ENDRA Life Sciences Inc.

Good afternoon and welcome to the Endura Life Sciences second quarter 2024 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 telephone 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.

Yvonne Briggs Thank you, Operator. This is Yvonne Briggs with LHA. Good afternoon and welcome to Endra Life Sciences' second quarter 2024 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. Except as 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 2023 fiscal year 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, Alexander Tuchman, Acting Chief Executive Officer, will begin the prepared remarks, followed by Ziad Ruag, new Head of Regulatory and Clinical Affairs, and then Michael Thornton, ENDRA's Chief Technology Officer. They will be followed by Richard Jacrou, ENDRA's new CFO, to review the second quarter financial results. With that said, I will now turn it over to Alex. Alex?

Thank you, Yvonne. Good afternoon, and thank you for joining us today to discuss Indra's second quarter 2024 financial results and business highlights. Before we proceed to the business update, let me address the reverse stock split and the subsequent trading of our common stock. As you know, after receiving shareholder approval earlier this month, the company authorized 1 for 50 reverse stock split which we announced last Friday and was effective this past Tuesday. The primary goal was to keep our share price above $1 and in turn maintain the NASDAQ listing. This plan was derailed because of an extremely high volume of exercise warrants which were issued as a part of the $8 million public offering that was completed in June. This public offering was necessary in order to keep the company operational and not to lose all the progress Android made over the years. We strongly believe that this sharp decline in our stock over the past few days is completely unrelated to Android business prospects. have the intended outcome as we are trading below $1 right now. We recognize the seriousness of this situation on the company and our investors, and we will keep you apprised of our actions as we move forward. Now let's turn our attention to the second quarter results and recent changes. I would like to start by reviewing with you six specific items we intend to do differently moving forward to become more actionable and predictable as we bring Andra's differentiation thermo-acoustic technology to market. The six changes include stronger operating team, relentless prioritization of our activities, new approach with FDA, enhanced go-to-market strategy for TAS liver device, crystallization of our Android vision, and finally, improved financial execution. Let me elaborate on each. First, we enhanced our management team by adding two experienced operators. We have proven track record of success in transforming new technology companies. Richard Jacrou is a seasoned CFO with public and private company experience, and he well understands lean operations and restructuring. He is already working very closely with Irina, formerly Senior Director of Finance, to ensure a smooth transition to daily finance operations. Irina will remain as an advisor to the company moving forward. Ziad Rouak has joined us as the head of clinical and regulatory affairs. Ziad has successfully led a number of emerging medical device technology companies through regulatory process and early commercialization. And he already made a huge impact on our most recent strategy and interactions with FDA. I anticipate that both Richard and Ziad experiences will greatly benefit Andra as we move forward through this critical phase for the company. Mike Thornton, our CTO, will continue to focus on product delivery as well as enhancing Andra's technology roadmap and intellectual property. Second change, after reviewing all the priorities that we are facing, We, as the new operating team, are unanimous in our relentless prioritization and laser focus on the most critical deliverable for the company, and this is executing a statistically-powered, multi-center, prospective clinical trial to obtain the necessary data that will allow us to successfully move forward. This clinical data is a foundational element for both regulatory and commercial success. It offers three important benefits. It allows for optimization of product design for maximum user utilization. It is a necessary piece of successful de novo application. And finally, it answers the big why, as in why I as a clinician or pharmaceutical user should utilize this technology. The third change we're implementing is we've fundamentally changed our regulatory strategy under Zia's leadership. We're switching from the use of retrospective data to a hypothesis-driven, statistically-powered, prospective clinical trial, which is pre-vetted through FDA. We are therefore expanding from a single clinical site to a multicenter trial, and we're increasing the number of subjects by an order of magnitude from 20 to about 250, which is necessary to achieve acceptable statistical power. We are now fully engaged with the FDA on establishing the consensus and trial design prior to data collection. Later in this call, Ziad will elaborate further on these changes. Fourth, we are revisiting our go-to-market strategy for the TAIS liver device. We have more and more evidence that hepatology may not be the beachhead market we should pursue. primary care and segments and them over the next six to 12 months as we pursue the regulatory clearance for the TAIS waiver device. Hepatology will likely remain a market for us, but perhaps not the primary target. Fifth, or the change, initiative number five, we're preparing changes related to endostrategic directions. We will formalize our longer-term business strategy and crystallize our vision as in what's next after we commercialize our taste liver device. We have to answer questions such as how do we add more value to our customers beyond the liver fat test and become a metabolic disease biomarker company which could be a lot more valuable. All of this is expected to be developed and assessed over the next 12 months. Lastly, we are focusing on improved financial stewardship. Our goal is to scrutinize every dollar we spend, and as a result, we recently conducted significant reductions about operating expenses, and we were able to reduce them by 3 million plus, which represents approximately 26% reduction on annualized basis. all of it without impacting the primary deliverable, which is clinical data collection in preparation for our FDA submission. Richard will elaborate on this further during the financial update. Now that I outlined what we will do differently moving forward, Siad, Mike, and Richard will now highlight for you the progress we made since one conference call in three areas, clinical and regulatory, technology and IP, and financial. Ziad?

Thank you, Alex. In May of this year, we met with the FDA at the headquarters in Maryland to demonstrate live the TELUS technology and review the clinical and statistical plans for the proposed pivotal study. The meeting minutes from the FDA meeting confirmed alignment between UNDRA and the FDA on the final product configuration, clinical study design, and regulatory pathway successful outcome. As part of our refocused clinical program, we are limiting initial data collection to three pilot sites, two US and one EU. These pilot trial sites were selected based on their ability to recruit patients. We have already acquired data on 25 subjects through these efforts. In terms of time tests, there will be sequential studies, meaning the results of the pilot study will inform the design of the pivotal study. Our goal is to have all clinical work completed and the data incorporated into our de novo submission targeted for mid-2025. I've handled similar opportunities during the course of my career with complex trials and devices, including imaging studies, and I'm highly optimistic about the regulatory path we have set for the TAOS liver device.

Mike? Thank you, Syed. Our patent portfolio now stands at 81 issued patents globally. During the second quarter of 2024, NREL has issued five additional patents, three in Europe and two in China. The issued patent portfolio consists of 42 thermoacoustic device and foundational enabling technology patents, 22 patents related to estimating fat fraction, and 17 patents covering other thermoacoustic applications and non-thermoacoustic technologies. Our broad intellectual property portfolio provides protection for the TEA system with its novel thermoacoustic technology, and the opportunity to explore licensing options beyond our core focus. I'll turn the call over now to Richard.

Thank you, Mike. And it's a pleasure to be speaking with our investors in my first quarterly conference call as Entra's CFO. During the quarter, we raised $7.3 million in net proceeds from the sale of common stock and warrants in a public offering. As of June 30, 2024, we had cash and cash equivalents of $6.4 million. Based on our current projections, our cash runway funds the company into the first half of 2025. Turning now to a review of our financial results, for the quarter ended June 30th, 2024, our total operating expenses decreased to $2.2 million from $3 million for the same period in 2023. The decrease was mainly due to declines in research and development and sales and marketing expenses. Year over year, R&D expenses decreased 684,000, or 49%, as we shift our resources and spending from development to clinical activities. In sales and marketing, costs decreased 85,000, or 34%, as we restructured our European operations to support the company's near-term clinical study goals. General and administrative expenses increased $5,000 overall due to the administrative cost of the fundraising, which offset decreases elsewhere. We continue to scrutinize our spending and will likely make further adjustments to our expense structure to focus on achieving our priorities as we reset our strategy. Now, I'll turn the call to the operator for questions. Operator?

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're 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 today is from Edward Wu with Ascendant Capital. Please go ahead.

Yes, nice to meet you, Alexander and Richard. My question is more on, as you guys are hitting the ground running, how quickly do you think you guys will be able to get your new strategic path fully implemented, or do you still think it needs time to evaluate the situation?

Thank you for the question, Ed. In terms of the next nine to 12 months, we have a clear priorities described that we're going to execute. So this would involve completing the clinical studies, obtaining all the necessary data to prepare for regulatory submission with FDA, as well as generating enough compelling data to use for promoting this technology to future customers. So in terms of, again, this priority has been agreed upon, and articulated to every employee within the company. In terms of longer vision, what happened following the introduction of TAIS lever device, we're going to sharpen pencils over the next six to nine months, look at all the opportunities that our IP offer, and determine the obstacle path going forward. One thing I can tell you for sure is that we're going to create a strategic roadmap that will include several growth opportunities, some of which we will pursue organically, and some of which could be licensed to others. More on this later.

Great. And just a final clarifying question. I wasn't sure if I heard right. Do you say that in 2025 you plan to file your FDA application? Do you give a specific time in 2025?

We haven't provided the specific guidance, I don't believe, but what I can tell you is that our goal is to complete the clinical study this year and initiate a pivotal study early next year with the goal of submitting sometime by mid of 2025. Great.

Well, thank you, and I wish you guys good luck. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Alex Tauchman for any closing remarks.

Alex Tauchman Thank you. Given, I would like to wrap this call by telling you that given that everybody feels the board and the operating team are bullish and there's technology and market opportunity. We expect that after implementing the six initiatives and changes I described earlier in this call, and their performance will improve, and we will reverse the course that the company has settled for in the past. I'm confident personally about this because I have led several successful turnarounds of medical device and emerging technology companies for both Fortune 100 and MicroCops, and I think we can do this again here. I believe the team is energized. We know what we need. to accomplish in the next 6, 9, and 12 months, and you'll see hopefully different output from this team moving forward. Thank you. Thank you for joining us today, and we look forward to keeping you updated on our progress.

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