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spk02: Greetings and welcome to Pulse Biosciences' fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Philip Taylor, Investor Relations. Please go ahead. You may begin.
spk04: Thank you, operator. Before we begin, I would like to inform you that comments and responses to your questions during today's fall reflect management's views as of today, February 22nd, 2021 only, and will include forward-looking statements and opinion statements. These statements regarding our plans and expectations relating to regulatory clearance, including the process, timelines, and expected outcomes, our commercial, operational, scientific, clinical, and financial projections, products, including the uses, benefits, and applications of such products, our commercial and regulatory strategies, the impact of the COVID-19 pandemic, and other future events. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2020. Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. Please note that this conference call will be available for audio replay on our website at PulseBiosciences.com on the News and Events section of our Investor Relations page. With that, I would now like to turn the call over to President and Chief Executive Officer Darren Uecker.
spk07: Thank you all for joining us this afternoon. As an organization, Pulse Biosciences has recently achieved major milestones that significantly advance our mission to offer bioelectric medical solutions that make meaningful differences for the betterment of patients and clinicians. Just weeks ago, Pulse Biosciences received FDA clearance and CE mark approval for the CellFX system. As a result, the company has transitioned from a clinical organization focused on observation and evaluation of a broad range of medicinal therapeutic potential opportunities, as well as regulatory validation across a number of geographies to a commercial organization, driving adoption of our novel CellFX system with CloudConnect services. 2020 was truly a transformational year for Pulse Biosciences and has laid a strong foundation for commercial growth and expansion of our CellFX technology platform. Our CellFX system and its embedded hardware, software, and cloud technology represent a new era of energy-based medicinal therapy platforms. On the call today, we are excited to provide a detailed update on our fourth quarter and more recent accomplishments. I will start by describing how the CellFX system regulatory approvals shape our corporate focus and priorities in 2021. Ed will outline the start and direction of our controlled launch program, including continued scientific community engagement. And then Sandy will detail the financial results before I provide color on significant therapeutic opportunities beyond dermatology and open the call for Q&A. In 2020, we set three main business objectives and were successful on all three fronts. The first objective was to achieve regulatory clearance for our CellFX system in the U.S., the European Union, and Canada. The second objective was to prepare for the commercial launch of the CellFX system with Cloud Connect Services. And our third objective was to further explore, evaluate, and prioritize meaningful therapeutic opportunities outside of dermatology. Our success with these three objectives drives our priorities for 2021. This year of major importance and top priority is the execution of our unique controlled launch program for the CellFX system with CloudConnect services in the US and EU and eventually in Canada. Our second objective is to continue to progress our stepwise regulatory strategy with FDA in the U.S., expanding the cell effect system's indications for use to specific lesions, including sebaceous hyperplasia, or SH, cutaneous non-genital warts, and other benign lesions. We will maintain our presence in the scientific community. where we are building our rapidly growing library of clinical evidence on the efficacy, safety, patient care, and provider value of the CellFX platform. And additionally, we will continue to advance therapeutic opportunities outside of dermatology. Before I cover our new objectives in more detail, I would like to explain our technology for anyone new joining us today. The first commercial product at Pulse Biosciences is a multi-application platform called the CellFX system. that delivers our proprietary nanopulse stimulation, or NPS, technology to the skin initially for use in dermatologic procedures. NPS is a nanosecond pulsed energy-based modality offering unique benefits. NPS is a non-thermal modality that affects only cellular structures while leaving non-cellular structures unharmed. Compared to thermal modalities, the cell-specific nature of NPS can lead to enhanced aesthetic outcomes in general dermatologic procedures as non-cellular collagen is unaffected, while the problematic cellular tissue is completely eliminated. We believe our technology represents a significant step forward as a procedure for aesthetic dermatologists and could provide the ability to treat conditions that were not addressed previously because the collateral damage using prior modalities could be worse than the original condition. The CellFX system is a software-enabled, tunable, cloud-engaged console that powers a handheld treatment applicator. The highly customizable configurations of applicators and energy settings enable a wide range of procedural settings to address multiple dermatologic conditions. It is designed to accommodate the clinical workflow preferred by dermatologists, with patient procedure times as quick as 15 minutes. Based on our extensive industry experience and a collaborative process with clinicians, we designed a proprietary integrated cloud software infrastructure that links our CellFX systems to our internal resources, which we call CellFX Cloud Connect. It is the backbone of our innovative utilization-based business model that aligns the interest of patients, practices, and the company. CellFX Cloud Connect is the cloud application that provides a novel suite of tools that integrates the customer, the system, our e-commerce customer portal, and practice management tools to track utilization data and other metrics, while on the back end connecting to our internal customer relationship management system, and enterprise resource planning system. The CellFX marketplace, a part of the CellFX Cloud Connect services, is our customer portal where medical practices purchase and wirelessly download cycle units directly to the CellFX system. Cycle units are purchased and then consumed on a per lesion basis. So the more lesions the patient wants cleared, the more cycle units are required. This enables a preferred economic model as physicians have fixed cost per lesion and can charge the patient on a per lesion basis, which is aligned with the patient's preference. Our model contrasts with the currently employed disposable and single-use based medical device models, removing many of the economic barriers created with disposable use models and reducing the purchasing and inventory burden on the clinic that can occur in those models. The CellFX Marketplace also provides a dashboard of utilization metrics for the clinic to monitor the productivity and profitability of the CellFX system on a daily basis. This novel capability, enabled by the CellFX Cloud Connect infrastructure, is a key feature that we believe will drive adoption of the CellFX system by providing key insights to the physicians in establishing and growing a successful CellFX franchise. One last note about CellFX Cloud Connect. is that it facilitates direct connectivity for Pulse Biosciences to remotely perform software upgrades to the CellFX system, as well as provide any service functions in real time. Because of this ability to streamline, be responsive, and reduce disruption to the clinical workflow, CellFX Cloud Connect allows us to provide next-level support and enable seamless commercial growth for our customers. We believe this advanced delivery model not only enhances the delivery of NPS technology, but will create a premier experience and growth potential for our valued physician customers and their patients. Our obligation and commitment is to make it as seamless as possible to integrate the CellFX system and CloudConnect experience into thousands of practices. That brings us to our first two objectives for the year, regulatory clearance and our controlled launch program. Following FDA clearance and CE mark approval, we are now permitted to market CellFX systems in the U.S. and the European Union. The controlled launch program was successfully initiated within days of our respective approvals. We have now shipped cell effect systems to U.S. and European physicians, and they have been trained and are performing procedures on their patients. Executing a commercial launch of new medical technology this quickly after regulatory clearance is a significant accomplishment in a single geography. To do so in two major geographies simultaneously requires an experienced, focused, and well-prepared team. and I would like to congratulate our organization for making this happen. We have an experienced and talented team in place, including sales, marketing, customer service, and operations professionals who are facilitating this launch. We plan to grow this team as our commercial efforts ramp. More important than how quickly we launched, though, is the thoughtful, measured approach we have designed to ensure key opinion leaders, the most influential physicians in the space, and their patients share an exceptional experience with the CellFX system, and that best practices related to this experience are observed, fully understood, and shared across our clinical partner base. The level of excitement and commitment to our technology from Control Lounge participants has been extremely encouraging. We are invested in helping these KOLs create model CellFX franchises in their practices. In turn, the KOLs have demonstrated their commitment through participation in extensive virtual and practical training It represents a reciprocated commitment to their CellFX system. Physicians and their staff are excited not only to learn about how to perform the procedure, but also how to educate their patients about the differentiated benefits of our CellFX platform. We are very pleased with where we stand less than a month into commercialization. We will use the remainder of 2021 to phase in our KOL participants in the U.S. and Europe. Based on the success of our 2020 awareness, scientific, and educational programs, and our immediate ability to service demand post-regulatory clearances, we have decided to embrace 75 clinics in our controlled launch program across the U.S. and EU. Later in the call, Ed will provide additional details on our approach and early experience. With regard to our Q4 2020 submission to Health Canada for approval of the CellFX systems, We recently received a number of questions in the form of an additional information letter and expect to respond to the questions in the next couple of weeks. According to Health Canada guidelines, once we submit our responses, Health Canada may take up to 45 days to complete the review. Based on this timeline, we expect the review to be completed in early Q2 2021. And if the review results in a Canadian medical device license for the Cellifex system, we will begin our controlled launch program in Canada immediately. Our second objective for 2021 is to drive progress on our stepwise regulatory strategy with FDA. Now that we have received the intended general indication label, the one we were pursuing, we are able to make subsequent submissions for indications for the treatment of specific lesions. These potential additional clearances will enable us to assist physicians in more targeted marketing of the procedures to their patients. As we have shared, we will initially pursue specific indication clearances for sedacious hyperplasia, followed by non-genital warts. We view these as large and unaddressed market opportunities that our customers are not able to treat to their satisfaction with existing technologies. We announced in January that the treatments in the pivotal comparison study to evaluate the treatment of SH are complete. We are finalizing this 510 submission, and it is on track to be submitted to the FDA as early as the end of the first quarter. In parallel, we have been working on designing and executing our trial for non-genital warts. The IDE was approved for a pivotal comparison study to evaluate the treatment of cutaneous non-genital warts, and we recently treated the first patients in this study. We expect enrollment to be completed in Q2 2021 and submission of the data in our 510K to FDA to take place in Q4 2021. The cadence we have established with our clinical and regulatory work is intended to drive regular cell effect system application expansion over the coming years. Now I will turn the call over to Ed to share more on her plans and progress for the controlled launch of the cell effect system in the United States and Europe. Thank you, Darren.
spk08: I would like to start off by congratulating the entire Pulse organization and thanking our clinical research partners in dermatology for the collaborative achievements represented by our recent regulatory clearances and the continued clinical and scientific progress that will be the foundation for a controlled launch process going forward. This is a very exciting time for Pulse Biosciences, and I am thrilled about the commercial opportunity and the team that we are building. Today, I'm going to review the mechanics of our previously discussed controlled launch and how this approach is indeed building the foundation for the short, intermediate, and long-term acceptance and growth of the CellFx system and CloudConnect services among leading dermatologists around the globe. In the aesthetic dermatology market, the acceptance and adoption of an innovative technology platform like the CellFx system begins with a top tier of respected key opinion leaders or KOLs in aesthetic dermatology. This elite group of physicians have a long track record for both clinical expertise as well as commercial acumen for introducing new technologies into a market. In anticipation of recently secured FDA clearance and CE mark approval, we planned well in advance to implement a carefully controlled and limited commercial launch to secure an established teaching resource among KOLs that will be crucial to both clinical acceptance and the commercial success of the Cellifex system when we launch to the next wave of early adopters. These early adopters will look to the guidance of our controlled launch KOLs on best practices for the integration of the Cellifex into their high-end aesthetic practices and with the demanding, cash-paying patients that our marketing research has identified as highly likely to prefer the new Cellifex procedure over older methods. This controlled commercial launch plan is a detailed, comprehensive, and disciplined approach to ensuring that this high-level group of advocates and advisors who are trusted by their peers will have the best possible initial experience with the CellFX system. The positive experiences and pearls of clinical wisdom and commercial experiences of these initial KOL participants will then be shared with their peers in a much more powerful way than any direct company promotion and will serve as professional validation and clarification of the full potential of the cell effect system with Cloud Connect and how it can benefit their patients and high-end practices. These controlled launch participants also meet important criteria of strategic geographic location in the top aesthetic dermatology markets and media markets with connections and existing relationships to facilitate both peer influence on the next wave of early adopters among aesthetic specialists, as well as media influence, both traditional mass media, as well as the all-important social media influence that we expect to create widespread geographic exposure to aesthetic patients. Taken together, the controlled launch is creating both early adopter physician awareness, support, and demand, but also forming the basis for viral awareness of the CellFX procedure with prospective patients who will also influence early physician adoption. In the months that preceded the FDA clearance and EU approval, our team has planned a calendarized rollout of controlled launch participants through continuous engagement on a high scientific level based on our impressive combination of peer-reviewed publications and major medium podium presentations. Just after our regulatory clearances, we began a standardized series of virtual training sessions to orient controlled launch physicians and their key staff members on what is expected to meet the requirements of controlled launch participation. We then execute formal agreements to ensure that all aspects of both training and execution are explicitly understood. One aspect of the controlled launch program for participating clinics is to identify, consult with, and treat at least 40 patients to qualify as a center of excellence and share their experience with other physicians. They have agreed to collaborate with us and share data from all aspects of the experience. Expectation and satisfaction surveys regarding the experience and outcomes will be completed by patients, physicians, and staff members for each procedure that they perform. We expect these physicians to treat and report on 40 patients in a timely basis. In return for treating 40 patients and providing the applicable quantitative and qualitative data, physicians will earn credits equal in value to the purchase of their cell effect system. When this commitment is complete, subsequent procedures will generate revenues to Pulse on a per patient, per lesion basis. Both during the controlled launch and into the future, our Cellifex Cloud Connect monitors the use of our device on a real-time basis. In addition to having meaningful utilization data, we expect the Cloud Connected Cellifex system to provide other quantitative and qualitative information around the usage and operation of our device that will benefit both the physician customer as well as sales. We envision CellFX Cloud Connect to provide both pre- and post-formal utilization and revenue analysis, and it will assist practices and ourselves to fully understand the value of their CellFX franchise and provide benchmarks for comparison with their peers. This controlled launch program will serve as both a commercial treasure trove of key opinion leader engagement and advocacy, as well as the data resources gathered by our network of interconnected devices that will provide a goldmine of strategic insights that will benefit our future business development and new applications that we plan to launch in the near future. The first three quarters of 2021 will be spent focused on controlled launch practices, their success, learnings, and standardizing best practices and optimizing patient and physician experience. This scheduled role of approximately 75 practices across the U.S. and EU includes initial sites across major territories, and that accelerates with the majority of practices coming on board in Q2 and the remainder in Q3. These experiences, along with the leverage of KOL advocacy, media exposure, and the valuable data gathered through our cloud-connected cell effect systems, all set the stage for beginning our wider selling effort with the first wave of early adopters as we move into the late summer, early fall buying cycle of aesthetic device purchases. As we've described in the past, our distribution model in Europe will most likely be a hybrid approach of direct distribution and independent distributors. The controlled launch participants in Europe include positions in Germany, France, Spain, which represent our initial direct distribution territories. With this group, we will maintain our high-touch controlled launch model. In summary, our controlled launch of the CellFX system aims to build a foundation of well-trained KOL users, optimize the patient and physician experience, generate data via the CellFX Cloud Connect, and establish clinical and commercial advocacy that will influence both early adopter physicians and consumer media exposure of the new CellFX procedure. We have the systems and processes in place to measure and evaluate our performance each step along the way. As we execute our plan, we will secure early adoption from industry influencers who will have gained significant experience with the procedure and then continued utilization of revenue-generating systems. Patients, physicians, and staff will have quality experiences and be likely to recommend self-ex procedures to peers and utilize their connections to both social and mass media. Validation data will be generated across clinical outcomes, patient identification, utilization, pricing strategy, and practice economics all available to share with the next wave of adopters. Finally, we will have one true champions of the CellFX experience who we believe will be willing to make podium presentations, share their experiences on social media, and advocate the all important best practices with an important new technology for which they will be appropriately seeing themselves as innovators and contributors. This 2021 controlled launch success forms a foundation for our significant 2022 commercial growth and additional application development. Our preparedness underpins our confidence and explains our excitement about this opportunity as it grows every day. From our early experience, the participants in the controlled launch are showing the same level of excitement about the clinical and financial potential of a properly integrated CellFX procedure into a successful aesthetic practice. Our plan is to seed and grow the excitement around the self-ex procedure as more participants gain more experience and create a positive buzz from the podium, in the media, and in other peer-to-peer settings, which is a cornerstone for broad adoption, growth, and recurring user revenue over the long term. This cornerstone is being fortified by our continued successes with the publication of new clinical data, including podium presentations during upcoming meetings of two of the most prestigious events in all of dermatology, including presentations of data on potential new applications for the CellFX system and CellFX Cloud Connect services that have the potential to increase future utilizations. For the mid-May meeting of the American Society of Lasers in Surgery and Medicine, four new studies were accepted for podium presentation at this largest worldwide meeting of physicians that specialize in the use of energy-based devices. Dr. Joel Cohen, a leading dermatology researcher and Mohs surgeon from Denver, Colorado, will present the results of an early feasibility study of the clearance of common nevi, or moles, which is a very difficult lesion to clear without surgery. Another data set is being presented by Dr. Ted Lane of Austin, Texas, which provides further evidence of the cell effects procedure efficacy in clearing warts, usually in a single treatment session. Dr. Suzanne Kilmer from Sacramento, California, who is one of the most prominent innovators in the development of energy-based systems, will be presenting data showing optimized treatment approaches in the clearance of sebaceous hyperplasia. an application that represents a major unmet need in aesthetic dermatology. Also at the ASRMS, Dr. Bruce Katz of New York City will present the latest results showing the feasibility of the Cellpex procedure to address difficult-to-treat back acne. And finally, Dr. Thomas Rohrer from the prominent Dermatology Center Skin Care Physicians of Chestnut Shell, Massachusetts, will present important new consumer research that provides clear evidence that aesthetic dermatology patients value benign lesion clearance at a procedure fee higher than that of mainstream aesthetic procedures like Botox or fillers. These most recently accepted abstracts for publication and presentation are just a continuation of our strategy to grow our support from key opinion leaders as a foundation for long-term acceptance and growth for a revolutionary new cell effects technology for years to come. Thank you. Now I will turn the call over to Sandy.
spk01: Thank you, Ed. For the fourth quarter of 2020, operating expenses were $13.8 million compared to $13.9 million for the prior year period. Decreases in general administrative costs offset by increases in research and development costs drove the slight decline in overall operating expenses. Operating expenses for the three months ended December 31, 2020 included $2.4 million of non-cash stock-based compensation versus $3.5 million in the prior year period. For 2020, operating expenses were $50 million compared to $48 million in 2019. Stock-based compensation for the 12 months ended December 31, 2020 was $10.1 million compared to $11.3 million in the prior year period. The increase in operating expenses was primarily driven by the expansion of operational infrastructure and increased headcount to support commercial preparations. General and administrative expenses consist of salaries and related employee expenses for executives, sales and marketing, finance, legal, human resources, information technology, and administrative personnel, as well as professional fees, patent fees and costs, insurance costs, and other general corporate expenses. General and administrative expenses decreased by approximately $1 million to $6.2 million for the three-month period ended December 31, 2020, from $7.2 million during the same period in 2019, primarily related to a $1.3 million reduction in stock-based compensation and $.4 million in travel, training, and other employee-related expenses as a result of COVID-19. These decreases were partially offset by an increase in employee compensation expenses driven by increased headcount from a year ago. For the year ended December 31, 2020, general administrative expenses increased by approximately $500,000 to $22.9 million from $22.3 million for the year ended December 31, 2019, primarily due to increases in personnel, business insurance, and the facility expansion costs related to our headquarters in Hayward, California, offset by $1.4 million reduction in stock-based compensation and $.9 million in travel, training, and other employee-related expenses as a result of COVID-19. Research and development expenses consist of salaries and related expenses for manufacturing, research and development personnel, as well as clinical trials and consulting costs related to the design, development, and enhancement of our potential future products. Research and development expenses increased by approximately $800,000 to $7.4 million for the three-month period ended December 31, 2020, from $6.6 million during the same period in 2019, primarily due to increases in personnel, facility-related costs, and consulting and outside services in support of our 510 , and IDE submissions, all partially offset by reductions in clinical trial expenses, sponsored research, prototype material and devices, and travel expenses from a year ago. For the year ended December 31, 2020, research and development expenses increased by approximately $1.5 million to $26.4 million. from $25 million for the year ended December 31, 2019, primarily due to increases in personnel, facility-related costs, and consulting and outside services related to our GLP preclinical studies in support of our 510 submission for a general dermatologic indication. These increases were partially offset by reductions in clinical trial expenses prototype material and devices related to our initial cell effects build and travel expenses as a result of COVID-19. Net loss for the fourth quarter ended December 31st, 2020 was $13.8 million in line with the same net loss of $13.8 million for the fourth quarter ended December 31st, 2019. Cash, cash equivalents and investments totaled $20.5 million as of December 31, 2020 compared to $29.6 million as of September 30, 2020. Cash used for the three months ended December 31, 2020 was $9.1 million. Cash used for the full year 2020 totaled $34.6 million compared to $34.2 million for the full year 2019. On December 31st, 2020, we delivered a notice of redemption to redeem all outstanding warrants to purchase shares of our common stock issued in connection with our June 2020 rights offering. Prior to the redemption date of February 5th, 2021, 636,432 warrants were exercised, generating approximately $4.5 million in gross proceeds. These respective gross proceeds are not included in the year-end cash balance of $20.5 million. Looking forward to 2021, cash usage will increase incrementally as we invest in activities to support broad commercial operations, including building a commercial team in Europe, increasing inventory levels, and conducting additional studies to support indication expansion with the FDA. To strengthen our balance sheet, in early February, we announced an at-the-market equity offering program having an aggregate offering price of up to $60 million. We believe this is a financing mechanism that will allow us to respond to investor interest and diversify the shareholder base, capitalizing on our recent accomplishments in a minimally diluted and shareholder-friendly way. We will continue to use our best discretion in authorizing distribution of shares. Usage of this program has been nominal to date and we will provide an update next quarter. On the top line, revenue generation will begin as each controlled launch clinic completes their IV-D patient commitment and opts to take ownership of the cell effect system. As such, incremental revenue generating systems will come online throughout the year as systems are implemented at practices and they complete initial procedures. In the second half of the year, we expect to begin direct cell effect system sales. This cadence is reflective of the intentions of our controlled launch strategy, calculated initial investments to enable and drive long-term adoption and growth. For these reasons, revenue in 2021 will be minimal for the first three quarters. Now I will turn the call back to Darren.
spk07: Thank you, Sandy. To conclude, we have begun the next chapter of Pulse Biosciences. Our product and technology have been validated by both the FDA and our notified body in Europe. We have generated clinical data that demonstrates the ability of our cell effect system to treat common dermatologic conditions with improved outcomes. Our work to date has generated significant demand for our technology. We've been able to partner and collaborate with a large group of top aesthetic dermatology KOLs to build a foundation of real-world best practices for developing new business lines in their practices while providing patients a best-in-class outcome and experience with cell effects procedures. We are confident we will continue to execute our controlled launch strategy with the same detailed precision demonstrated by launching just days after the receipt of clearance and approval and we look forward to providing updates on this progress in the coming quarters. The future is bright for Pulse Biosciences, and the commercial launch of the CellFX system with CloudConnect services in dermatology is just the beginning. Our mission at Pulse Biosciences is to build a viable business. We strategically chose dermatology as the initial market to achieve this, and our focus on this mission remains clear and unwavering. What is also clear, now more than ever, is that the CellFX system and NPS technology represent a new era in energy-based therapies with the potential for broad applicability in medicine. From the start of our development of the CellFX system, our goal has been to design a tunable, software-controlled, cloud-enabled platform capable of safely delivering NPS, not only in dermatology, but across a broad set of potential applications and in various healthcare settings. We believe we have accomplished this goal. Over the last several years, we have made significant investments in scientific and clinical programs in dermatology, and this has given us unique insights and a deeper understanding of this novel and proprietary cell-based platform technology that will inform and accelerate the use of NPS in other application areas. So today we are poised to leverage our broadly applicable cell effect platform, our deep understanding of the novel non-thermal cellular mechanism of NPS, our experienced team of energy-based medical technology development and commercial veterans, and our broad and growing intellectual property portfolio to pursue a number of compelling application areas within and outside of dermatology. We are constantly examining, expanding the range of therapeutic applications relevant to the CellFX system and CloudConnect platform, potentially spanning fields such as gastroenterology, cardiology, pulmonology, and ear, nose, and throat, to name a few. We believe a number of these opportunities are comparable to dermatology in terms of patient needs and potential market opportunity. It needs to be said that we take on considerable risks as we engage in expansion opportunities. There is no assurance we will be successful. Having said that, not pursuing these activities incurs the risk of not living up to our potential, our vision, our obligation to one another, and our commitment to making a significant impact for the betterment in the fields of human health care. It's early to discuss specifics. Suffice it to say, we are enthusiastic to be moving forward in this manner, and we will continue to keep our eyes wide open, all the while being focused on what matters most. This is consistent with the broader mission we have had at Pulse Biosciences from day one, that is to utilize NPS technology for the betterment of patients and physicians across medicine, while continuing to drive meaningful shareholder value. Joining me now for Q&A are Ed Ebbers, Executive Vice President and General Manager Dermatology, and Sandy Gardner, Executive Vice President and Chief Financial Officer. Operator, please open the call for questions.
spk02: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star key. One moment while we poll for questions. Our first question comes from the line of R.K. with H.G. Wenright. You may proceed with your question.
spk06: Thank you. Good afternoon, Darren and Sandy. Congratulations on getting the early launches done. reporting on the first treatment used utilizing the CellFX system. Certainly all good news. Just to get a little bit more color on the 75 clinics that you're looking at for your initial launch, You said you're trying to do this in an orderly fashion, you know, calendar-wise. So at what point do you think you would have initiated with the 75th clinic? And I'll follow up with a couple more after that.
spk07: Yeah, hey, RK. This is Darren. Thanks for joining the call, and, yeah, thanks a lot for your support. Yeah, you know, I think the way to think about or the way we think about the controlled launch is, you know, we think that 75 clinics across the U.S. and Europe is the right number based on, you know, sort of size of these territories. And we'll, you know, as we announced, we've already started rolling them out into clinics and really begun the process of this controlled launch, which, you know, as you know and we've described before, and Ed described on this call, is a really comprehensive and detailed program whereby we work with these KOLs to really understand how best to introduce the CellFX system and the Cloud Connect services into their practice. You know, I think at this point, it would be premature to talk about, you know, exactly when we think the 75th would be installed. You know, I think as we mentioned, you know, we started these installations Already we expect, you know, the bulk of them to happen in the second quarter and then probably some, you know, early in the third quarter. So that's kind of how we see it, but I think, you know, we also appreciate that we're going to learn as we go. We're relying on, you know, these KOLs to really help us understand, you know, these best practices for introduction of this very unique cell effects technology. And so, you know, I think we'll take it as it comes and accelerate as we're able.
spk06: Thank you for that. And then these 75 clinics that you have chosen on both sides of the Atlantic, so are these majorly like teaching hospitals or the clinics that have physicians that actually can influence additional dermatologists in terms of trying to get them to adopt when you're ready to broaden the launch. That's question A. And then question B, you know, you said you could potentially get Canada, since you said 45 days from your reply to their questioning, let's say by the end of second quarter you're all done with it. Does that 75 clinics include Canada, or will that be in addition to what you are currently looking to launch at?
spk07: Yeah, thanks, RK. So I'm going to ask Ed to respond to Part A of that question on who those KOLs are and their influence in the community, and then I'll jump in and talk about the second piece. Thank you.
spk08: Okay, thanks for the question. The world of aesthetic dermatology is very different than traditional hospital-based procedures. It's dominated by physicians who understand that this is a significant cash-paying business and typically have established their own center or actually centers and treat these patients in their own facilities. It's not really like a traditional technology in that respect. Having said that, they're very closely associated with each other in that they belong to trade groups that discuss the scientific findings associated with energy-based devices on a regular basis. So when we talk about the American Society of Lasers in Medicine and Surgery, these are their peers really worldwide that they look to when it comes to new technologies that they themselves should be adopting. So something like the ASA contains both our KOLs, but also the next generation of early adopters that would be listening to them for what should be coming next in terms of new energy-based devices. So in that regard, this is a very different model than what is traditional in medical devices. And among the reasons why our program is global in nature in geared towards this network of physicians as opposed to a particular hospital or particular center.
spk06: Okay, thank you.
spk07: Yeah, and to Part B with regard to Canada, I think to some extent it depends a little bit on the timing, but given what we know and what I communicated, I think we expect that we would likely add a handful of controlled large sites in Canada, probably in the areas that you can imagine, the major metropolitan areas.
spk06: I don't know if this could be considered technical, but I'm just trying to understand. in the CellCloud system, since you are launching on both sides of the Atlantic, are there any differences in terms of technology itself, whether it is how secure the data would be or anything in terms of communication between the mothership, which is your offices to the different clinics out there, Is there any differential or what I'm trying to get at is like, you know, how much would this be learning for management as much as it is for the clinics?
spk07: Yeah, that's a good question. So, you know, our CellFX Cloud Connect infrastructure is something that we've, you know, developed right along with the CellFX system. We contemplated, you know, from the get-go, you know, that we would be a global company and have products, you know, shipped globally and the cell effects shipped globally in particular. So, you know, we've spent a lot of time really developing that infrastructure and making sure that it is, you know, just as seamless in Europe as it is in the U.S., as it is in Canada, and will be, you know, in other parts of the globe. So, you know, I think, you know, I think one of the things to – to realize is that these cloud-based technologies and everything sort of moving to the cloud and residing largely in the cloud is not something we have to spend a lot of time developing from a technology perspective. So I think you can appreciate that we leverage a lot of the technologies that are developed in that space by companies that are significantly larger than us and across a lot of different verticals. And so we take advantage of of those technologies and certainly other companies are utilizing technologies that are useful globally. What we do from a proprietary perspective is really the connection of our cell effect systems inside each one of these clinics and up to the cloud and then the integration of that data into our backend infrastructure so that we can both provide analytics and data to clinics but also we have access to that as well. And it's all around trying to create a better experience for the clinics, for patients, and allow us to serve them better. So I think, again, we built it from the beginning to be globally available. We work in each locality to make sure that at the clinic level they're able to connect the CellFX to the cloud and so far so good as it relates to that.
spk06: Thank you. Thanks for taking all my questions. You're welcome. Thanks, RK.
spk02: Our next question comes from the line of Michael Fox with Party City Capital. We're going to proceed with your question.
spk03: Hi, guys. Congratulations on the recent regulatory approvals and the exciting news about commercializing the Solitech system. With regard to the dermatology rollout, I would imagine the timing could be pretty good given that the country's potentially opening up after the pandemic. Are you guys hearing that from the dermatologists that you speak to about pent-up demand that people may have missed appointments over the last year and now they're, you know, pent-up demand for appointments with dermatologists?
spk07: Yeah. Hey, Mike, thanks a lot for the for the question and for joining the call. It's good to hear from you. So I'll just make one quick comment and then I'll hand it over to Ed. Ed can comment. He's been traveling both in the U.S. and in Europe as we get this control launch going. So he has some in-the-field experience. But I think the one thing we have heard just generally is from a lot of clinics is they are definitely back up and running. They've done a very good job at understanding how to open safely for patients and provide procedures. I think one of our earlier experiences, which you may recall from the fall, was that we ran a clinical study here in the U.S. for sebaceous hyperplasia, and we were able to enroll that study in just about five weeks, enrolling 60 patients across five centers. So it's a small sample size, but I think it's an indication that these clinics are up and Patients are interested in procedures like ours that we have to offer to treat their benign lesions, and clinics have figured out how to make that happen. So let me hand it over to Ed. Ed, maybe you can comment on your in-the-field experience.
spk08: Yeah. So I will echo what Darren just said. We have a very optimistic customer concerning this sort of pent-up demand, which I think is a term that you used, It's not only pent-up demand. There's people, especially in this, what I think of as a luxury goods market, that haven't had much to spend their money on. And certainly self-improvement is right up on the list of things that they're thinking about in a post-COVID world when they're more likely to see people in person again, which we're all looking forward to. So I see that the underlying fundamentals of demand are healthy from both a supply standpoint, and that is that there's positions that who are used to having very lucrative practices, who had to operate at reduced levels, who are ready to increase their throughput going forward. So I expect that to be the case. Currently bookings are quite a few months ahead of time, and I imagine more patients will be coming out of the woodworks once we start getting through the same dates that we're all talking about in terms of society being much more active than it's been recently. That's true in Europe as well. On really both fronts, that is pent-up demand, but also sort of pent-up supply because of the lack of ability to use the capacity that these positions have, and they very much want to get back to business as usual.
spk03: Okay, great. And then also just one other comment on I think you guys made a smart move with the ATM as opposed to a more traditional financing, and I think I just want to commend you on that. So thanks a lot, and I look forward to the rollout of the cell effect system. Thanks.
spk07: Thanks, Mike. Appreciate your support.
spk02: Our next question comes from the line of Brian Gravitz. Can we proceed with your question?
spk05: Hi, guys. Congratulations on... All the accomplishments that you had over the past quarter, I had a few questions for you. The first one, considering that you got approval in the U.S. and Europe, were you surprised by the additional questions from Canada?
spk07: No, not at all, Brian. Thanks for the question. You know, every country has their own regulatory system and requirements. You know, it's the first time, you know, that Health Canada has seen any information on the cell effect system. So I think, and similarly in the EU as well as FDA, it's pretty common to get clarifying questions along the, you know, the review process. So it's It's not out of the ordinary. The questions, frankly, are all good and good clarifications, and so we're pleased with where we are in the process.
spk05: Okay, thank you. You spoke broadly about the non-dermatology area. That's the first that I've heard of that after being on most of your conference calls. Or can you lend any insight into kind of what you saw that made you give such a broad list?
spk07: Sure. So, you know, I think where this stems from is – and I would say, you know, early on in the company's history – I'm not sure how long you've been following us or on these calls, but certainly in the early days we spoke a lot about and I think we continue to speak about how we believe that NPS and our cell effect system is really a platform technology and energy modality that has highly differentiated mechanism of action that could be useful across a broad range of tissue types. you know, we've gone into dermatology first for a lot of what we think are very good reasons in terms of the applicability of the technology in skin as well as, you know, the dermatology market. But the more we learn about the impact or the mechanism of our technology in tissue, in particular in cellular tissue, and how it does not affect acellular structures, I think the more and more excited we become about the potential in other application areas. And just like, you know, older energy modalities, for example, thermal-based modalities like radiofrequency or microwave, you know, they're broadly used throughout the body. So they're used to some extent in skin, but But as I'm sure you're aware, they're used, you know, broadly in other applications. And so we think NPS and, you know, our cell effect system has exactly that same potential, which is to be utilized across many applications throughout the body. And some, we think, you know, are going to fit right into this exciting mechanism of action that we have. You know, again, being non-thermal, cell-focused, and and not impacting a cellular structure. So we're very excited about it. I think, you know, as we are executing on our controlled launch, we thought it appropriate to, you know, to start to mention that we have been doing some clinical work in this area, and we will continue to do so. And as I mentioned in the scripted part of the call, I mean, these do not go without risks. So, you know, like anything, we're approaching them first pre-clinically so that we can learn more, and then we'll continue to move forward as we see the good data that comes out of it. So that's kind of how, you know, that has come about and where we're at with it.
spk05: Thank you. And my last question, Darren, is for you. Do you see any similarities between your time at Computer Motion and your time at Pulse? Kind of lessons that you learned from Computer Motion that are applicable to Pulse or just kind of a broad new technology being adopted?
spk07: Yeah, that's a really good question. I know that with a lot of investors and analysts that we've spoken to, I've often drawn... parallels between both computer motion and intuitive surgical, you know, specifically surgical robotics and pulse biosciences and this new nanopulse simulation technology. I think in both cases, you know, you have these very powerful, broad platform technologies. And I think, you know, what you saw in surgical robotics was You know, there was a good number of years where they looked for what is the appropriate application for robotics to make its place. And ultimately, you know, that ended up being urology, and then it expanded from there. You know, I think what I learned from that experience was exactly that, which is when you have a platform technology, it's critically important that you identify that initial application area, that initial market, that you focus on that. but then begin to build a pipeline so that you can apply that platform to other things as you move on and are successful in that initial application area. And so I think that's what we've done here. And I would also mention that our chairman, Bob Duggan, as you may well know, was the CEO at Computer Motion when it was acquired by Intuitive Surgical. So he has lived through that experience as well and together, I think, We both see many parallels and have tried to take the learnings from that experience and really apply it to what we're doing here at Pulse Biosciences.
spk05: Do you see a parallel in revenue potential?
spk07: I think we have a huge opportunity in front of us at Pulse Biosciences. There are a lot of applications. And I think we're very optimistic. But we've got to start where we're starting, which is dermatology. We're very excited about that opportunity. We think it's big. And there are a number that I think could come behind it that could be equally as exciting but carry risks just like anything else. So I think our job today is to really focus on our dermatology application area you know, drive this controlled launch and then the full launch into dermatology. And at the same time, you know, continue to explore these other application areas. And like we say, you know, keep our eyes open and make sure we're making good decisions along the way.
spk05: Okay. Congratulations on a great quarter.
spk07: Thanks a lot, Brian. Appreciate it.
spk02: Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Mr. Darren Euchre for closing remarks.
spk07: Thanks, operator, and thank you, everybody, for your support and for joining us on the call today. We look forward to next quarter's call. Thank you.
spk02: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your evening.
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