ENDRA Life Sciences Inc.

Good afternoon, everyone, and welcome to the NDRA Life Sciences First Quarter 2022 Financial Results Conference Call. All participants will be in a 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 and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like you to turn the floor over to Yvonne Briggs with LHA. Ma'am, please go ahead.

Thank you, Operator. This is Yvonne Briggs with LHA. Good afternoon, and welcome to NDRA's first quarter 2022 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 website. 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 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 Mike Thornton, Endra's Chief Technology Officer, followed by Renaud Meliberti, Endra's Chief Commercial Officer, and then Irina Pestrikova, Senior Director of Finance. With that, 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 UNDRA's 2022 first quarter financial results and an update on our business. We're very encouraged by the recent progress we've made in advancing our TA system toward global commercialization, and I'm delighted to share some of the highlights with you today. As many of you know, subsequent to the quarter close, we were able to raise $7.8 million through our at-the-market equity facility without the overhang of warrants or convertible debt. This fundraise bolsters our cash position to fund operations through several important milestones, including ramping up our commercial activities in Europe and advancing the TAIS system through the regulatory process in the U.S. What's more, I believe our ability to raise capital efficiently in this very challenging macro environment reflects investor confidence in our progress, our technology, and our market opportunity. The six weeks since our fourth quarter earnings call has been a very productive time for UNDRA, with several noteworthy accomplishments. First, we helped advance studies that are underway or being planned by our clinical research partners. These studies will support the commercial adoption of TEIS in Europe and will provide the additional clinical data needed for our FDA de novo submission in the U.S. We're leveraging the vast majority of our previous 510K application and are gathering data from a subset of our clinical partnerships to submit the de novo request as quickly as possible. We're on track to do so in the third quarter. Mike Thornton will provide more details in a few minutes. We're ramping up our sales and marketing efforts across Europe as pandemic restrictions continue to ease. Renaud will speak specifically about these activities in a minute. And third, we significantly strengthen our intellectual property portfolio, not only to protect our technology, but also to enhance out-licensing opportunities. Year-to-date, five patents were issued in the U.S., two in Europe, and four in China. These additions bring our global IP portfolio to 90 assets, including 46 issued patents. One of the issued U.S. patents we announced earlier this week has the potential to expand licensing and revenue opportunities for the company into a new space. The patent protects a proprietary method for acquiring, analyzing, and sharing data on equipment not connected typically to the Internet. Although this technology was developed specifically for Andrositea's system, based on our market research and industry discussions, it has broad applicability and out-licensing potential within the healthcare industry where it could help lower service and maintenance costs on things like laboratory equipment, thereby enhancing equipment uptime for laboratories and hospitals. I'll turn the call over now to Mike Thornton, our Chief Technology Officer, to provide updates on our clinical studies. Mike?

Thank you, Francois. This is a very exciting time at Endra. Our team and development partners have accomplished a tremendous amount in creating a first-of-its-kind clinical technology. To our knowledge, Endra's fatty liver assessment device is the first thermoacoustic device that combines RF energy delivery and ultrasound detection in one handheld unit. Through the efforts of the Endra team, we produced a completely novel technology and achieved the first regulatory clearance in Europe for a thermoacoustic application. On a personal note, as the first employee at Endra, it's been incredibly gratifying to contribute to the development of TEAS from concept to device deployment and ultimately a first clinical application. Let me update you now on our recent clinical activities. We deployed TEAS systems to two U.S. sites last year, and I recently visited one of the U.S. sites and was able to observe study subjects undergoing TEAS fatty liver exams. With each new clinical technology, there is naturally a new workflow, exam procedure, user interface, and data display. I find it very encouraging to observe the learning curve where the clinical user transitioned from familiarization with TAIS to completing routine exams all in the same day. So far this year, approximately 40 study subjects have had TAIS exams. remain confident in our goal of achieving 200-plus subjects scanned by the end of the year as current studies progress and additional sites come online throughout the year. To that end, I'm happy to announce today that we've deployed a TAIS system, trained the staff, and we'll begin scanning patients next week at a new clinical research collaboration site in Germany that will contribute clinical data, provide usability feedback, and help Endra evaluate new TAOS product features. This is a big milestone for us as it represents our first active site in Europe. These ongoing and planned studies in the U.S. and Europe are essential to the clinical validation of our technology and will support the commercial activities and additional regulatory submissions in new markets. On this last point, as we announced in February, ENDRA will leverage our existing clinical study sites and previous 510 application to support the expected submission of our de novo request to the FDA in the third quarter. Commensurate with the de novo process, we intend to provide smaller scale TEAS human study data from our existing market adoption sites. And importantly, this is not expected to add material expense to ENDRA. I'll now turn the call over to Renaud Maloberti for a commercial update. Bruno?

Thanks, Mike. Indeed, we are really happy to start scanning patients on TAIS in Germany and look forward to initiating the other European evaluation sites in the coming months. As a reminder, we have four clinical evaluation sites in France, Switzerland, and in the UK, as well as a second site in Germany. We've recently returned from the DGIM conference in Wiesbaden, Germany. DGIM is the annual meeting for the Society of Internal Medicine Specialists, which attracts over 5,000 attendees, including many ultrasound users. This was the first in-person gathering for this large clinical conference in over two years, and we received a lot of interest from visitors at our booth, where we demonstrated the TIA system on medical imaging platforms and made new connections with potential customers in Germany. Attending this trade show is part of our outreach to clinical specialties outside of radiology and hepatology who are interested in the study of the liver. Like other specialties, the need in internal medicine for a non-invasive point-of-care device to assess liver health was evident in the multiple meetings we had with clinicians. Coming up, we are actively focused on preparing for NRAS participation in the European Association for the Study of the Liver, known as EASL. After a two-year online-only presence, this event will be held in person in London next month. This is the biggest liver-focused clinical conference in Europe and typically is attended by over 10,000 hepatologists, endocrinologists, and other specialists. The conference will continue to reinforce the importance of NAFLD and NASH and the growing need for innovative new diagnostics and treatments. Andra will have a booth at ESIL, and Mike Thornton and I will be staffing it along with our European team. We'll be demonstrating our test product, and we are looking forward to meeting our clinical partners and developing new relationships. The weeks leading up to ESIL will be preceded by a cadence of targeted communication to clinicians in our Andra's proprietary database, inviting them to our booth. As TAIS gains recognition through our sales team activity and engagement, we are receiving a growing number of requests from clinicians asking us to share publicly available TAIS product information so they can incorporate it in their peer-to-peer presentations. This is an extremely positive trend that augurs well for the future of the commercial acceptance as typically physician prefer to learn about new products and technologies from other physicians. In summary, we have a well-trained and active sales team on the ground in Europe. We are expanding our outreach to new high value clinical segments, including endocrinology and internal medicine. We are increasing our presence at clinical conferences by some 40% this year, and we are developing new rental programs to facilitate customer adoption of TEIS as we look forward to generating revenue for NDRA. Now, I'd like to turn the call over to Rina to review the financial results for the first quarter of 2022. Rina?

Thank you, Renaud. Our financial results for the first quarter of 2022 are as follows. For the quarter ended March 31, 2022, our operating expenses increased to $2.9 million from $2.6 million for the same period in 2021. The increase was primarily due to highest spending for commercialization of sales and ongoing product development. Our research and development expense increased year-over-year by approximately $70,000 due to an ongoing product development work. Our sales and marketing expenses increased by approximately $180,000 for the quarter as we began to expand our sales efforts as Bernard just described, including adding to our headcount. General administrative expenses increased by approximately $30,000 due to higher professional fees. Our net loss per share for the 2022 first quarter was $0.07, compared with a net loss of $0.06 per share a year ago. We continue to advance our commercialization initiative with an asset-light operating model and conservative cost structure. As of March 31, 2022, we had cash and cash equivalents of $7.1 million. Year-to-date, the company raised $8.7 million in gross proceeds through our ATM facility, of which $7.8 million was raised subsequent to the close of first quarter. Given this additional fund and our strengthened balance sheet, we believe we're well-capitalized and have cash runway to support our commercial activities in Europe as we prepare our turnover request for the FDA. Now, I'll turn the call back to François. François?

Thanks very much, Irina, Renaud, and Mike. In summary, I'd like to reiterate the significant milestones we're focused on achieving this year. They include, first, advancing TEIS through the U.S. regulatory process and submitting a de novo request plan for Q3. Second, demonstrating TEIS's clinical value by generating additional data with our strategically positioned study sites to support the regulatory submission and our commercialization. Third, accelerating our commercial channel and marketing activities in line with the reopening of global markets to generate orders and revenue for TAIS in Europe. Fourth, securing additional industry partnerships to expand the opportunity for TAIS outside the clinical end-user market. And finally, continuing to strengthen our intellectual property portfolio to protect our proprietary technology, expand its potential areas of use, and increase out licensing opportunities. So with that review of our business highlights and financial results, I'd now like to open the call for questions. Operator?

Ladies and gentlemen, at this time, we'll begin the question and answer period. If you would like to ask a question, you may press star and then one on your touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. Our first question today comes from Vernon Bernardino from HC Wainwright. Please go ahead with your question.

Hi, Vernon.

Hi, Francois. Thanks for taking my question, and congrats on the progress. I'm just wondering if you could talk a little bit more about the happenings in Europe. It's intriguing the comments you made as far as the growing interest there. I was wondering if you could give a little bit more detail and insight, and especially how other people are pounding the pavement.

Sure. And maybe I think let's pass that to Renaud, if you could give us a sense of some of the anecdotal feedback and themes that you're hearing at these conferences, Renaud, and as well as some of the tactics that we're executing in Europe.

Yeah, no, absolutely. Thank you for the question. Yes, I mean, as we go... Hi, how are you, Vernon? As we are going back to in-person trade show in Europe and conference in Europe, it is becoming very clear to us that more and more specialists, whether they're hepatologists or endocrinologists, are very interested in our technology in order to start really understand liver health on their patients, on their patient population. You know, we've had multiple requests for demonstration. We are organizing multiple lunch and learn with our partner GE at various sites in Europe. And as I commented earlier, we have multiple physicians asking us for materials so they can talk about our technology in their own talk to their colleagues and friends when they do different talks and conferences as well as their students. So I see a very high uptick of interest in the solution that we provide as well as in the technology and how it differs from the existing ways of measuring liver fat.

Hey, and, Renaud, if I could, I just wanted to piggyback on that, if I might, Vernon. As you know, we started with GE in the radiology part of their business, which is their strength. But GE, like a lot of medical device companies, have other divisions, including what are called point-of-care ultrasound. And these are the ultrasounds that are typically used in emergency rooms or internal medicine or non-radiology settings. And we're seeing that that solution, you know, portable ultrasound, the size of a laptop, the size of an iPhone, are an increasingly attractive element to combine with our technology when we're talking to an endocrinologist or a hepatologist who doesn't necessarily own an ultrasound the way you have it in radiology. So we're finding that the partnership and discussions and field work with GE are actually, in many regards, evolving as we learn more about the market and as customers draw on us with their needs. I hope that's helpful.

Definitely, and that segues very neatly with my second question, and that is how were people asking how to use it. Do any of them ask how much it costs? I know that it's a... Too early, perhaps, but because they have familiarity with ultrasound, I would imagine a doctor who already uses ultrasound might wonder what additional cost it may entail.

Sure. And I think we were as strategic as we could be when we originally started setting price. Now, we all know there's a difference between price setting and price getting, but our price setting, and so far what we're hearing in the marketplace is the $50,000 U.S. price for our technology is something that is appealing because many in radiology, certainly the ones doing the ultrasounds of the liver today for gallstones and other reasons, are investing $75,000, $150,000, $200,000 for an ultrasound. So having an add-on technology that enhances their ultrasounds at a reasonable price point, was certainly something in our consideration. And so far, Renaud, I don't know if you've got any additional feedback, but the feedback we're getting, along with the rental programs that we're putting in place to facilitate acquisition of the technology, has certainly been well received. Any additional comments, Renaud, from your side?

No, I think the price point that we have talked about has been very well received and accepted by the customer. So I am very confident that we should be able to get that price point around that price point when we sell.

Great. Thanks. I hope that's helpful to you, Vernon, and your investors.

Definitely, because obviously these days, I think everybody's thinking about the cost of things. Thank you for taking my question and follow-up question.

Always. Thank you so much, Vernon.

And our next question comes from Edward Wu from Ascendant Capital. Please go ahead with your question.

Hi, Ed. Congratulations on the progress in the quarter and also on your first Germany or first site in Europe, your clinical study partner. Just how many of your eight partners are actually scanning today, and what is the timeline to get them all up and running?

Sure. So with the German site we just mentioned, that will be our third site going live. We have the remaining sites certainly phasing in here over the coming months. Our goal is to have all of them live. up and running, COVID permitting, obviously, but certainly getting them all up and running this year. And our, I would say, even more essential goal is to have upwards of 200 patients scanned because we feel like that's really reaching a new level, a new level of critical mass needed to support both commercial activity, being able to say to clinicians who are considering a purchase, hey, we have scanned this many patients. That's always extremely confidence-building. and also to be able to support the regulatory submission for the FDA. I want to emphasize the de novo path, as Mike Thornton described, is not at all a long-term, large study with hundreds of patients the way a pre-market approval for an invasive device or a drug might be, a PMA as they're called. So I won't be able to define at this point, because the FDA has not prescribed it, we have to come back to the FDA with, a representative cohort of in vivo data to complement the 510 work we've done. We're definitely going to be able to do that within the pool of sites that we've already got started. And certainly, as we add more, we'll have even greater flexibility and volume in terms of clinical data. I hope that's helpful.

That is very helpful. You know, congratulations on, you know, obviously, you know, making a lot of progress in Europe and the EU. Obviously, you know, your device has already been, you know, got C-marked. Do you anticipate, you know, focusing a lot more of your marketing in Europe until you do get FDA approval in the U.S.? Absolutely.

Yeah. I mean, we as Americans often forget how large Although culturally diverse, Europe is, but it's, you know, a very large market. And certainly from a healthcare market, very, very attractive. We believe we have people on the ground in the key markets in France, in Germany, in the U.K., And I think our focus should be there. We've been very careful not to spread ourselves too thin. Obviously, by getting the clinical study sites in the U.S. up and running ahead of our regulatory approval will give us a head start when we do get approval to add salespeople here in the U.S. And as we mentioned also earlier in the year, we signed a prestigious partnership with Shanghai General Hospital in China. And I would say after Europe, and the U.S. will be certainly turning our attention to Asia, which is, as we all know, the world's most populous health care market. But I want you to hear, and I want investors to hear, we're not trying to be everywhere at the same time. One, we're preserving capital. We're focusing on what we think is going to be the highest return, and that's starting in Europe, definitely.

Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you.

Thank you so much, Ed. Yvonne, have we received any additional questions, possibly by email?

Yes. One question we got is, can you further discuss the licensing opportunities with the recently issued patent regarding data transfer?

Yeah, that's actually really exciting. Before I turn it over to Mike to kind of give you a real sense of that one, I do want to contextualize it. I mean, Endra's been very active in the last five years patenting you know, comprehensive range of innovations that span thermal acoustic applications and enabling technologies. And those are focused on fatty liver as well as other applications and temperature monitoring, things that could allow a surgeon or interventional radiologist who's trying to treat cancer or cardiological condition to be able to see the tissue being treated with heat or cold. We've mentioned that before. We think that's a very compelling tool. opportunity, a real game changer for companies who were involved in that, because today there's no way to easily see tissue temperature change when you're burning or freezing something below the skin. So, you know, clinicians tend to do their very best, but they obviously have limited visibility to that. So we think that's a key area for Andra and the TEAS platform. But I'd love for Mike Thornton to speak a little bit more about this new space that And I want to emphasize that this new space is a derivation of some work we were doing on TEA. So this is not a pivot of the company. This is an incremental opportunity for Endra, which we're very excited about from an out-licensing perspective. So, Mike, if you'd give us a sense of the most recent U.S. data pool, that would be great.

Sure, and thanks. Yeah, the most recently issued U.S. patent broadly covers the transfer of equipment performance data in a really novel way. Specifically, our patent enables manufacturers of laboratory diagnostic and other types of equipment to easily extract performance data and service metrics where conventional wireless or network connectivity isn't available. surprisingly, a lot of that information is not automatically downloadable from equipment and is often copied by hand by service techs in the field. As you can imagine, this is a fairly inefficient process. This IP is an example of Endra innovations potentially expanding far beyond Endra's core test technology.

Thanks, Mike. I think that's exciting. I mean, I want investors and our listeners to hear two things from us. One, we're laser focused on making KSLiver a success in Europe, generating revenue, as well as securing U.S. regulatory approval. But we're also advancing in a very efficient way without distracting ourselves from those primary goals, other opportunities that we can leverage from our technology platform, including the IP that Mike mentioned, which might be of interest from an out-licensing perspective. So I think that's compelling. I think investors understand that broader, longer-term potential to scale the business. But obviously, we're focused on the immediate, and we're looking forward to achieving some great things this year. Yvonne, if we don't have anything else, I think, operator, we can close the call now.

That's it for me.

Okay. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining today's conference call. You may now disconnect your lines.