Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q2 2022 Earnings Conference Call August 15, 2022 4:30 PM ET
Company Participants
Lisa Wilson – Investor Relations
Dane Andreeff – President & Chief Executive Officer
Jeff Mathiesen – Chief Financial Officer
Conference Call Participants
Jeffrey Cohen – Ladenburg Thalmann & Co.
Operator
Good day and thank you for standing by. Welcome to the Helius Medical Technologies’ Q2 2022 Earnings Conference Call. [Operator Instructions] Today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Lisa Wilson. Please go ahead.
Lisa Wilson
Thank you, operator. Welcome to the second quarter 2022 earnings conference call for Helius Medical Technologies. This is Lisa Wilson 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 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 report 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 August 15, 2022. 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, Lisa. Welcome, everyone, to Helius Medical’s second quarter 2022 earnings conference call. The second quarter saw the first commercial sales of our Portable Neuromodulation Stimulator or PoNS device which is indicated in the U.S. for short-term treatment of gait deficit due to mild to moderate symptoms of multiple sclerosis, MS and is to be used in conjunction with a supervised therapeutic exercise program.
Gait dysfunction is an extremely common symptom among the estimated 1 million people in the U.S. suffering from MS. Over 70% of patients report difficulties walking, yet there remains a huge unmet need in this area. Until now, treatment options have been limited. But 14 weeks of PoNS therapy has demonstrated significant gait improvement when compared to physical therapy alone. PoNS therapy is the only available portable and readily accessible neurostimulation therapy that promotes neuromodulation and may lead to neuroplasticity which is the brain’s ability to modify, change and/or adapt in response to modulation of brain activity. It is safe, effective and offers patients hope and neurologists a new tool in their tool belt.
We are pleased to report that PoNS continues to see a promising reception in the marketplace. We have received more than 300 inquiries to date that we are actively following up on and are working to convert as many as possible to prescriptions. We have also added of video advertisement at our landing page, www.ponstherapy.com, in the past week which we believe will help drive interest and inquiries in PoNS. I encourage each of you to take a look at it. Because the company has four stakeholders; patients, payers, physical therapists and physicians, we have seen a few bottlenecks in the process of getting PoNS therapy to those who need it. One major impediment has been in training the physical therapists who wish to treat MS patients with PoNS therapy. Historically, therapists were trained through an in-person multi-day course with only 5 to 10 people able to participate at any one time. This has resulted in a slow process, leaving many physicians unable to find a trained physical therapist to fill the prescription.
To solve this problem, we’ve implemented a self-paced online training module which can be completed in 3 hours or less instead of over several days. Though the module was only introduced in mid-July, we’ve already onboarded practitioners from clinics around the United States, including UCHealth Sports Med in Colorado, NEA Baptist in Arkansas, St. David’s Rehabilitation Hospital in Austin and the University of Rochester Medical Center. We currently have more than 80 physical therapists already trained or in the process of getting registered for or completing training.
Another hurdle to PoNS use will be lessened when we roll out our telehealth, e-commerce, online pharmacy initiative later this year. ponstherapy.com is an increasingly robust site but we expect the direct-to-consumer e-platform to be a game changer for physicians and patients. Once live, the platform will be immediately available in all 50 states and will include a network of fully licensed providers with e-prescribing capabilities. Currently, it could take a patient several weeks to set up an appointment with their neurologist or primary care physician. Through this site, patients will have the ability to match with practitioners and make appointments online, shrinking the 4-week window to as low of 24 hours. In addition, the online store will give patients the option to have the PoNS device delivered directly to their door.
Currently, sales in the U.S. are on a cash pay basis. The established U.S. list price for PoNS device is $25,700 comprised of a onetime cost of $17,800 for the controller and $7,900 for the mouthpiece. As we pursue commercial and government reimbursement programs, we want to make sure cost is not a barrier to access on label PoNS therapy at a significantly reduced price patients can now use the Patient Therapy Access Program. PTAP is expected to run through December 31, 2022. In addition, we are setting up a registry program for all MS patients treated with PoNS therapy which will collect important health, economic information to support the value of PoNS on key therapeutic outcomes and help generate evidence for coverage. We expect the registry to be available to HCPs and patients by the fall.
Helping all stakeholders understand the functional outcomes of PoNS therapy and the ways that can improve the quality of life is an important part of reaching the broadest group of patients possible. ponstherapy.com website is one way we’re working towards this goal and our therapeutic experience program is another.
TEP is an open-label observational trial designed to gather information on the extent to which patients’ adherence to a PoNS therapy regimen can lead to a meaningful therapeutic outcome. By partnering with some of the nation’s premier academic medical centers, we can observe PoNS therapy in a real-world setting while keeping key opinion leaders in MS management build their knowledge. Through TEP, we aim to treat 40 to 50 patients across 10 to 12 planned centers of excellence, treating neurologists and neuro rehabilitation centers identified as having the greatest potential to be early adopters of our technology.
During the second quarter, we were thrilled that the Shepherd Center in Atlanta as 1 of our centers. And we are currently engaged with approximately half a dozen centers which we hope to add in the near future. We also project to enroll with first patient for TEP late in August and expect to complete enrollment by early next year. Also by the end of the year, we expect to get additional clinical evidence to support long-term durability of PoNS therapy for MS.
Before I turn it over to Canadian activity, I want to give a brief update about the pilot trial in stroke which we partnered on with the Medical University of South Carolina. The study is designed to evaluate dynamic balance and neuromodulation in chronic stroke survivors, with neuromodulator translingual stimulation delivered using PoNS therapy. We anticipate enrollment in the MUSC trial will commence soon and expect it to have full enrollment by mid-2023.
Turning to our Canadian activities. Since 2019, PoNS has been authorized for sale in Canada for chronic balance deficit due to mild-to-moderate traumatic brain injury and subsequently for the treatment of gait deficit due to mild-to-moderate symptoms from MS. We now have 41 authorized PoNS clinics in Canada, up from 37 at the end of 2021. In addition, we currently have small trial programs with a few insurance carriers in Canada evaluating the benefit of PoNS therapy which we hope will lead to coverage by some or all of those carriers in the near future.
Having said that, while we have gained valuable data from our patients in Canada, some of which we’ve used to achieve FDA authorization in the U.S., our sales have not reached the levels we have targeted. We are currently evaluating additional measures and alternatives to achieve greater market adoption in Canada.
With that, let me turn the call over to Jeff to discuss our second quarter financial results in detail.
Jeff Mathiesen
Thanks, Dane. It is a pleasure to be with you today. Total revenue was $119,000 for the second quarter of 2022 compared to $71,000 in the second quarter of last year for an increase of 68%. This was the first quarter in which we reported product sales in the U.S. which comprise $63,000 of the total revenue. For the second quarter of 2022, our gross profit was $31,000 compared to $4,000 in the prior year.
Operating expenses for the second quarter of 2022 decreased to $3.5 million compared to $6.2 million in the second quarter of 2021, a decrease of $2.7 million. This decrease was primarily due to a decrease in stock-based compensation expense as well as lower product development and clinical trial costs. Operating loss for the second quarter of 2022 was $3.4 million compared to a loss of $6.2 million for the prior year period. We reported a net loss for the second quarter of 2022 of $3.8 million or a loss of $0.97 per basic and diluted common share compared to a net loss of $6 million or a loss of $2.58 per basic and diluted common share for the same period last year.
Our cash burn from operations for the second quarter 2022 was $3.7 million compared to $3.8 million for the second quarter of 2021 and in line with our expectations. As of June 30, 2022, we had $6.3 million of cash and no debt. Following the second quarter, we closed on an $18 million public offering, generating net proceeds of approximately $16.4 million, bringing our pro forma June 30 cash balance to $19.7 million.
Turning to our outlook. We currently expect third quarter revenue to be modestly above the second quarter levels. Factoring in the timing required to pair patients with trained physical therapists and potential delays for some portion of U.S. patients to pursue insurance coverage prior to filling their prescriptions. As we disclosed in our second quarter 10-Q, certain performance criteria were achieved for outstanding performance-based stock options in August, resulting in the vesting of performance-based stock options, for which, we will recognize a onetime noncash share-based compensation expense of approximately $1.2 million in this third quarter.
As we continue to build momentum and expand our sales coverage, we expect future quarterly revenue to continually increase sequentially quarter-over-quarter throughout the year and through 2023 as the U.S. commercialization of PoNS develops.
With that, operator, let’s now open the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question will come from Jeffrey Cohen of Ladenburg.
Jeffrey Cohen
A few questions from our end. So firstly, the foreign exchange loss for the quarter. Do you expect any pull-through on that into the back half of the year? I assume that’s from the strength of the dollar to the Canadian dollar.
Jeff Mathiesen
Yes. So we don’t really — I think it really has to do with our balance sheet balance on the intercompany activity. And so it is something that we don’t necessarily forecast what FX is going to do. This is something that — we’re not into forecasting FX.
Jeffrey Cohen
Got it. Okay, that’s helpful. Could you talk about the size of your commercial organization now and number of territories, number of people? And then, talk a little bit about the audience uptake out there as far as your new marketing sales directives and focus. Is it going toward — more toward patients, less towards physicians or vice versa? And how might that look over the coming quarters?
Jeff Mathiesen
Yes. Jeff, I’ll break this up. Well, we have two jets on the call. So — but I’ll begin the call — sorry for the confusion. But just the U.S. commercial uptake, again, we were in the — we’re in the top half of the first inning here. We had to wait for the software, the PT module training software. A lot of PTs we’re waiting for that. So our sales team have been initiating and having great conversations with neurologists but also with PT clinics, especially larger rehab hospitals as well. The other thing we’ve been waiting for is prescriptions because of the PT training which didn’t start until after the second quarter, we’ve had physicians out there waiting for PTs to get PoNS-trained, PoNS-certified, before they wrote their prescriptions. And then because they know it takes a few weeks for that patient to schedule with the PT.
So, if you look at that circle of stakeholders, the physicians, prescribers, the PTs and payers, there’s a lot of push-pull between them right now. And with the new PT module training, we can train all over America, in all 50 states. And we expect in the fourth quarter the same initiative going across the e-commerce telemedicine will really help bring demand forward. When you have a physician being able to prescribe within a 24-hour period, that’s going to help not only our sales team, our hub services but it’s really going to help our digital marketing presence as well.
So again, with the financing, it helps us to launch into new initiatives like the telemedicine, e-commerce but it also helps us to look at where sales and marketing can be increased, given the new financing on our balance sheet.
Jeffrey Cohen
Okay, got it. And one more, if I may. Could you talk about the payers out there, at least domestically in the U.S.? And have there been any one-offs or discussions or applications or payers stepping forward on a patient-by-patient basis?
Dane Andreeff
So right now, we’re in the early stages of that initiative, Jeff right now, if you recall, the MCIT rule was taken away last fall and the new TCET rule is — potentially could replace that for some time next year. That would be the fastest way for Helius, given our breakthrough designation, to be granted reimbursement. But if you notice, we talked a little bit about the Canadian initiative. We’ve had some very good pilot studies going on in Canada with payers. And we look to potentially have those similar strategies in the United States as well.
Jeffrey Cohen
Okay, perfect. And one more, if I could squeeze it in. What’s the enrollment size on the pilot trial for South Carolina for stroke?
Dane Andreeff
It’s 12.
Operator
I would now like to turn the conference back to Dane Andreeff.
Dane Andreeff
Thank you, everyone.
Operator
This concludes today’s conference.
Dane Andreeff
Oh, I’m sorry. Sorry, I just want to say thank you, everyone. Despite some of the challenges we faced, it was an overall strong quarter. We have great momentum going into the second half of the year. And I just want to thank everyone for your time and interest in Helius Medical Technologies and we look forward to speaking to you next quarter.
Operator
This concludes today’s conference. Thank you for participating. You may now disconnect.
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