Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q3 2023 Earnings Call Transcript

Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q3 2023 Earnings Call Transcript November 12, 2023

Operator: Good day, everyone. My name is Chelsea, and I will be your conference operator. At this time, I’d like to welcome everyone to the Helius Medical Technologies Third Quarter 2023 Financial Results. [Operator Instructions] As a reminder, this conference call is being recorded today, November 9, 2023. It is now my pleasure to turn the floor over to Michelle Bilski, Investor Relations for Helius Medical Technologies. Please go ahead. Michelle Gable Bilski Thank you, Chelsea. Welcome to the Third Quarter 2023 Earnings Conference Call for Helius Medical Technologies. This is Michelle Bilski of In-Site Communications, Investor Relations for Helius. With me on today’s call are Dane Andreeff, Helius Medical’s President and Chief Executive Officer; and Jeff Mathiesen, Chief Financial Officer.

At this time, all participants have been placed in a listen-only mode. Please note that this call is being recorded and access to the webcast can be obtained through the Investors section of the Helius website at www.heliusmedical.com. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Such factors may be updated from time to time in our other filings with the SEC, which are available on our website.

All statements made during this call are as of November 9, 2023. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law. I would now like to turn the call over to Dane Andreeff, President and Chief Executive Officer of Helius. Dane Andreeff Thanks, Michelle. Welcome, everyone, to Helius Medical’s Third Quarter 2023 Earnings Conference Call. We began the quarter with the conclusion of our very successful Patient Therapy Access Program, which we launched in June 2022 to give qualified Americans, suffering from balance and gait impairment due to MS, the ability to purchase PoNS at a significantly reduced price. The implementation of PTAP enabled us to accomplish 2 key objectives.

By subsidizing the cost of PoNS, we meaningfully reduced a major barrier to use while also adding to our MS patient registry. Through the registry, we can collect important health economic information to establish the value of PoNS on key clinical and therapeutic outcomes, which is critical as we pursue reimbursement. As expected, quarterly sales of PoNS Systems in the U.S. decreased following the expiration of the PTAP program on June 30 as sales of PoNS Systems reverted to the cash-pay price. We continue to believe that broad third-party payer reimbursement is needed to achieve our full revenue potential, and I’m pleased to report, we’re moving closer to that goal. In September, the PoNS system and mouthpiece were assigned UPC numbers, the equivalent of NDC numbers for pharmaceuticals with the listed price of $25,700 and $7,900, respectively.

The UPCs are now included in the Wolters Kluwer Health’s pharmacy database to which 17 of the top 20 grossing PBMs are subscribed. Receiving the UPC numbers was a game changer for Helius because with the DME accreditation announced last quarter, PoNS is now one of the few products with pharmacy and device codes, which means 2 paths towards reimbursement. We are also steadily moving toward our goal of achieving U.S. authorization for stroke. We recently established relationships with 2 important Canadian health care providers having received an order for 10 PoNS Systems from the School of Rehabilitation at the University of Montreal as well as a letter of intent from the Quebec Ministry of Health and Social Services to purchase 30 PoNS Systems to treat gait imbalance in stroke patients.

These are exciting opportunities and both come about due to the body of clinical evidence demonstrating the effectiveness of using PoNS to treat stroke. Among other outcomes, PoNS Therapy has been shown to reduce the risk of fall in 28% of stroke patients as opposed to a reduction of just 1% to 3% with physical therapy alone, which is the current standard of care. Stroke patients experienced a significant improvement in gait, averaging a 6.74 point improvement in the Functional Gait Assessment score over the 14-week treatment period. Overall, 69% of the patients experienced at least a 5-point FGA improvement, which is larger than the 4.2 minimal detectable change usually seen in stroke patients. The fact that these 2 institutions committed to purchase PoNS reflects the medical community’s strong desire to improve treatment for this patient population, and we believe that evidence from the treatment outcome will support healthy economic benefit and cost effectiveness of incorporating PoNS therapy as a first-line treatment for stroke patients.

Furthermore, this evidence should provide valuable benchmark for other Canadian health care providers and private payers as they evaluate reimbursement of PoNS Therapy. The data from these clinical application trials will also provide supporting evidence of PoNS therapeutic benefit that can strengthen the registrational program for stroke currently ongoing in the U.S. where there are more than 5.5 million people experiencing impaired walking due to stroke. If and when PoNS is approved to treat stroke in the U.S., it will be eligible for coverage under the proposed Transitional Coverage of Emerging Technologies or TCET pathway, which would expedite Medicare coverage of certain breakthrough devices by allowing manufacturers the opportunity for increased premarket engagement with CMS.

Helius has 2 breakthrough designations granted by the FDA, putting us among the less than 1% of medical device companies that have a breakthrough designation with our second one in balance and gait deficit due to stroke. While we don’t know the outcome of this bipartisan piece of legislation, we are optimistic about its potential and the fact it provides another pathway toward reimbursement and greater access for patients. We are always looking for ways to help reduce barriers to PoNS use. Earlier this year, we launched our UpScript e-commerce telehealth platform to make it easier for people suffering from MS to access PoNS Therapy and start treatment more quickly instead of having to wait up to 3 months to see their neurologists. The platform offers, among other services, online health evaluations with qualified medical providers, a fulfillment of prescriptions required for PoNS Therapy and the shipping of PoNS devices directly to the homes of eligible patients in the United States.

As you can imagine, this is a great benefit to those who face mobility challenges. We are pleased to report that virtually all the prescriptions in the United States are now fulfilled through UpScript. We also continued to expand PoNSTEP, our company-sponsored outcome research trial designed to evaluate the real-world impact of MS patients’ adherence to PoNS Therapy. We recently added Montefiore Medical Center in Nyack, New York to the program, bringing the total number of PoNSTEP centers of excellence to 6. We have increased enrollment at each site with the goal of enrolling 5 to 15 patients per site. Enrollment in PoNSTEP began during the fourth quarter of 2022 and will continue throughout March of 2024. Turning now to our Canadian activities.

Revenues in Canada were $72,000 during the quarter, up 29% over the third quarter of last year. We are starting to see traction with the exclusive distribution agreement with HealthTech Connex for portions of Western Canada that we signed at the end of the first quarter and expect steady overall growth to continue. Earlier this week, we were proud to announce the results of a study performed by Pacific Blue Cross and HealthTech Connex with the ultimate goal of reducing long-term disability and improving the quality of life for individuals suffering from traumatic brain injury in Canada, where PoNS is authorized to treat TBI. The program participants were all at least 2 years post-injury and had not responded to standard rehabilitation treatments and not expected to return back to work.

The results were truly remarkable. 89% of the patients suffering from long-term disability due to chronic TBI said that balance and gait issues were no longer a barrier to return to work. 56% of the participants actually returned to work. And remember, these patients were deemed unlikely to resume their jobs. 80% of those returned to their prior occupations full time for at least 6 months. In addition to significant improvements in balance and gait, patients reported improvement in headache severity as well as in cognitive and mental health symptoms. It was also found that PoNS Therapy reduced the financial burden to the insurance provided by at least $1.6 million for the 5 individuals who returned to work for nearly a 10x savings on cost. This was an important study given that 7 million people in North America suffer from chronic balance deficit and other disabilities related to TBI.

Rehabilitation therapy is the current standard of care, but its return to work rate is very low. And a large percentage of patients end up on long-term disability often permanently. We believe the findings from this collaboration may promote our efforts to gain reimbursement by Canadian insurance companies and health care providers as well as demonstrating the PoNS Therapy’s significant health economic benefit and cost effectiveness as we negotiate coverage with U.S. payers. It was a busy quarter for us at Helius, and we’re excited about what we accomplished and the road ahead. With our continued focus on cash management and a runway that will take us into the second quarter of 2024, we have both the drive and resources necessary to continue pushing forward and bringing our life-changing therapy to as many patients as possible.

With that, let me turn the call over to Jeff to discuss our third quarter financial results in detail. Jeffrey Mathiesen Thanks, Dane. It is a pleasure to be with you today. Total revenue for the third quarter of 2023 was $143,000, a decrease of $53,000 compared to $196,000 in the third quarter of 2022, primarily attributable to the decreased unit sales of PoNS systems in the U.S. following the termination of the PTAP on June 30, 2023. This was partially offset by increased sales of systems in Canada. For the third quarter of 2023, cost of revenue was $187,000 compared to $101,000 for the prior year period due to fixed overhead cost increases, which were primarily comprised of salaries and benefits of employees involving management of the study of the supply chain and certain production costs.

Selling, general and administrative expense for the third quarter of 2023 was $2.2 million, a decrease of $1.2 million compared to $3.4 million in the third quarter of 2022, primarily the result of a decrease in performance-based stock compensation expense. Research and development expense for the third quarter of 2023 were $700,000. It was essentially flat period-to-period over the third quarter of 2022. Total operating expenses for the third quarter of 2023 decreased to $3.1 million compared to $4.9 million in the third quarter of 2022. Operating loss for the third quarter of 2023 was $3.2 million compared to a loss of $4.9 million for the prior year period. We reported a net loss for the third quarter of 2023 of $3.7 million or a loss of $5.49 per basic and diluted common share compared to a net loss of $1 million or a loss of $2.90 per basic and diluted common share for the same period last year.

Our cash burn from operations for the third quarter of 2023 was $2.5 million compared to $3.8 million for the third quarter of 2022, reflecting the results of our focus on managing cash burn. As of September 30, 2023, we had $6.6 million in cash and no debt and $4 million in proceeds receivable from warrant exercises as of September 30, 2023, and we expect our cash runway to extend into the second quarter of 2024. With that, Chelsea, let’s open the call for questions.

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Q&A Session

Operator: [Operator Instructions] And our first question comes from Nick Sherwood with Maxim Group.

Nicholas Sherwood: Hi, guys. How is it going.

Jeffrey Mathiesen: Good, Nick.

Nicholas Sherwood: So my first question is about the letter of intent from the Quebec Ministry of Health and Social Services. Do you know what their time line is to evaluate the benefit of PoNS Therapy with those 30 devices?

Jeffrey Mathiesen: So this is Jeff. I’ll just step in. In the press release, we commented that the letter of intent, their desire is to have the — all 30 patients, either beginning treatment or lined up by the end of March of next year. So it would be something that should play out fairly quickly.

Nicholas Sherwood: And then, are there any — is there any additional sort of like agreement or ideas that based on success that they would buy additional? Or is that sort — or are you looking to go through the study, work with them, do the study and then once that’s completed, work with them from there?

Jeffrey Mathiesen: Their intent in the letter of intent, what they’re looking to have come out of this is, if successful, they would want to incorporate this as part of their standard of care. But there are no specific commitments to do anything beyond that.

Nicholas Sherwood: I understand.

Dane Andreeff: Hi, Nick. This is Dane. Just a little more color on who Quebec, the Ministry of Health, is. It is their provincial health care provider like a CMS Medicare and most strokes are covered under government policies.

Nicholas Sherwood: Okay, I understand. And then sort of what — is there any — I mean, what sort of communication can that Quebec Ministry of Health have with other provinces such as like Ontario? Or is it kind of you have to reach each Canadian province health system sort of on an individual basis?

Dane Andreeff: Yes. I’ll take that one. So yes, like Ontario OHIP plan, we would have to reach out and provide a similar conversation where a lot of them, provincial health care providers, would like to do their own studies. But they’re also happy to see Quebec being the first one stepping in to do this balance and gait study in stroke.

Nicholas Sherwood: Okay. Awesome. And kind of switching gears, can you just give a little bit of color on the relationship with HealthTech Connex and sort of any buying patterns they have for PoNS Therapy? And I mean the numbers — people getting back to work who had traumatic brain injury, a lot of really good results from that. Can you just sort of give some more detail on that relationship?

Jeffrey Mathiesen: Yes. This is Jeff. I’ll step in. For the first part of the question, so we do have an arrangement with them where they are exclusive for the Vancouver area. And that was something that we signed earlier this past year. And so it’s an agreement where they — as part of the — having this exclusivity, they do have a commitment to purchase a certain number of units throughout the period of the agreement and also an opportunity to renew that agreement after the first five year period with an additional payment and then also additional commitments for purchase. So we’ve had a great relationship with them for a number of years. They’re a big promoter of PoNS and have done a lot of things, studies and things on their own using PoNS.

And then we’re part of a program with Pacific Blue Cross, where those two work together to evaluate PoNS with these TBI patients that was just reported. So I’ll let Dane talk a little bit more about that specifically. But in general, we have a great relationship with them.

Dane Andreeff: No, Jeff, I think you covered it all. So thank you.

Nicholas Sherwood: Awesome. And then I’ll wrap it up with one final question. Looking at the therapeutic experience program, do you still expect to enroll about 8 to 10 centers by the end of the year? And do you expect any of that enrollment to continue into the next year?

Dane Andreeff: Yes. Right now, we’re at six sites, and the enrollment keeps increasing. And in each site, the goal is five to 15 patients per site to get us in the 50 patients for the total research trial that we deem is very valuable to bring all these KOLs in to expand mindshare and really get experience treating their MS patients with PoNS.

Nicholas Sherwood: Okay. Awesome. Thank you for all that detail. I will return to queue.

Dane Andreeff: Great. Thanks Nick.

Operator: Thank you. [Operator Instructions] And our next question will come from Jonathan Aschoff with ROTH MKM.

Jonathan Aschoff: Thank you very much guys. I was curious, the PBC estimate that five individuals who returned to work saved the provider like $1.63 million in net costs netting out the cost of PoNS. Can you tell us the number of years of those LTD claims that each of those five had coming to them that PBC doesn’t have to shell out for?