HeartBeam, Inc. (NASDAQ:BEAT) Q4 2022 Earnings Call Transcript

HeartBeam, Inc. (NASDAQ:BEAT) Q4 2022 Earnings Call Transcript March 17, 2023

Operator: Greetings. And welcome to the HeartBeam Fourth Quarter and Full-Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation.

Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today’s discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results crossed the wires this afternoon at 4:01 p.m. Eastern Time and is available in the Investor Relations section of our company’s website, heartbeam.com. Your host today Branislav Vajdic, Chief Executive Officer and Founder; Rob Eno, President; and Rick Brounstein, Chief Financial Officer, will present results of operations for the fourth quarter and year ended December 31, 2022.

At this time, I will turn the call over to HeartBeam Chief Executive Officer, Branislav Vajdic. You may being.

Branislav Vajdic: Thank you, operator. And good afternoon, everyone. I’m pleased to welcome you to today’s fourth quarter and full-year 2022 financial results conference call. I could not be more enthusiastic about the future for HeartBeam, the rapid pace of our product timeline and our team’s ability to trace our commercialization path. For those of you joining us for the first time, or who might have not had the opportunity to meet, I’d like to take a moment to introduce HeartBeam and our opportunity in a short video introduction. The video explores the HeartBeam AIMIGo technology, unique market opportunity and use in the heart attack detection case. HeartBeam AIMIGo is the first and only credit card size 12-Lead ECG device for most heart attack detection.

While we are playing the video, for our dial in participants, unfortunately, it will be about three minutes of silence. But I’d like to remind you that this video is available on our website, heartbeam.com. It’s important to understand how our ECG technology is different and vastly more powerful than ECG technologies that are in the marketplace today. Today, there are many ECG technologies offered to consumers and patients outside of a medical facility. What they all have in common is that they do not offer a standard of care 12-Lead ECG in a user-friendly, always-in-a-patient, easy-to-apply solution. That means that they are not capable of detecting a heart attack. In the great majority of cases, it is a single lead ECG. This may be adequate for some arrythmias, but it’s certainly not capable of detecting a heart attack.

Shown in this slide is the actual message from Apple Watch, warning the user of its inability to detect a heart attack. Similarly, AliveCor, with their cardiac product, prominently features on their website the same disclaimer about the inability to a heart attack. Our technology, we believe, has solved the problem of heart attack detection outside of a medical institution. The HeartBeam technology is intended to quickly and accurately help clinicians identify a heart attack. This could reduce the critical time to intervention for heart attack patients, saving many lives and reducing healthcare costs by ruling out heart attacks and reducing the number of emergency room visits. Shown on this graph are ECG technologies and their diagnostic capabilities.

Today, in the market of ambulatory ECG devices, we see technologies that offer 1 to 6 actually leads. What is common to all these technologies is that their diagnostic value is limited to arrhythmia such atrial fibrillation or AP. There are some well-known players in this space such as iRhythm, Apple and AliveCor. If we go beyond 6 Leads, in other words to 12-Lead, in this graph, we see the standard of care capabilities are achieved, but there are no players in this space that’s offering a user-friendly, always-in-a-patient, easy-to-apply 12-Lead ECG solution. The technologies that has diagnostic capability that goes over and beyond standard of care 12-Lead is vector electrocardiography, or VECG. Our HeartBeam AIMIGo technology is capable of recording and processing VECG signals and using powerful 3D vector-based algorithms to detect heart attacks.

Perhaps, most importantly, for this initial phase of our technology development, HeartBeam AIMIGo technology, will bring the power of standard of care 12-Lead ECG to physicians from in front of their patients and remotely that are anywhere at any time. No other user friendly, easy to use, always-in-patient technology is able to offer that. This slide shows several companies in the cardiac monitoring market that you are very familiar with. While each product offers some of the capabilities of the HeartBeam telehealth product, the heart attack detection, 12-Lead ECG capability, integration of patient’s history and symptoms, and representational baseline and symptomatic ECG to the physician, the HeartBeam AIMIGo device is significantly different and it is offering in a very underserved market.

We believe HeartBeam AIMI and HeartBeam AIMIGo, by leveraging our patented 3D vector ECG technologies, offers substantial capabilities beyond existing offerings, and we continue to engage with potential customers and partners in anticipation of the FDA clearance and commercial launch for our products. Our fourth quarter was highlighted by forward movement toward production and commercialization of our products, underscored by a series of milestones, including new partnerships, IP protection, and a strengthened management team. As we look forward to FDA clearance for HeartBeam AIMI, we’re also making significant progress with our core product, the HeartBeam AIMIGo 3D VECG collection device as we prepare for FDA submission in the coming weeks.

Recently, we announced the acquisition of substantially all assets from LIVMOR, a digital health solution company providing a patient engaging remote monitoring system of clinical physiological biomarkers. This consisted of LIVMOR’s intellectual property, including three US patents, and the LIVMOR technology including the Halo+ atrial fibrillation, AFib, detection system. The Halo+ AP detection system is the world’s first FDA cleared prescription wearable for continuous cardiac system monitoring. The Halo+ system provides continuous monitoring of pulse rhythms for the detection of AFib on demand during the day and automatically overnight. The acquisition extends our reach in remote monitoring and detection with full ownership of an existing, cutting-edge FDA cleared product.

This acquisition is a natural fit, an extension of our successful partnership with LIVMOR and our complementary goals to dramatically improve patient outcomes and to significantly reduce healthcare system costs. Our newly acquired, state-of-the-art, FDA cleared, watch-based arrythmia detection tool, once integrated with HeartBeam AIMIGo telehealth platform, presents a unique opportunity to extend our product capabilities well beyond what is currently available for cardiac patients outside of a medical setting. During the quarter, we partnered with Evolved Manufacturing Technologies, a contract medical device manufacturing company, to build the credit card sized HeartBeam AIMIGo 3D VECG recording device. Evolve has deep medical device manufacturing expertise and a strong reputation in the industry for delivering consistent product quality and customer care rarely found in medical contract manufacturers.

We can now leverage Evolve’s manufacturing and packaging expertise to support commercialization of HeartBeam AIMIGo device following expected FDA clearance. We further advanced intellectual property protection with two recent new patents. An initial European patent strengthens IP for the HeartBeam AIMIGo technology offering 12-Lead ECG capability as we expand our product applications to reach a variety of regions and global markets. We also received a US patent for a 12-Lead ECG smartwatch based monitor intended for the detection of heart attacks and complex arrythmias. The breakthrough inventions protected by this patent enable our proprietary 3D VECG technology to be built into a smartwatch, eliminating the need for a dedicated ECG device, while offering 12-Lead ECG capability enabling heart attack and complex arrythmia detection.

We believe this patent may prove to be one of our most valuable patents as we continue to expand on our granted and pending core patents for most heart attack detection. We recently welcomed Rob Eno to the newly created position of president. Rob, who you will meet in a moment, is a passionate and visionary senior executive with over 28 years’ experience making go-to-market strategies for multiple breakthrough products. He’s playing a key role in our strategic decisions, commercialization efforts, and day to day operations. He joins our other recent appointment, Dr. Peter Fitzgerald, as Chief Medical Officer, Peter is now playing a major role in defining best paths for adoption, clinical strategies, and partnerships to advance our products in the market.

I would like to turn the call over to our President, Rob Eno, to further discuss our product and commercialization plans. Rob?

Robert Eno : Thank you, Branislav. And to everyone joining us today, I’m privileged to join HeartBeam at such an exciting time as the company prepares to enter a new phase of commercialization. Since joining in January, I’ve been incredibly impressed with the HeartBeam team, their accomplishments and diligence in working toward our mission. Turning to our product timelines and updates, we had several key developments related to our HeartBeam AIMI and HeartBeam AIMIGo platforms. As Branislav mentioned, we previously announced the 510(k) submission of our HeartBeam AIMI platform to the FDA. We received questions from FDA within the statutory 30 day review deadline, discussed the questions via teleconference with the FDA review team and provided written responses addressing the questions to the primary reviewer.

The substantive review is in progress, and we expect to receive FDA clearance in the second quarter, followed by a limited market release in early Q3. Briefly, the total available market for the HeartBeam AIMI software solution is $500 million. And for AIMIGo, it is $12 billion. These are estimated market numbers for the US only. HeartBeam AIMIGo has a 510(k) regulatory pathway. We’ve already identified predicate devices and plan to demonstrate substantial equivalence with a validation study. Importantly, the clearance of the V1 device allows HeartBeam to collect 3D vector cardiogram data and use these data for conducting 12-Lead equivalent studies for the V2 product. Turning to HeartBeam AIMIGo product updates. In September, we were granted a patent that provides additional intellectual property protection for our HeartBeam AIMIGo technology, offering 12-Lead ECG capability in the form of a credit card sized device with the same footprint as the single lead products currently in the market today.

We also partnered with Evolve Manufacturing Technologies, a contract medical device manufacturing company, to build the credit card sized HeartBeam AIMIGo 3D VECG recording device that enables a 12-Lead ECG readout for remote heart attack detection. We plan to file an initial 510(k) submission for the V1 version of HeartBeam AIMIGo as an ECG collection device followed by a second submission for the software that enables 12-Lead synthesis from our 3D VECG signals. We expect to file the V1 submission shortly and the V2 submission is targeted for Q4. Our go-to-market strategy for HeartBeam AIMIGo is a phased approach. We’ll initially focus on direct pay market segments in which payment is outside of the reimbursement system. Within the direct pay segments, we will initially focus on those where we will demonstrate HeartBeam AIMIGo as equivalent to 12-Lead ECGs. We will then focus on developing clinical and cost effecting this evidence, which will be the basis of expansion into new direct pay segments and ultimately unique reimbursement.

We have a deep product pipeline, starting with the HeartBeam AIMIGo system. Other products in the pipeline include a 12-Lead ECG extended wear monitor or patch, as well as a system that fully integrates HeartBeam AIMIGo in the heart monitoring smartwatch technology we acquired from LIVMOR. In addition, the product pipeline includes predictive algorithms that result from applying machine learning to our VECG data and a 12-Lead ECG smartwatch for heart attack detection, complex arrythmia monitoring and other cardiac disorders. I’ll now turn the call over to Rick Brounstein, Chief Financial Officer, to discuss operational updates and financials.

Richard Brounstein: Thank you, Rob. Turning to our financials. I will now give us a sneak preview of our financial results. A full breakdown is available in our regulatory filings and in the press release that just crossed wires after the close of market today. But let me start with Silicon Valley Bank. They were our checking account and payroll account. On March 10 last week, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. And as a result, we stood to lose approximately $600,000. On March 13, the Federal Reserve announced that the account holders would not bear the loss of this event. Nevertheless, before the issues with SVB, we had planned a move to a big four bank and we are currently completing that move.

Turning now to the statement of operations. General and administrative expenses for the fourth quarter of 2022 were $2.1 million compared to $1.2 million for the fourth quarter of 2021. For the year ended December 31, 2022, G&A expense increased to $7.4 million compared to $2 million in the same period of 2021. This reflects the growth in our team and other costs in support of our being a public company. Research and development expenses for the fourth quarter of 2022 were $1.6 million compared to $96,000 in the fourth quarter of 2021. For the year ended December 31, 2022, research and development expenses increased to $5.7 million from $255,000 in the prior year. Most of 2021 was pre IPO. Our 2022 focus on R&D consisted largely of product development costs for HeartBeam AIMI, which is now essentially done, and also HeartBeam AIMIGo. HeartBeam AIMIGo includes both software and hardware, the latter with our professional services agreement with Triple Ring Technologies.

Additionally, there are clinical costs in support of our FDA submissions for both our products this year, as well as research costs in support of the future product pipeline coming from our patented vector 3D VECG platform technology. Other income during the year ended December 31, 2022 of $69,000 primarily related to the cash balances from the IPO. In 2021, we had $2.1 million of expense, largely tied to the 2015 convertible note accounting. These notes were converted and added to common stock at the November 2021 IPO and in equity as of December 31, 2021. Net loss for the fourth quarter of 2022 was $3.7 million compared to a net loss of $2.1 million for the fourth quarter of 2021 and $13 million for the full year 2022 compared to $4.4 million in the year-ago period.

We ended the fourth quarter of 2022 with $3.6 million in cash and cash equivalents compared to $13.2 million as of December 31, 2021, having invested the proceeds from the November 21 IPO to accelerate our product development path. Most of the cash is maintained in short term investment accounts not tied to potential bank liquidity problems. As you have seen, we are publicly marketing through our S-1 registration statement. And as noted in the IPO registration statement, we plan to finance ourselves to the next inflection point in 2024 FDA clearance of our HeartBeam AIMIGo product with a personalized 12-Lead simulation display that a physician is used to seeing with a standard 12-Lead ECG today by using our patented VECG technology. I will now turn the call back over to Branislav for some closing thoughts.

Branislav Vajdic : Thank you, Rick. Indeed, ours is a true platform technology. So far, we have developed two products that are either already submitted to the FDA, in the case of HeartBeam AIMI, or soon to be submitted to the FDA for the HeartBeam AIMIGo product. The recent LIVMOR asset purchase has also brought to HeartBeam LIVMOR’s intellectual property, including three US patents, and the LIVMOR technology, including the Halo+ atrial fibrillation products as well. Halo+ is the world’s first FDA cleared prescription wearable for continuous cardiac arrythmia monitoring. During the fourth quarter, we continued to operate from a position of strength, equipped with strategic partnerships to advance product development and near-term milestones.

We continue to strengthen our IP with patents granted, most recently with the European patent for a signal transformation from vector electrocardiogram to 12-Lead ECG and the new patent for a 12-Lead ECG smartwatch-based monitor intended for detection of heart attacks and complex cardiac arrhythmias as well. We also acquired three issued United States patents as part of our LIVMOR asset purchase. All of these enhance our intellectual property and provide protection of our technology in priority global markets. Beyond that, looking at the product pipeline, we think that the application of artificial intelligence will be of great value to us. We will have a very unique data set of patients who actually have recorded their ECG on a daily, weekly or monthly basis.

That longitudinal data for our patient population will be of tremendous value. Applying artificial intelligence to this data set that is extremely data rich, much richer than the standard 12-Lead ECG, will yield, we strongly believe, additional insight into cardiovascular disease and further help cardiovascular patients. On the right side of this slide is shown the 12-Lead patch. We have recently received a patent for that technology. We are very pleased with that development because it addresses a very large market, projected at $4.8 billion by the year 2030. This is a disruptive technology that has the potential to have a significant influence on the PET industry as a whole. Looking ahead, we remain confident in our anticipated upcoming product milestones.

Our next milestones on the commercialization path include FDA submission for the initial HeartBeam AIMIGo 3D vector ECG product and FDA clearance for HeartBeam AIMI, both expected in the near future. We approach these milestones from a position of strength with an experienced team, bolstered by the recent appointment of Peter Fitzgerald as Chief Medical Officer and Rob Eno as President to support these goals. I’d like to share a final thought. We are all very excited about the prospect of helping millions and millions of cardiovascular patients, initially heart attack patients, but we believe our technology will essentially address all cardiac diseases that are detectable by a 12-Lead ECG. So that’s a very exciting prospect for us and a great motivator to be helping many millions of patients throughout the world.

I look forward to providing our shareholders with further updates in the near term as we move toward commercialization. Thank you all for attending. And now, the HeartBeam team would like to answer your questions. Operator?

See also 12 Biggest Palm Oil Companies in the World and 20 Biggest Plumbing Supplies Companies in the World

Q&A Session

Operator: . Our first question comes from the line of Jason Kolbert with Dawson James.

Jason Kolbert: My first question was regarding the recent acquisition. I know you got a lot of IP, but I think you also had a lot of intellectual capital. Can you talk a little bit about how many of those folks have come over to HeartBeam and what it is that they’re really bringing to the company?

Branislav Vajdic: Yes, we’ve covered so far in our presentation the IP aspects of this acquisition in the form of three patents. They are very significant because they really give us an incredibly fast head start into the AFib detection. This is the company we wanted to get into. And with the addition of these three patents, we have an incredibly good entry point into the AFib market. Beyond that, we have acquired the whole technical team that has developed these technologies for LIVMOR. And in that sense, we 3have completed the whole circle in a way because we now have the FDA cleared product, we have three patents, we have the platform Halo+ platform, and we have all the key people that have developed this platform. So we are very excited about this acquisition and what it will mean for the future of HeartBeam.

Jason Kolbert: I’d like to drill down on that. How does that break down in terms of software versus hardware? And is there even a manufacturing component associated with the hardware that you feel helps support HeartBeam in terms of its commercialization efforts and kind of managing that whole process?

Branislav Vajdic: LIVMOR technology is based on so-called PPG sensor, which is integral part of €“ in the case of €“ they developed a Samsung Watch. And so, the components of the hardware that LIVMOR has used comes from Samsung. What the real value for us is, is the full ownership of the Halo+ platform that we previously licensed and now we have a full ownership of it with all the source codes and ability to modify and extend it, plus the FDA cleared product. So, the main value points are centered around software, intellectual property and the team.

Jason Kolbert: On the manufacturing side, is that something where you feel you’re in a good position with your current contract manufacturers that you can make changes, revisions because, clearly, there’s next generation product on the AIMI side here?

Branislav Vajdic: Yes. For our initial production goals, we have engaged Evolve Manufacturing, and that’s clearly capable and willing of producing tens of thousands of our devices. We are working with Triple Ring and Evolve because they have really incredibly good teams on driving the costs down. Initially, these units, they’re not cost effective. And with our current project, we are reducing the cost several times, four to five times reduction in cost. And we plan to go down that curve even further.

Jason Kolbert: Yeah, that’s exactly what I was looking for, Branislav, and it’s not , but it’s a hard point for people to understand who haven’t been in the business and having €“ you have a concept, you come up with units, but you know that you have to get the cost down when you get to scale. And it makes sense that a team that’s already done that is going to add a lot of value as you pursue that. My last question has to do with both AIMI and AIMIGo, and it has to do with the time gap between when you complete the submission and when you get FDA clearance. And that’s a relatively short time gap, about six months. And I guess that’s pretty standard in the industry. You have confidence that that review time should work for you as well, is that right?

Branislav Vajdic: Yes, we have a very close interaction with the FDA. We have just completed another meeting with them and the interaction is very productive. And we remain confident that the results will be positive. And that’s all I can say. It has been perhaps a process that extended a bit longer than we expected. But it’s very much an unpredictable process. And in our case, included a holiday season, and so on and so on. So, yeah, we remain very optimistic about the prospect of getting the clearance for AIMI, and again, submit AIMIGo in Q2 of this year.

Jason Kolbert: In terms of a successful financing, that seems to be critical now as you look because clearly there’s going to be a rise in SG&A spending as you anticipate the beginning of commercialization into the second half of this year and next year, right? That’s correct?

Branislav Vajdic: Yes. Rick, maybe you want to comment on this question?

Richard Brounstein: Absolutely. And obviously, not only we have the S-1 registration as it works out, of course, but we have the S-3 in place, the ATM facility. So we have ability to sort of bridge ourselves as we need. I think most people saw we did a deal with Maverick that gives us a short-term capability for $4 million. So we’re careful. It’s clearly challenging in these times, but we can moderate ourselves, and we think we have the capability to get things done.

Jason Kolbert: That’s exactly the comment I was looking forward to, is that you don’t have a gun pointing out at you. The ATM offers you a bit of a bridge and some breathing room, so that you can kind of build a syndicate towards a successful capital raise. Right?

Richard Brounstein: Yeah, absolutely.

Operator: Our next question comes from the line of Bill Sutherland with The Benchmark Company.

William Sutherland: I was intrigued with the patent on the patch and wondering if there’s any preliminary ideas at this point about the path for that to get to a commercial live stage.

Branislav Vajdic: Yes. The more we look at the patch €“ we have two patents actually that will protect this invention extremely well €“ the more we realize the value of this technology and product for the future of HeartBeam. As it stands right now, we realize that this market is projected to be about $4.8 billion by the end of the year 2030. And our ability to develop this product is very real. And in terms of time and money needed to arrive with a prototype, we are seeing some estimates that are very attractive. So at this point, it’s under consideration. But everything we have seen is pointing to the direction of doing the patch sooner rather than later, which does not put any concrete start date for these projects. But we really like what we are seeing instead terms of the value and potential disruptive effect it may have with this well-established market with a $3 billion company market cap being the leader.

William Sutherland: Interesting comparison. The other very fascinating development is the AI development. And curious how you might benefit from the data that you’re going to be €“ being able to analyze and work with. Is that quite an elite product or monetization of some kind?