Pulse Biosciences, Inc

Good afternoon and welcome to the Pulse Biosciences fourth quarter and full year 2021 earnings 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 Philip Taylor of Investor Relations. Please go ahead.

Thank you, Operator. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today, March 31st, 2022 only, and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission. 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. We disclaim any obligation to update or revise these forward-looking statements. We also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, can be found in the press release. Please note that this conference call will be available for audio replay on our website at pulsebiosciences.com on the news and events section on our investor relations page. With that, I would now like to turn the call over to President and Chief Executive Officer, Darren Uecker.

Hello, and thank you all for joining us. On today's call, I will highlight Pulse Bioscience's 2021 developments, discuss our 2022 growth strategy, including the evolution of our commercial focus, and cover plans to advance our clinical and regulatory pipeline. Sandy will detail the financial results, then I will conclude and open the call for Q&A. In 2021, we achieved regulatory approvals for the CellFX system in the U.S., Europe, Canada, and Australia, initiated the controlled launch program, and onboarded 70 participants, closed our first commercial system sales, continued to generate clinical data illustrating the capabilities of nanopulse stimulation technology, and engaging the scientific community while advancing additional applications for the CellFX system. On the corporate side, we strengthened our commercial leadership team, board of directors, and balance sheet. These accomplishments have laid the foundation to drive cell effect system adoption and utilization in dermatology and other medical specialties. We believe the cell effect system presents an attractive opportunity for clinics to pioneer a new solution to address the clearance of benign lesions they previously did not treat because of the lack of treatment options that could produce aesthetically pleasing outcomes. Clinics are motivated to cultivate new business opportunities. Based on the number of patients with the nine lesions, the patient's perceived value of treatments, and the time required for dermatologists to perform treatments, we feel this category is positioned to be a significant revenue and profit-generating service line in their practice. To introduce the CellFX system to aesthetic dermatologists, in early 2021, we initiated a controlled launch program across the US, Europe, and Canada 70 key opinion-leading aesthetic dermatologists committed to participate in the controlled launch program. In exchange for sharing extensive data and observations about our patients and their own experience with treatments, clinics earned credits towards the purchase of their system. A number of learnings have come out of the controlled launch program. First, the controlled launch program has helped us better understand the variation in dermatology clinic types, from cosmetically procedure-focused to medically procedure-focused, and how best to target clinics and optimize the integration of the CellFX system into the clinic, depending on this mix of cosmetic and medical procedures performed by the clinic. It's also become clear that many of the clinics we are working with are generally at capacity, especially with patient demand coming back strong from the slower period impacted by the COVID-19 virus. And integrating CellFX procedures introduces an opportunity cost that we must demonstrate will drive long-term value creation for the clinic. We must work with clinicians and staff to integrate cell effects procedures into this already busy workflow in order to optimize the potential for utilization and minimize workflow disruption. On the positive side, cell effects treatment candidates present themselves in clinics every day, so we remain confident of the potential efficiency of the cell effects integration. The control launch program has increased our belief and confidence that the benign lesions that are being treated using the cell effects system, such as non-genital warts, sebaceous hyperplasia, seborrheic keratosis, and increasingly dermatofibroma represents valuable opportunities for all dermatology clinics. While the real-world delivery of NPS technology through the CellFX system has proven to clear benign lesions in clinical studies, we have learned that the market development for benign lesions and the integration of this procedure into practice workflow will require a high-touch model to generate the system utilization we are expecting. We initially expected clinics to complete the controlled launch program requirements in three to five months. However, the average time for clinics that have completed the controlled launch has been seven months. Upon completion, we have seen some clinics accelerate their commercial use, while others' utilization has slowed. It is now our priority to address this dynamic and drive more consistent and increased commercial utilization of CellFX systems and turn these early commercial customers into CellFX reference centers for future purchasers of the system. In the fourth quarter, 17 dermatology practices that were participating in our control launch program opted to acquire the CellFX system, bringing the cumulative total as of December 31, 2021, to 29 commercial conversions. We also had six clinics opt out of the program as of December 31, 2021. In the first quarter, we expect 10 clinics to convert to commercial use, and another five clinics have opted out of the program, bringing the total commercial conversions to 39, with a total of 11 having opted out. Therefore, we expect to have 20 clinics still in the controlled launch program at the end of the first quarter, and those clinics will continue to move through the program throughout 2022. Our focus has now shifted to ensuring that our commercial cell effects clinics are integrating routine use of the CellFX system in their clinic workflow, and we have made it our priority to partner with these clinics and drive commercial utilization in 2022. To do this, we will more actively engage with our current commercial clinics, providing increased training, education, and marketing support on all aspects of the CellFX system and its integration into the clinic. In the first quarter, average commercial clinic utilization has increased from month to month. and currently our commercial clinics are averaging 10 patient treatment sessions per month with their CellFX system. Our goal for the end of the year is to increase that to 40 patient treatment sessions per month at our current commercial clinics. To drive this increased utilization and emphasis on education, training, and marketing at our current accounts, we have implemented changes to our commercial leadership, restructured our commercial field organization, and modified our strategy in support of our utilization focus and reduce emphasis on new system sales in the near term. As a result of this focus, we have initiated operating expense reduction programs across the company. These programs include a reduction in headcount, which we expect to be between 15% and 20% of the workforce, along with reductions in other expenses, which we expect will lower total operating expenses by approximately 20% from the current run rate. Outside of the controlled launch, three practices, two in the fourth quarter and one in the first quarter, have made the first three commercial purchases of CellFX systems. We do not expect new system purchases will be a significant contributor to revenue until we achieve our utilization goals. We remain confident in the long-term opportunity for the CellFX system and NPS technology in dermatology and other medical specialties. Our commercial strategy will now focus on going deeper with the accounts we have and ensuring they're able to build viable benign lesion franchises within their practice. Spearheading our commercial efforts will be our newly appointed Chief Commercial Officer, Kevin Danahy, and Joe Tallarico, our newly appointed Vice President of North American Sales. Kevin and Joe are healthcare industry veterans with proven track records of building exceptional commercial teams and implementing strategies to drive market penetration and significant growth with new medical technologies across a variety of medical disciplines. They are uniquely qualified to take on these roles at Tulsa Biosciences as we grow the cell effect system business in dermatology and expand into new applications and markets. And we look forward to the impact they each will have on expanding the commercial footprint for the cell effect system. Ed Ebers, former EVP and general manager of dermatology, is serving in a consulting role during this transition. We thank Ed for his service and contributions. To supplement our commercial marketing efforts, we continue to stay engaged in the scientific communities to support cell effect system clinical evidence generation and promote the latest discoveries with the technology. In December, Dr. George Haruza from St. Louis, past president of the American Academy of Dermatology, presented an overview of MPS technology at the Cosmetic Surgery Forum, a multi-specialty educational symposium that covers the latest research, treatment, and techniques in dermatology and cosmetic surgery. At the recent American Academy of Dermatology meeting, the cell effect system was mentioned in multiple scientific presentations. And at the upcoming American Society for Laser Surgery and Medicine meeting in April, we anticipate additional presentations on the cell effect system, including positive clinical data. Transitioning now to our clinical and regulatory pipeline. As we have mentioned, we are taking a stepwise regulatory approach to expand the cell effect system's indications for use, which would in turn enable us to assist clinics with marketing the cell effects for treatment of specific lesions in addition to general benign lesions. The first specific indication we are seeking FDA clearance for is the treatment of sebaceous hyperplasia, which we are approved to treat under our CE mark and Health Canada approval. Following the submission of the 510 to the FDA in the fourth quarter, we received an additional information request letter from the FDA. In the AI letter, the FDA stated it did not believe the company had provided sufficient clinical evidence at this time to support the expanded indication for use and that the company had not met the primary endpoints of the SH-IDE study. The company anticipates meeting with the FDA to discuss the contents of the AI letter and potential next steps, which may require additional clinical data and potentially a new 510 submission. This 510 process to include a specific indication has no impact on the existing 510 clearance for the CellFX system, which is a general indication for ablation and resurfacing of the skin, including for use on benign lesions. While this represents potential setback, this does not change our fundamental outlook. A second specific indication we are targeting is for cutaneous non-genital warts. In the third quarter, we completed enrollment of our 150 patient FDA IDE approved pivotal comparison study. We are currently analyzing the study data, and we are anticipating a 510K submission during the second quarter. We have also completed follow-up in our basal cell carcinoma feasibility study. This data is also being analyzed, and we anticipate meeting with FDA to discuss a potential pivotal study for a specific indication to treat basal cell carcinoma lesions with the cell effect system later in Q2 or early Q3. On the development side, we will continue to pursue research on additional benign lesions to grow the CellFX Systems application portfolio where it makes the most sense for dermatologists. As we mentioned on the third quarter earnings call, dermatofibroma is an example of a new lesion of interest emerging from controlled launch participants. Dermatofibroma are small benign lesions typically found on the extremities, especially the lower legs. We surveyed 100 medical and cosmetic dermatologists and found that they see 15 to 25 patients per week with dermatofibroma. Currently, the only treatment option is to excise the lesion, so dermatologists typically elect to leave the lesions untreated. Now I will turn the call over to Sandy.