This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good day and welcome to the INDRA Life Sciences Third 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 then one on your telephone keypad. And 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 Miss Yvonne Briggs. Please go ahead.
spk05: Thank you, Operator. This is Yvonne Briggs with LHA. Good afternoon and welcome to Endra's third quarter 2022 business update and financial results conference call. Earlier today, Endra issued a press release on this topic, which is available in the Investors section of Endra'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. Acceptance required by federal securities laws the company disclaims any obligation to update or revise any forward-looking statements. Please refer to the company's Form 10-K for the 2021 fiscal year and subsequent Forms 10-Q for more information about risks and uncertainties related to forward-looking statements. In terms of the structure of today's call, Francois Michelin, Chairman and Chief Executive Officer, will begin the prepared remarks, followed by Michael Thornton, NDRA's Chief Technology Officer. Mr. Thornton will be followed by Renaud Malaberti, Endra's Chief Commercial Officer, and then Irina Pestrikova, Senior Director of Finance, will review the third quarter financial results. With that said, I will now turn the call over to Francois Michelon. Francois?
spk03: Thank you, Yvonne. Good afternoon, everyone. Thanks for joining us today to discuss Endra's third quarter financial results and business highlights. Today we'll review the progress we're making on many fronts to advance our thermoacoustic enhanced ultrasound system known as TEAS. I'd like to start by underscoring that the collection of high-quality clinical data that validate the TEAS system is the top priority for NDRA. These data will enable a compelling U.S. regulatory submission and will also support global commercialization. In the meantime, We're continuing to build awareness of our TAIS system with a steady cadence of marketing activities in Europe and the U.S., and importantly, our balance sheet remains strong to enable the achievement of several significant milestones. As a way of background, TAIS is a proprietary technology platform with an initial application focused on accurately measuring liver fat for the early assessment of non-alcoholic fatty liver disease, known as NAFLD, which affects over a billion people globally. TEIS allows for the non-invasive visualization of tissues in ways similar to an MRI, but at the point of patient care and at about one-fiftieth the cost. TEIS is approved for sale in countries that recognize the CE mark, including those in the European Union, and in the U.S. we're diligently working towards submitting a de novo request to the FDA. Admittedly, it's taken longer than we expected to achieve our clinical milestones, partly because COVID restricted or even halted work at our partner clinical sites for the better part of two years, and also because Endra is developing a completely new and game-changing technology, which naturally comes with some challenges. But as you'll hear from Mike Thornton in a minute, we're making strong progress on the clinical data front. And as you'll hear from Renaud Malaberti, we're maintaining an excellent cadence of marketing activities to build awareness of Artea's fatty liver technology among prospective customers in Europe and the U.S. We also continue to enhance our intellectual property portfolio to protect our technology from multiple applications. In the third quarter, we had eight patents issued and now have a total of 56 patents issued globally. Several recent Andra patents focus on novel cloud-enabled connectivity of medical devices, including Andra's TAIS system. And we're pursuing potential licensing opportunities for this technology to help other companies collect data from their equipment, such as laboratory equipment, which may not have a direct Internet connection. On a separate point, we recently announced a special shareholder meeting to approve a reverse split of our stock. and I want to make it very clear. The reverse split is proposed to maintain compliance with NASDAQ listing requirements, and there is no capital raise connected with Endra's reverse split. Okay, now, over to Mike Thornton. Mike?
spk04: Thank you, Francois. Let me summarize what we've accomplished clinically, where we are currently, and what we can expect in the near term. In 2019, we conducted a first-in-human feasibility study for a thermoacoustic liver application. At that time, there had previously been some academic research and preclinical work in the field of thermoacoustics, but very little clinical work in humans had been performed beyond the breast cancer research by Dr. Robert Kruger and colleagues in the late 90s, and none for fatty liver applications. Enver's feasibility study with 19 human subjects provided an insight into the potential performance of a thermoacoustic application for fatty liver assessment. So far this year, using our clinically targeted platform, our clinical study sites have obtained 95 study participant exams. That's nearly double the number that we shared in our Q2 update. We know that the TAIS system has low measurement variation based on instrument repeatability and reproducibility studies. This means that the TAIS instrument provides consistent measurements day-to-day and across individually manufactured devices. Those studies show variation is less than 3% for the instrument. Now we see that some of our clinical study users are also able to obtain clinical TAIS measurements repeatedly and with good reproducibility. However, we've identified some user variability and recognize that additional interactive guidance tools will enable consistent user performance across clinical sites. Specifically, we have updated the instructions for use and added interactive graphical user feedback that will guide users in positioning the TAIS probe, enabling users to obtain measurements more reliably with higher repeatability. We expect that subsequent iterations of the user guidance tool will leverage machine learning and other AI approaches to further improve the intra- and intraoperator performance with our KS system. So, what's ahead? In addition to deploying the user guidance tools, we'll work with our current clinical study sites to complete the data collection for our U.S. regulatory submission. will then begin activating additional study sites to build the clinical evidence in support of our commercialization efforts. As Francois mentioned, while it's taken longer than we expected to achieve our clinical milestones, we believe the additional effort to ensure repeatability and reproducibility across clinical sites is essential for our successful FDA submission. And longer term, it will also provide Renault's commercial team with the clinical data to support commercialization. I'll now turn the call over to Renaud Malaberti. Renaud?
spk01: Thanks, Mike. Last week, as part of NDRA's ongoing marketing activities, Francois and I attended NDRA's 11th clinical meeting of the year, the American Association for the Study of Liver Disease, known as AASLD, in Washington, D.C. AASLD is the most important liver disease conference in the U.S., attracting well over 8,000 clinicians and industry participants. This was the first time in three years that the conference was held in person, so the meeting was packed and high energy, and we were able to demonstrate our TAIS system to a good number of potential customers. NDRA also sponsored a well-attended presentation by two leading hepatologists, Dr. Raza Malik and Dr. Chris Cowdley on the State of Diagnostics and Therapeutics in Liver Disease. These presentations are available on NDRA's website. At ASLD, we also met with Hepion Pharmaceuticals, and the partnership remained strong, with both companies looking forward to deploying our test system as a screening tool as Hepion ramps up their Phase IIb clinical site. The three things we took away from the AASLD meeting which reflect broader market trends were, first, with well over 1 billion people affected by NAFLD-NASH growing at a 12% to 15% annually, there is a growing unmet clinical need for accessible, high-quality, noninvasive diagnostics to identify patients early when the disease is reversible. MRI is too costly, and liver biopsy is invasive and increasingly suspected of sampling and interpreter errors. We did notice a number of new diagnostic entrants in the ASLD, but most added nothing new to existing ultrasound technologies, such as attenuation. So we feel very good about the continued differentiation of NDRAS technology versus competitive alternatives. Second, we heard a lot of discussion about how liver biopsy may be a bottleneck of pharmacotherapy development in the liver space. In other words, if you're using an endpoint measurement tool that is prone to sampling and interpreter error, like biopsy, you may not be making optimal decisions about which drugs to advance or to stop. Despite this, it was encouraging to see positive clinical outcomes results from NAFLD-NASH therapeutic companies such as Altimmune, Alnilam, and Akiro, all of which could assist in expanding the market for TAIS. Currently, there are no FDA-approved drugs for NAFLD-NASH. And third, NAFLD-NASH is increasingly viewed as a multidisciplinary disease at the intersection of radiology, hepatology, endocrinology, general practice, bariatric surgery, and even psychology for lifestyle and weight loss. That's great for Andra because it broadens the market opportunity to deploy our technology outside radiology and hepatology into endocrinology and primary care settings where checking liver fat should be as routine as checking blood pressure and cholesterol. So if you distill these three points, you see that NDRA's goals of providing a high-quality, non-invasive diagnostic tool is increasingly relevant for patients across a growing range of clinical care settings and also for pharmaceutical developers and CROs in the medium term. As Mike and the clinical team build the body of clinical evidence that will be essential to our TAIS cells activity, On the ground in Europe, Endra is remaining flexible in our sales efforts by offering rental and lease options in addition to direct capital purchases for the TAIS system. We believe this range of purchase options combined with the clinical data and the continued market need for a better diagnostic tool for NAFLD across a range of high-value clinical segments will ultimately lead to our first sales and revenues. Now, I'd like to turn the call over to Irina to review the financial results for the third quarter of 2022. Irina?
spk06: Thank you, Renaud. Our financial results for the third quarter of 2022 are as follows. For the quarter ended September 30, 2022, our operating expenses increased to $3.4 million from $2.7 million for the same period in 2021. The increase was primarily due to higher spending for commercialization of TAIs and ongoing product development. Our research and development expense increased year-over-year by approximately $660,000 due to ongoing product development work. Our sales and marketing expenses increased by approximately $140,000 for the quarter as we began to expand our sales and marketing efforts as Renatje described including attending a growing number of medical conferences. General administrative expenses decreased by approximately $35,000 due to lower payroll expenses. Our net loss per share for the 2022 third quarter was 5 cents, compared with a net loss of 6 cents per share a year ago. We continued to maintain our asset-light operating model with present hires in our operations team in anticipation of future growth. As we execute our regulatory and commercial strategy for TAIS, we plan to adjust the expense structure accordingly in support of these activities. As of September 30, 2022, we had cash and cash equivalents of $8 million. With our current balance sheet, we deliver well-capitalized with cash runway to support the submission of our turnover request for the MTA and continued commercial activities in Europe. And now, I'll turn the call back to François.
spk03: Thanks very much, Irina, Renaud, and Mike. In closing, here are the three key messages I want listeners to take away from this call. First, ENDRA's primary focus is the effective collection of clinical data to enable both a successful U.S. regulatory submission in the short term and strong, global commercialization over the long term. We're making excellent progress in this area, as you heard from Mike, with 95 scans year-to-date, nearly doubling our scans since Q2. Second, we're maintaining a steady cadence of marketing activities to build awareness of Arteas technology with a growing number of clinical specialties in Europe and the U.S. We've participated in 11 clinical conferences this year versus eight conferences last year, And our customer database now includes over 5,000 clinician names that we continue to cultivate across the globe. Third, we have a strong balance sheet that we believe will enable us to achieve several important milestones, including ramping up commercial activities in Europe and submitting our de novo regulatory filing in the U.S. With that overview, I'd like to turn the call over to our listeners for questions. Operator?
spk00: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Edward Wu with Ascendient Capital. Please go ahead.
spk02: Yeah, congratulations on the progress. As you attended all these various conferences, have you noticed any change in people being concerned about the macro environment?
spk03: Well, thanks. Listen, I'm going to ask also my colleagues to weigh in since we've been sharing the burden in the market going out to these conferences. Yeah, I think there's a growing optimism that wasn't there a year ago. I mean, while there's a little more reality setting in on the mania that perhaps was in place pre-COVID about therapies for NAFLD-NASH. As we mentioned, there's a realization that the main measurement tool for endpoints, biopsies, may be so stringent or prone to error that it may be hampering some development. We're really excited about the progress that some companies like Akira and others are making. So I think overall there's realistic optimism that's building. As you heard also from Renaud, the macro epidemiology is daunting. I mean, it's well over a billion people affected, growing in double digits. So for us, centrally located, we don't really care what drugs succeed. We hope many do, but we're agnostic to that. That will precipitate even more the need to screen these patients, put them on therapies, and then monitor the results. We hope that Ender can play a central role there. So aside from other factors that we can't control, such as supply chain and, you know, interest rates, we think that in our space the clinical need remains large and hungry. Clinicians are eager and, in fact, more are weighing in on this metabolic disease. As Renaud mentioned, it's really becoming a multidisciplinary view of the disease. So primary care, endocrinology, bariatric surgery, and many others are increasingly aware and interested in treating this obesity and liver epidemic. And so we think that we continue to be very well placed in that despite the micro and macro trends. Mike Thornton, perhaps you have another perspective or you could add some more color to that from your time in the field.
spk04: Sure. Thanks, Francois. Yeah, I think broadly, endocrinology, diabetology, obesity specialists, these clinicians continue to be excited about a point of care fatty liver assessment tool that's cost effective. You heard about the clinical need. It's clear. And we're excited about what our technology has the potential to uniquely do for liver and metabolic health.
spk03: I hope, Ed, that touches on most of what you were asking.
spk02: Yes, it does. Thank you very much. And my last quick question is congratulations on the 95 test scans that you got year-to-date. Have you guys been able to really, you know, develop learnings and experience so that the next 95 will be significantly faster as they, you know, get more comfortable with the system?
spk03: Let me again turn that over to Mike, who's leading that effort, if you would, Mike.
spk04: Yeah, so as Francois mentioned, we continue to remain focused on our target of 200 scans, but clearly achieving that goal depends not only on our users' comfort with the device, but also the availability of MRI time and study subject recruitment, which can vary from site to site. That's what we've seen. You know, one thing I want to be clear about is we are targeting 200 or more scans to support our commercialization efforts, but we don't believe we'll need 200 scans to complete our de novo submission. We're supporting our clinical investigation, investigators and sites in every possible way to collect that necessary data effectively. I think Some of what I talked about, the great feedback we get from our current sites, you know, as a new technology, that's really critical. And these guidance tools are going to drive engagement and reliability and effectiveness. So we're excited.
spk02: Great. Well, thank you for answering my questions, and I wish you guys good luck. Thank you. Thank you.
spk03: Thank you, Ed. That covered a lot of ground. I don't see any other questions in queue operators, so I think we can wrap up the call and pay respect to everyone's time.
spk00: Well, this concludes our question and answer session. I would like to turn the conference back over to Mr. Francois Michelon for any closing remarks.
spk03: Thanks, Chuck. And, again, just a quick thank you to everyone listening today. Thank you to all our listeners. New and historical events. Association, and also thank you to the Endra team who are working in a very lean and focused way to bring game-changing technology to the marketplace. We look forward to speaking with all of you again at our next quarterly conference call, and we wish you a good evening. Thank you.
spk00: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer