ENDRA Life Sciences Inc.

Good day and welcome to the NDRA Life Sciences fourth quarter 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal 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 touch-tone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Yvonne Briggs. Please go ahead.

Thank you, Operator. This is Yvonne Briggs with LHA. Good afternoon and welcome to NDRA's fourth quarter 2021 Business Update and Financial Results conference call. Earlier today, NDRA issued a press release on this topic, which is available in the Investors section of NDRA's websites. Before we begin, please note that today's discussion will include forward-looking statements. All statements by management, 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 2021 Form 10-K filed later today 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, NDRA's Chief Commercial Officer, and Irina Pestrikova, Senior Director of Finance. With that said, I will now turn the call over to Francois Michelon. Francois?

Thank you, Yvonne. Good afternoon, everyone, and thanks for joining us today for a discussion of Endra's 2021 fourth quarter and full year financial results and an update on our business. The last few months have been a productive time for Endra with several noteworthy accomplishments, including first, clarifying the U.S. regulatory strategy for Artea system to a de novo pathway, a strategy that is supported by the FDA. Second, securing new clinical research partners in China and the U.K. which will expand the sources of data supporting our global commercialization efforts. Third, signing a second pharmaceutical partnership to expand the adoption of TEIS beyond the clinical end-user market. Fourth, ramping up our commercial efforts in Europe as pandemic restrictions are lifted in key geographies. Fifth, strengthening our intellectual property portfolio to protect our technology and enhance our out-licensing opportunities. And sixth, maintaining a capital-efficient business model with a solid balance sheet in order to support our operating plan in 2022. I'll start with an update on our U.S. regulatory strategy. Last month, we announced that after extensive and productive dialogue with the FDA, ENDRA is now pursuing a de novo request for our TEAS liver system. The de novo process builds on our completed 510 submission and provides us with the opportunity for an entirely new product classification, which can yield important and sustainable commercial advantages for the TEIS platform once approved. We'll be able to leverage a substantial portion of our 510 submission, which encompasses many of the same elements needed for the de novo request, including safety and efficacy data. We believe we're aligned with the FDA on the scope of the clinical data they require, and we intend to include data from a subset of our global clinical partnerships. We're committed to generating this additional data as quickly as possible and to submitting the de novo in the coming months. Finally, since the FDA is familiar with key elements of our 510 submission, we're optimistic that the de novo process will be efficient. As a reminder, we previously secured CE mark approval, which serves as an important precedent for additional regulatory approvals throughout the world, and more importantly, means we can actively market the TEA system in Europe, which is our current commercial focus. I'm happy to announce that earlier today we received the ISO 13485-2016 recertification from the British Standards Institution, which validates the foundation and sustainability of our quality management system upon which we obtain our CE marking. In addition, I want to note that the FDA has proposed adoption of these ISO standards in an effort to harmonize its quality system regulation with the international standard. So, NDRA is ahead of the game here. In terms of commercial activity, the COVID-19 recovery is on a positive trend globally from a mortality perspective. However, the pandemic continues to impact individual countries at different levels. As such, Endra's sales team is driving awareness for our TAIS system in person and virtually as allowed in each geography. For example, in Germany, which still restricts in-person sales visits to hospitals, we're conducting virtual sales calls. In France and the UK, I'm encouraged that we're now conducting a growing number of in-person sales calls and demonstrating our technology in person at clinical conferences in hepatology and increasingly endocrinology. Renaud will go in-depth into our commercial activities in a moment. Let's turn to our clinical research activity. We've grown our clinical research partnerships to eight globally, three in the U.S., four in Europe, and one in Asia. In December, we added the prestigious King's College Hospital in London, a teaching hospital that's world-renowned for its pioneering research in liver disease. Last month, we expanded into China with our new clinical research partner, Shanghai General Hospital, which has the highest ranking in China's classification system of A++ by China's National Health Commission. This rating is awarded to only 12 of China's approximate 35,000 healthcare facilities. We believe this is one of the strongest partners possible to provide an entry point strategically into the Chinese healthcare market to help address an estimated 350 million people in China affected by NAFLD and NASH. Collecting TAIS clinical data from our eight global partners is the primary focus for ENDRA in 2022. This local data from sites in France, the UK, Germany, Switzerland, will be key to driving commercial adoption of TAIS in each market. providing independent local evidence of how TEAS performs compared to the gold standard of MRI. We've had a good start to the year with data collection underway at two clinical sites in the U.S. and expect a third site to initiate recruitment of study participants in the next few weeks. Each of these sites will be comparing liver fat assessments in patients scanned with a TEAS system with the same patients scanned with MRIs. with both scans performed with a couple of weeks of one another to ensure comparability of results. As we noted on previous calls, many of the world's clinical research activities were paused for last year or two due to COVID, so our progress has been slowed a bit. While we continue to see some backlog of MRI systems at hospitals where postponed elective procedures have returned in high volume, overall healthcare access and operations are looking stronger in 2022, which is an encouraging recent development. Internationally, we remain committed to getting our European research sites in the UK, France, Germany, and Switzerland up and running in the coming months. And all told, we anticipate scanning 200 to 300 patients globally by the end of 2022. I'll point out that TAIS clinical studies don't need to be completed and published to support our sales team. The research sites just need to be active so our sales team can connect potential buyers to speak with the study investigators and discuss how TAIS is performing relative to MRI. Turning now to Andrew's commercial opportunities beyond frontline clinicians in hepatology, radiology, and endocrinology, we believe our technology holds considerable potential value to pharmaceutical companies and contract research organizations that are conducting clinical studies and need an efficient and practical way to measure liver fat as a metabolic biomarker. By our count, There are over 50 companies working in this area, and each company has up to several hundred research sites associated with their drug trials. In November, we signed a collaboration agreement with VGI Health Technologies to pilot TEIS as an add-on technology to support their patient screening and biomarker measurement during their upcoming Phase II NAFL-NASH study. This follows our first pharmaceutical collaborative agreement with Hepion Pharmaceuticals to incorporate our TEIS technology into their phase 2B study for the treatment of NASH. We believe TEIS can help drive time and cost savings for companies developing liver and metabolic disease drugs, starting with a clinical trial enrollment process, which currently rejects in the industry on average over 50% of potential recruits after incurring the high cost and inconvenience of an MRI or biopsy. Ender's technology may have an important role upfront in screening patients to determine if they meet the study's criteria before they're sent to an MRI or biopsy. This belief is substantiated by the two existing pharma partnerships we've secured, as well as other active discussions underway. Turning now to our intellectual property, continue to grow our portfolio to protect our technology globally from multiple indications, as well as positioning Endra for out-licensing opportunities. In the fourth quarter of 2021, Four domestic patents were issued for a total of 24 patents in the U.S. To date, in 2022, one patent has been issued in the U.S., two patents have been issued in Europe, and two were issued in China. Our current global IP portfolio stands at 89 assets, which we define as patents in preparation, filed, or issued. With that update, I'd like to turn the call over to Renaud Malaberti to provide more detail on our commercial activities. Renaud?

Thank you, Francois, and good afternoon, everyone. Our European sales team continues to drive awareness for the TAIS system and to enhance our commercial efforts in regions where COVID restrictions are easing. Currently, we have four commercial representatives in the UK, France, and Germany. As sales and marketing activities pick up, we intend to add personnel in high-value markets while diligently managing our cost structure. In certain countries, including Germany, Austria, the Netherlands, and Norway, outreach efforts are currently still limited to video conference meetings, while in others with lower COVID case levels, like France and UK, we are able to execute a higher degree of in-person visits and group demonstrations. We are confident that the TAIS value proposition to assess liver fat will begin to gain traction in the marketplace as we expand our commercial efforts with more and more product demonstrations. On average, we expect the sales cycle for TAIS to be several months from the time of the first in-person customer interaction, given its novel technology as a capital equipment purchase, although we expect that this will vary widely by customer and by institutions. We also understand that generating TAIS and MRI clinical data from our clinical research partners in each target market is essential to converting demonstrations to sales. Our longstanding partner, GE Healthcare, is providing valuable assistance to supplement our direct sales effort as GE has a significant installed base of ultrasound clients. We continue to coordinate sales activities, to leverage resources, and to collaborate on positioning in the marketplace given GE's dominant global market presence in imaging diagnostics. In addition to clinician outreach by our salespeople in each market, we are pursuing a range of marketing initiatives to create awareness and build interest in the TIS system. These include various e-marketing activities, educational video campaigns, white papers, use of social media, and leveraging our website as a resource for information and data on the benefit of TAIS. Last week, Hendra had a booth at the French Society of Diabetology Conference, which was focused on advanced technologies and treatment for diabetes. This clinical meeting attracts 4,500 clinicians, focused on diabetes and metabolic health. We posted images of our well-attended booth and sales team demonstrating taste on social media. Attending the Diabetes Conference is part of our dual strategy to further penetrate individual markets like France and to grow outside of radiology and hepatology. We plan to show our technology at over 10 global clinical conferences this year, which is a 40% increase over the seven conferences we attended last year. Through our commercial field work last year, it has become clear that another clinical sales opportunity exists, targeting endocrinologists who are seeking practical diagnostic tools to assess liver fat and identify patients with NASLD, which occurs in 80 to 90% of obese adults and in 30 to 50% of patients with type 2 diabetes. You see, many patients with AFLD are asymptomatic and go undiagnosed for years as their liver health deteriorates. In fact, an estimated 25% of NASH patients develop fibrosis, which can result in permanent scarring and liver failure. As such, it is imperative for the endocrinologist to have a non-invasive diagnostic tool at the point of care, like the TAS system, to assist them in identifying and risk stratifying patients in the early stages of NAFLD, and to continue with monitoring and assessing liver health after diagnosis. By adding endocrinology as a sales call point, it expands our addressable market beyond hepatology and radiology and builds on what we are learning during the initial launch phase of TIS. In response to market dynamics, Andra is also developing TAIS rental options to facilitate customers' adoption if their capital budgets are limited and or time-consuming to access. The benefit of this additional sales approach is the potential to generate recurring revenue for Andra in addition to service agreements on the TAIS system versus a one-time sale for a standalone unit. In summary, despite some remaining COVID headwinds, We have a well-trained and active sales team. On the ground, we are expanding our outreach to new high-value clinical segments, including endocrinology. We are increasing our presence at clinical conferences by 40% this year, and we are developing new customer purchase options, all of which we are confident will yield revenue for Endra. Now, I'd like to turn the call over to Irina to review our recent financial results. Irina?

Thank you, Renaud. Our financial results for the fourth quarter and full year 2021 are as follows. For the quarter ended December 31, 2021, our operating expenses increased to $3.1 million from $2.3 million for the same period in 2020. The increase was primarily due to higher headcount and regulatory expenses. Our net loss for the fourth quarter ended December 31, 2021 was $3.1 million or 7 cents per share as compared with a net loss of $2.3 million or 8 cents per share a year ago. Overall, for the year ended December 31, 2021, our operating expenses were $11.5 million unchanged from 2020. Increases in sales and marketing expenses were offset by decreases in research and development and general administrative expenses. Our research and development expense decreased year over year by approximately $435,000 due to reduced spending for product development. Our sales and marketing expense increased by approximately $493,000 for the year as we began to expand our sales efforts, including adding to our headcounts. General administrative expenses decreased by approximately $62,000 due to reduced spending for investor relations and legal fees. Our net loss for 2021 was $11.2 million or $0.28 per share as compared with a net loss of $11.7 million or $0.63 per share in 2020. We continue to maintain an asset-light operating model with a conservative cost structure as we advance our commercialization initiative. As of December 31, 2021, we had cash and cash equivalents of $9.5 million and continue to have availability from our ETSA market offering program, which we'll utilize on an opportunistic basis. We believe we are well capitalized with a solid balance sheet to support our commercial activities through 2022 in Europe as we prepare our de novo request for the FDH. Now, I'll turn the call back to Cynthia.

Thanks very much, Renaud and Irina. As we look to the balance of 2022, we're focused on achieving several significant milestones, and these include, first, advancing TEIS through the U.S. regulatory process and submitting a de novo request. Second, demonstrating TEIS's clinical value by generating additional data with our strategically positioned research sites to support our regulatory submission and commercialization. Third, accelerating our commercial channel and marketing activities in line with the reopening of global markets to generate orders for TEIS in Europe. Fourth, securing additional pharmaceutical and other industry partnerships to expand the opportunity for TEIS outside the clinical end-user market. And fifth, continuing to strengthen our intellectual property portfolio to protect our proprietary technology, expand its potential area of use, and increase out-licensing opportunities. With that review of our business highlights and our financial results, I'd like to open the call now to questions. Operator?

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Ed Wu with Ascendian Capital. Please go ahead.

Yeah, thanks for taking my question and congratulations on all the progress you're doing, particularly in Europe. Do you feel that each country has equal opportunities or do you feel that you guys are more of better established commercial operations in certain territories?

Yeah, thanks for the question and for joining the call. I think our deployment historically of the four salespeople across the key markets we listed, Germany, France, and the UK, really represent where we think the biggest opportunities lie. Germany is certainly the largest healthcare market in Europe, but France and the UK are very close behind. So that's really where we're focusing. Renaud touched on our plan to, you know, as the market opportunities present themselves, go into other markets either through distribution partners or with Endra headcount in markets that can bear premium prices potentially like Scandinavia. But I think to answer your question today, we've got a really good base of both commercial resources as well as clinical research partners in the top markets in europe and i think that's where uh we'll focus it first thanks for your question um does your approval for tas is it eu wide or is it country by country so um yeah the ce mark does give us the ability to market the product in the 20 plus ce mark countries and then at each level we register the product locally with each market so that is a follow on. But yes, that's the process. And so really, those countries certainly include the markets I've mentioned, plus all the other members of the EU.

Great. And my last question is, you know, as you guys are, you know, I guess, prepare for the de novo filing for the US FDA, does that impact at all the distribution deal you have in Vietnam?

So good memory, yeah, the distribution agreement we have signed in Vietnam will go live once we receive FDA approval. And so that is currently awaiting the FDA approval, but it's a good way to remind our listeners that we have this first Vietnamese exclusive distributorship with a commitment of at least 40 systems once we receive FDA approval. And I do want to just reflect on the de novo pathway as something that's the culmination of a lot of discussion with the FDA. It's been very productive. It builds on our 510 submission. And as I mentioned, it is very likely to afford some commercial differentiation under the de novo approval that we would not otherwise have received under the 510 . So we're very excited about that and confident that we will receive FDA approval for the TAIS system. Thanks very much for your questions.

Great. Thank you.

Operator, if we're not seeing any other questions, perhaps Yvonne Briggs on our investor relations partner is getting some questions online.

Yeah, Francois, could you provide some additional color on how your commercial efforts are being received in Europe, but specifically from the endocrinology segment of the market?

I think I'll let Renaud speak to that since he's closest to it with his team on the ground. Renaud?

Yeah, Francois, that's a good question, actually. I certainly can tell you that our recent experience at the French Congress for Diabetology, we had a lot of interested clinicians coming to our booth. I mean, we made about 60 very good new contacts here from France, Switzerland, Belgium, and other French-speaking countries as we demonstrated the TIS system and learned a lot more about the needs for endocrinologists. Clearly, I mean, this is a specialty that is focused on metabolic health, But depending on the countries, of course, they may also need to be trained a little bit more on ultrasound than the radiology segment needs to be, which is not a big deal. What I think is exciting is that this segment is additive to the other markets that we've historically pursued, like radiology and gastroenterology. So we basically have the opportunity to increase the pie that we are looking at.

Thanks for now, and hopefully that answers your online question received, Yvonne. Are there any other questions that you see, Yvonne, or the operator, please?

Yeah, the last question, obviously there's a concern in the marketplace over global supply chain issues. Has ENGRA been impacted at all, or do you have any concerns regarding the impact in the future?

Yeah, indeed, a lot of companies are facing constraints in supplier distribution. But thankfully, we don't see supply chain issues affecting Andra in the near term. In 2021, we made bulk buys of critical components, and we continue to actively assess our needs and suppliers to avoid issues. So I can't completely predict the future, but I think we're in good shape today, and we'll continue to very actively manage that situation over the coming months. Thank you for that. Yvonne and Operator, I think if there are no more questions, we can proceed to close the call.

Thank you. Yes, this concludes our question and answer session. I would like to turn the conference back over to François for any closing remarks.

Thank you, Operator. And just a closing thank you to our listeners, our investors. as well as the NDRA team. We look forward to keeping you updated on our progress and speaking with you again in our next quarterly conference call, and I wish you all a good evening.

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