate on each of these now. COVID isn't gone in Europe. In fact, according to the Johns Hopkins Coronavirus Center, new cases in the UK are up 10% since October, France is up 40%, and Germany has a staggering 98% increase in COVID cases since October. But Endra's commercial team in Europe has been leveraging every opportunity to expand our sales and marketing efforts. We continue to conduct in-person and virtual sales visits, as well as facilitate group customer demonstrations of our TEAS system where possible to build a pipeline of sales leads. To drive awareness of TEAS, continue to participate in key U.S. and European clinical conferences, and we've been building a deeper presence in country-specific conferences targeting our end-user clinical segments in radiology, and gastrohepatology. Many clinicians and pharmaceutical companies attend these events to learn about new research and new technologies, as well as to pursue collaboration. Recently, we participated in two in-person conferences in France, and we had the opportunity to demonstrate our TEA system in the Endra booth with a good number of potential customers. We've also just wrapped up our virtual attendance at the American Association for the Study of Liver Disease, known as AASLD, and we look forward to showcasing our TEA system in an Endra booth next to our partner, GE Healthcare, at the Radiological Society North America, known as RSNA, the nation's largest medical conference in Chicago, later this month. As a reminder, these conferences are posted on the events section of our corporate website, and Renaud will provide more details on commercial activities in a moment. In addition to the commercial outreach, we continue to advance and support our clinical evaluation sites as they come online to collect valuable real-world data for TEIS. You'll recall we have a total of six partnerships globally, three in the U.S. and three in Europe. Studies by these partners are comparing liver fat assessments in patients scanned with Ender's TEIS system to those same patients scanned with MRI with both scans performed within a couple of weeks of each other to ensure comparability of results. These clinical evaluations will build the base of real-world clinical data to support commercialization. While these clinical sites are not currently linked to our FDA submission, they may provide valuable real-world data for the FDA if needed. In the U.S., Rocky Vista University in Utah and the University of Pittsburgh Medical Center have begun scanning patients. Rocky Vista is performing the largest study with 200 patients, and UPMC started performing scans for its study of approximately 75 patients while it continues to manage its backlog of MRI procedures. We remain in close contact with our U.S. and European clinical evaluation partners, and we look forward to starting the remaining studies as soon as possible as pandemic restrictions and temporary backlogs for MRIs subside. In addition to radiology, hepatology, and endocrinology clinicians as a commercial market for Andra, we also believe that our liver fat measurement technology holds considerable value for over 50 pharmaceutical companies and clinical research organizations that are conducting clinical studies in the liver and metabolic disease space. We believe TAIS can provide efficiencies to pharma companies in three key areas. First, during the recruitment and enrollment process of liver drug trials, which historically reject 50% of potential recruits. Andrus technology can support a more efficient screening of patients to determine if they meet the study's liver fat criteria before incurring the time and convenience and cost of a liver biopsy or an MRI scan. Second, once a trial is underway, TAIS can provide convenient liver fat measurements between MRI, and biopsy endpoint measurements, which may identify liver fats earlier. And finally, once a drug is approved, TASC can serve as a quick and easy assessment tool at the point of care to help clinicians identify patients suitable for therapy and to monitor their progress. Earlier this year, we signed our first collaborative agreement with Hepion Pharmaceuticals. to incorporate our TEAS technology in their Phase 2B study for the treatment of NASH in Q2 2022. TEAS will be used as an add-on technology to support patient screening and biomarker measurement of liver fat. This will provide UNDRA with TEAS measurement data similar to our clinical evaluation sites in Europe. And we're pursuing additional pharmaceutical collaboration opportunities as part of our commercialization plans, so stay tuned here. In regard to our intellectual property position, we continue to enhance our portfolio to protect our technology globally for multiple indications. In the third quarter, we had four patents issued for a total of 21 patents in the U.S., and our current IP portfolio stands at 89 assets, which we define as patents in preparation, filed, or issued. Let me tie this last point about intellectual property back to our work with the FDA. Clearly, TEAS has many unique attributes, which is why we've been able to secure such a large and growing global patent estate. These unique attributes also mean that the TEAS regulatory submission is not a simple check-the-boxes application. Indeed, we believe the FDA may be looking at TEAS as a potential predicate device for other applications to come in the future, and those considerations may be contributing to the extended and deliberate pace of the FDA review process. Those same considerations, however, may very well serve to benefit and protect TEIS competitively in the long run. We continue to be actively engaged with the FDA regarding the TEIS 510 submission. We're working collaboratively with the agency for agreement on a definitive path forward, including potentially providing additional real-world clinical data as the review period has taken longer than we expected. Because TAS represents an advancement in ultrasound technology, the review requires considerable analysis and discussion and time, but we remain confident in the technical performance of our device and, importantly, its safety profile. With the goal of advancing this review process, we're discussing the potential to provide FDA with additional real-world clinical data, which we would secure from our clinical evaluation partners in an efficient and timely manner. And as I mentioned, our discussions with the FDA are ongoing, and we seek to identify that clear, definitive path forward for TAIS. I can assure you we're doing everything within our control to gain clarity with the FDA regarding their needs, and we continue to be highly responsive to all their requests. I want to emphasize that we remain optimistic that regulatory clearance will be granted for our TAIS system, although the process will likely extend into next year. With that update, I'd like to turn the call over to Renaud to provide more detail on our commercial activity. Renaud?

Thank you, Francois, and good afternoon, everyone. Our European sales team continues to make good progress with our commercial efforts for the TAIS system. In-person sales visits have increased as COVID-19 restrictions ease in some markets, and we are starting to build solid momentum with our commercial activities. We have a total of four people on our commercial team in Europe, and we expect to add a sales representative in each target country at the appropriate time. Currently, we have Android representatives in the UK, France, and Germany, and one pan-European person. We will continue to monitor the market and remain opportunistic to add sales and marketing personnel to optimize our cost structure. Sales outreach activities include in-person visits and group demonstrations, as well as the historical video conference meetings in certain areas. Given that TAIS is a capital equipment purchase and we are new to the market, we expect the sales cycle to be several months from an initial in-person interaction with our customers, although these vary by customers and by institutions. We continue to be optimistic as these meetings are being well received with positive feedback from potential customers. To supplement our direct sales effort, we are working with our partner GE Healthcare to leverage their significant install base of ultrasound clients. Our sales team has held collaborative calls with GE to coordinate sales activities, allocate resources, and review market feedback. GE is a highly valuable partner in imaging diagnostics, given their global market presence. As part of our global commercial strategy, we also plan to build out an indirect distribution channel in certain markets. As I have mentioned in prior calls, we signed a premier distributor of value-added medical technology to a 40 TS system sales commitment in Vietnam, which represents a substantial revenue opportunity upon receipt of FDA clearance and local approvals. Additionally, our commercial team is focused on numerous marketing initiatives to build interest for the TAIS system. We have created awareness through various e-marketing and educational campaigns by producing videos, publishing white papers, and utilizing our website as a valuable resource for information and data on the benefit of TAIS. As François mentioned, we participated in two trade conferences in France, with the ability to conduct demonstration and to add to our network of clinicians. We have several more conferences planned for the balance of this year that will also be in-person events. These industry trade shows continue to be a rich resource to network and to extend our pipeline of sales leads and industry contacts. We are just coming back from the AASLD, the American Association for the Study of Liver Disease, where the topic of liver fat was prominently discussed at the meeting, and the clinician reiterated the need for a better way of evaluating early onset of AASLD, which is seen as the root cause for multiple costly diseases. So in summary, we continue to advance our growth strategy by expanding our pipeline of sales lead and enhancing awareness of this and developing our clinical relationship. We look forward to booking our first day of sale and to updating you on our progress. Now I'd like to turn the call over to Irina to review the financial results for the third quarter of 2021. Irina? Thank you, Renaud.

Our financial results for the third quarter of 2021 are as follows. For the quarter ended September 30, 2021, our operating expenses decreased to $2.7 million from $3.3 million for the same period in 2020. The decrease was primarily due to reduced spending for product development and investor relations. Our research and development expense decreased year over year by approximately $600,000 due to reduced spending for product development. Our sales and marketing expense increased by approximately $140,000 for the quarter as we began to expand our sales efforts, including adding to our headcount. General administrative costs decreased by approximately $145,000 due to reduced spending for investor relations and legal fees. Our net loss per share for the 2021 third quarter was $0.06, compared with $0.15 per share loss a year ago. We continue to maintain an asset-light operating model with a conservative cost structure as we advance our commercialization initiatives. As of September 30, 2021, we had cash and cash equivalents of $11.8 million. We have a current ATM facility, which we expect to utilize on an opportunistic basis in the future. We believe we are well-capitalized with a solid balance sheet to support our commercial activities in Europe as we engage with the FDA to gain clarity on the pending TAIS 510K submission. Now, I'll turn the call back to Francois.

Thanks very much, Renaud and Irina. In summary, I'm pleased with our accomplishments to date, which include accelerating our commercial channel and marketing activities, despite an uptick in COVID-19 cases in Europe, starting to build our data set of clinical evidence at Rocky Vista and University of Pittsburgh, with these evaluation partners that will support global commercialization efforts, securing pharmaceutical partnerships to facilitate adoption of TEIS beyond the clinical end-user market, and continuing to bolster our intellectual property portfolio to protect our technology and enhance out licensing opportunities. As I mentioned in my opening remarks, our highest priorities are to secure initial sales in Europe while simultaneously working closely with the FDA to clarify a definitive path forward for our US regulatory clearance of the TEAS system. So with that review of our business highlights and financial results, I'd like to open the call for questions, operator.

We will now begin the question and answer session. As a reminder, to ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star, then two.

Thanks. And, Operator, while we're waiting for investor questions to queue online, Yvonne Briggs, perhaps you've received some questions from investors on your side that you'd like to share.

Sure. Sure. One question we received is that GE recently announced it's splitting up into industry-specific divisions, with GE Healthcare being a standalone entity in 2023. Will that restructuring affect Endra's agreement with GE?

Yeah, I think that's a great question, and I think I'll ask Renaud to give us his thoughts because he's been working with the GE teams locally in Europe closely. So, Renaud, if you have some thoughts on that question, that'd be super.

Yeah, sure. It's a great question. No, GE split will not change its relationship with Andra and for a number of reasons. First, Andra's agreement is with GE Healthcare Division, which is not a central GE corporate entity. Second, Andra's agreement extends until the end of 2022 and will engage with GE to discuss renewal options before the GE spinoff occurs. We have a good relationship with GE. So finally, from a broader perspective, it's important for investors to remember that while Andra benefits from GE's relationship with ultrasound equipment and customer introductions, Andra's future does not depend heavily on GE. Andra's multi-channel approach involves its own direct salespeople and distributor partnerships. enabling NDRA to not be overly dependent on a single resource for commercial success. And that's the way we want it.

Great. Thanks, Renaud. And Yvonne, I don't know if you have any more there.

One other one came in that you mentioned that NDRA is actively engaged in a dialogue with the FDA. How would you characterize the tone of the conversations and what kind of questions is the FDA asking?

Yeah, obviously that's top of mind for many people. I mean, indeed, I want to emphasize Andrew is actively engaged in communicating with the FDA. We're certainly not sitting back waiting for FDA to make a decision. And I think that's the right place to be. We have to co-lead this. And I think both parties want a successful outcome. The tone of the discussions with the FDA is collaborative, certainly rigorous. And the areas of exploration are, include the intended use, the technological characteristics of our system, the safety and effectiveness, and naturally the scientific testing methods that we've used to demonstrate those. So I think it's rigor on the part of the FDA, which we always respect. And I think the best way for us to get this across the goal line is to respond very quickly and positively to their requests. I also want to point out that, you know, as I mentioned in my earlier remarks, due to Endra's unique technological attributes, it means that TAIS regulatory submission is not as simple as a check-the-boxes application. So the review process has taken longer than we expected, but I remain very optimistic that the regulatory clearance will be granted for our TAIS system, and we're working in that capacity. So thank you, whoever asked that. Yvonne, I don't know if you have any more. Otherwise, we could go over to the operator's Q&A.

Yeah, operator, can you... Yes, the first phone question comes from Ed Wu with Ascendian Capital. Please proceed.

Yeah, thank you for taking my question. My question, I know you mentioned on the call that you guys are actively, you know, scheduling in-person visits in Europe. What do you think... you know, are you guys at a hundred percent? You think you're about half, uh, uh, uh, you know, capacity or what do you think you guys in terms of, you know, ability to meet people given, you know, the COVID spread in Europe?

Yeah, it's, it's fluid and I don't want to lead with an excuse of COVID. Uh, we're all tired of it, but unfortunately it's a reality and perhaps more reality in Europe, uh, based on those numbers that I, um, Shared in the prepared remarks. So to answer your question, I don't think we're at 100% capacity in terms of mobility, certainly. But I will say our sales teams in France, Germany, the UK are seizing every opportunity to meet in person. Whenever possible, we're securing virtual commitments to demonstrate our product and trying to convert those as things change. into direct visits. So at this point, I don't want to put a number on capacity, but I would say certainly due to mobility issues, access to hospitals, and even personal preferences by clinicians for meeting in person versus virtually, we're not at our peak yet. And I think Renaud touched on that. I don't know, Renaud, if you have other opinions or thoughts that you might want to add to that.

I think you're correct. It's hard to put a number on it, but we're doing everything we can to make sure that we take advantage of every opportunity that is presented to us at this point.

Yeah, and a couple of examples, Ed. As we want to penetrate markets of interest more deeply, we attended these two in-person clinical conferences focused on the liver in France. And we were thrilled to be able to have a booth, demonstrate the product, interact directly with customers. So whenever we are able, we do that. But we also don't want to sit on our hands. We also want to leverage virtual tools and outreach in that manner. So we're trying in every way possible. Hopefully that helps answer your question, Ed.

Yeah, that's great. And then one last question. You mentioned that you guys are returning back to trade shows. I'm going to ask the same questions. Are trade shows back to normal, or are they still kind of a hit or miss in terms of what's being held in person? And how important is trade shows to your overall commercialization strategy?

Yeah, great question. So let me say that, first of all, these clinical conferences are are very important to Andra and most healthcare technology providers because they are the meeting point for all parties involved, the providers, the clinicians, the insurers, the strategic partners. And we all go to these meetings to learn about new technology, new treatments, new research. So while the last year and a half has been, I would say, a mix of virtual gradually returning to some more In person meetings. I'm also very happy that Andrew has been in the field physically very actively going to six to seven of these conferences globally since 2018 so we're not handicapped per se. As someone who's trying to be new to the block and only able to kind of introduce ourselves virtually All of our clinical collaboration partners, University of Pittsburgh in Europe and elsewhere, we met at these conferences. And so we're building on that momentum by continuing to participate virtually when that's the only option. And I'll give you a good example of a big meeting that was just converted and we just came back from the American Association for Study of Liver Disease. Surprised everyone, that's a big US meeting and it went virtual for reasons of COVID. We participated. We have a virtual booth like everyone else there. We have someone who is present virtually. It's not a passive just website waiting for people. We are there. And as soon as someone engages with us in a chat room or via a scheduled meeting, we participate. So it's a good conduit for us. But to finally sort of close your question, Ed, RSNA, Radiological Society of North America, one of the biggest organizations conferences in the world and certainly in the U.S. historically with 40,000 to 50,000 attendees. It's huge. That is in person. And we have a booth right next to our partner, GE Healthcare. It's a little smaller than GE, but it's a very effective vehicle for us, and we're looking forward to demonstrating our product there. So I think the world is coming back, but, you know, It seems to be two steps forward and one step back, but we're there meeting the pace every step of the way.

Great. Well, thank you for answering my questions, and I wish you guys good luck. Thank you. Thanks a lot, Ed. Thank you.

Our next question comes from Vernon Bernardino with HC Wainwright. Please proceed.

Hi, Vernon.

Hi. This is Ryan Johnson on behalf of Vernon. Hey. Hi, Ryan. Hi. Hi. Um, could I just ask about, um, any updates on the Rocky Vista study, um, in particular, like, um, maybe how many patients have been screened so far or, um, have there been any, um, clinical workflow or performance feedback?

Yeah, great question. So, um, we haven't disclosed a number of patients, uh, in real time that that it's an independent study and we want to kind of maintain that certain independence, but the goal is 200. We started, And I will say it was our first clinical study. And we certainly, besides just collecting performance data, are learning. And so we've learned, you know, in terms of how to train people, some of the feedback in terms of positioning our technology, and some of the interface. And I'd say that that is a natural process. Besides just picking up pure clinical data, learning – you know, objectively from clinical users in the field is an important part of what these clinical sites can contribute. And so with each one we're learning, I will say that one thing we've also learned is Rocky Vista is a deeply radiologically driven site. And so it was a naturally intuitive way for them to add this new capability to their ultrasounds. University of Pittsburgh has enormous interest in this space, obviously, because they're a global liver center of excellence, but they have more hepatology trained people. And so we had to adapt our training a little bit and it didn't take much longer, but we clearly were dealing with people who had less ultrasound workflow experience. And I think that informs how we train additional partners, how we train commercial customers. And so we're very happy for that along the way, but everyone remains deeply interested in this space And we're happy to participate in it. I hope that's helpful, Ryan.

It is. Thank you. And can I just quickly follow up with that? Do you have any loose predictions on when we can possibly expect some kind of readout or other from this study?

Yeah, fair question. So when we kick these off, by design they were, except for Rocky Vista, which has 200, Most of these studies that we have in Europe and the remaining in the U.S. were fairly small. And by small, I mean 75 patients scanned on our system and then quickly compared to MRI, which we believe MRI proton density fat fraction is the global gold standard used for research, even though it's impractical. We wanted to compare ourselves to that because it's the most accurate, albeit very expensive, measurement tool. But it depends on a number of factors, Ryan. So a good example of that is the COVID accessibility when facilities shut down or get swamped with other priorities that potentially delay a study, not just ours. The other element that I've touched on is MRI backlogs. I think I mentioned this in prepared remarks, but because we're comparing ourselves to an MRI, when the hospital has a need for the MRI for clinical patient treatment, those procedures can pile up. And we don't want to scan a patient on our system and then wait six weeks to scan them on an MRI because that person may have lost weight or something else may have changed in their chemistry. And so we may not get a good sort of close readout of the two together. So in the case of UPMC, they certainly experienced some of that variability in MRIs. But I would say in a more normal time. These studies should be six to nine months in length. And the more the world returns to normal healthcare operations, the more you can anticipate that timeframe. These are not two to three year studies. These are under a year, I would say is a good rule of thumb. So certainly next year you'll start seeing those, but we are supporting them, but these are independent objective studies by design. And I think that they will, by virtue of their contributions, geographic location, and reputation, be very helpful to NDRA as it builds its base of clinical evidence. Hope that's helpful, Ryan.

It is. Thank you.

Thank you. Operator, I don't know if we have anyone else. If not, we can wrap up the call.

No, we are showing no further questions at this time. And this concludes the question and answer session. I'd now like to turn the call back over to Francois and Michelin for any closing remarks.

Well, thanks. And I want to thank our investors for joining us today. We do look forward to keeping you updated on our progress. We will not limit ourselves to quarterly calls. If we have material news or updates on any of these topics, including through the very end of the year, we will continue. gladly and proactively call a meeting, a call, and inform our investors. And that's definitely our plan as we go forward. And, again, appreciate the support of our Endura investors and look forward to speaking to you at the next event. Have a good evening.

The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.