Q1 2024 Helius Medical Technologies Inc Earnings Call

Participants

Michelle Bilski; Investor Relations; In-Site Communications Inc

Dane Andreeff; President, Chief Executive Officer, Director; Helius Medical Technologies Inc

Jeffrey Mathiesen; Chief Financial Officer, Vice President; Helius Medical Technologies Inc

Nicholas Sherwood; Analyst; Maxim Group LLC

Presentation

Operator

Good day and thank you for standing by. Welcome to the Helius Medical Technologies first quarter 2024 earnings conference call. (Operator Instructions) Please be advised today's conference is being recorded. I would like to hand the conference over to your speaker today, Michelle Bilski, with In-Site Communications, please go ahead.

Michelle Bilski

Thank you, Kevin. Welcome to the first quarter 2024 earnings conference call for Helios Medical Technologies. This is Michelle Bilski of In-sight Communications, Investor Relations for Helios. With me on today's call are Dane Andreeff, Helios 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 investor section of the Helios website at www.heliosmedical.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 including statements regarding potential reimbursement pricing involve inherent risks and uncertainties that can cause actual results to differ materially from those indicated, including those identified in the risk factor section of our most recent annual report on Form 10-K.
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 May 13, 2024. 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

Great. Thanks, Michelle. And thank you to everyone joining us today on Helius Medical's first quarter 2024 conference call. In 2024, our focus remains on two things, securing widespread reimbursement for PoNS and achieving FDA approval for stroke. We made progress on both fronts and are confident these milestones are just around the corner.
The $6.4 million financing we just announced last week, which extends our cash runway into 2025, will help get us there. I'll start with our pursuit of widespread reimbursement for PoNS. We are pleased that CMS Medicare understood the benefits of this innovative treatment and established HCPCS codes for both the PoNS mouthpiece and controller, which went into effect on April 1.
This was a critical reimbursement and access milestone, and the unique HCPCS codes give us the ability to begin negotiating reimbursement with third party payers. As a reminder, the list price for the PoNS device in North America, where it's indicated is $25,700, comprised of $17,800 for the controller and $7,900 for the mouthpiece.
Earlier this month we were pleased to learn that CMS had released its preliminary medicare payment determinations for the PoNS controller and mouthpiece and placed Helius on the agenda for the public meeting with CMS on May 29. As the preliminary payment determination is subject to change, we are looking forward to presenting arguments at the meeting on the 29, to support higher reimbursement rates.
PoNS is different from any neuromuscular peripheral stimulation therapy, and so for the controller, we'll advocate using the gap-filling methodology based on our list price versus mapping it out to other not comparable neuromuscular stimulation devices.
For the mouthpiece, we will argue that it is actually a supply that is applied to an individual's tongue, and therefore, the lump-sum payment structure is more appropriate than the cap rental structure set in the preliminary determination, and therefore, the gap-filling should be done using the list price.
We believe we are in a good position to secure higher rates than those established in the preliminary determination. Once finalized, the payment rates are expected to be effective October 1, 2024. We believe the final determination of these rates will make it easier to expand reimbursement across third-party payers, creating a pathway to positive cash flow as we continue working to secure FDA authorization under PoNS breakthrough designation for stroke. We look forward to keeping you updated on our evolving discussions with CMS.
Turning now toward our pursuit of stroke authorization in the United States, we made several important strides towards this objective during the quarter by adding six more sites to the stroke pathway in both the US and Canada. Based on encouraging results from an earlier trial, as well as real world evidence from Canada, where PoNS is already authorized for treatment of stroke.
The clinical program aims at establishing the effects of cranial nerve non-invasive neuromodulation using PoNS therapy on gait and dynamic balance in chronic stroke survivors. Since gait and balance deficit is a medical condition that almost inevitably leads to falling and increasing the health care cost burden for these patients.
For stroke registrational program also aims at confirming our real-world evidence that PoNS therapy significantly reduces the risk of falling in at least 28% of stroke patients with gait and balance deficits as compared to the average 1% to 3% from physical therapy alone.
In January, we announced the addition of Brooks Rehabilitation Hospital to our stroke clinical program, and it is the first site to have started enrolling patients in the open-label study, which is an integral part of our stroke registrational program because it brings the PoNS clinical experience to additional sites in the United States.
Last month, we announced the participation of Shepherd Center in our registrational program. Recruitment for the single-arm study begins this month with the goal of enrolling 8 to 10 participants by the end of the year. Shepherd Center has already been a valuable partner for Helius as part of our PoNS therapeutic experience program, which was designed to evaluate the impact of subjects adherence to PoNS therapy and people with Multiple Sclerosis, MS.
In addition to adding more sites to our stroke pathway during the quarter, we aligned with the FDA on our development plan to significantly streamline the size, timeline, and the cost of the registrational program. We are targeting regulatory submission by early 2025, with the goal of receiving marketing authorization utilizing PoNS breakthrough designation in stroke later in the year.
Well over 5 million stroke survivors in the United States are affected by walking and balance disability, and we are excited for this groundbreaking treatment to reach those who need it. As we continue to pursue stroke approval, we remain committed to getting PoNS therapy into the hands of more people suffering gait and balance impairment due to MS.
Those efforts include ongoing engagement with the physical therapist community. And we now have PoNS-trained therapists located nationwide. We attended, recently, the American Physical Therapy Association combined section meeting where we had the opportunity to further highlight PoNS therapeutic benefit. PTs are critical to patient success with PoNS, and we're always eager to engage with this important group.
Last quarter, I mentioned our efforts to target the Department of Veterans Affairs, which is the largest integrated health care system in the United States and sees more than 28,000 cases of MS annually. I'm pleased to report that we're officially partnered with Lovell Government Services, an approved supplier to the VA and DoD, to make PoNS available to federal health care systems. We've seen firsthand how PoNS therapy has improved the lives of veterans suffering from MS, and we're thrilled that more service members will have access to this treatment.
Turning now to our Canadian activities. In Canada, where PoNS is already authorized for stroke, we are currently working to establish sites in five separate administration regions as parts of a government-funded initiative, designed to further validate the effectiveness of PoNS therapy when used by patients suffering the effects of stroke. We believe this initiative will not only accelerate adoption in Canada, but also benefit our pursuit of market access and third-party coverage here in the United States.
Moving into the rest of 2024, achieving reimbursement, and making progress on our stroke registrational program remain our top priorities, and both sites-- both goals are in sight. We could achieve CMS reimbursement as early as October 1, which would enable us to expand reimbursement across third-party payers. Significantly boosting our revenues and giving us a pathway to positive cash flow as we pursue authorization for stroke.
With that, let me turn the call over to Jeff to discuss our first quarter financial resorts in more detail.

Jeffrey Mathiesen

Thanks, Dane. It is a pleasure to be with you today. Total revenue for the first quarter of 2024 was $135,000, an increase of $24,000 compared to $111,000 in the first quarter of 2023, reflecting increased product sales in both US and Canada. For the first quarter of 2024, cost of revenue was $123,000 compared to $122,000 for the prior year period, remaining relatively flat due to fixed overhead costs.
Selling general and administrative expenses for the first quarter of 2024 decreased to $2.6 million compared to $2.9 million in the first quarter of 2023. Due primarily to a decrease in professional fees and payroll-related expenses, partially offset by an increase in contract manufacturer expense associated with the transition to the new contract manufacturer during the current year period.
Research and development expense for the first quarter of 2024 decreased to $0.8 million compared to $0.9 million in the first quarter of 2023. Driven primarily by a decrease in product development expenses and clinical trial activities as we transitioned our focus to US commercialization activities. Operating loss for the first quarter of 2024 was $3.4 million compared to a loss of $3.8 million in the prior year period.
We reported a net loss for the first quarter of 2024 of $2.5 million or a loss of $3.8 million per basic and diluted common share. We also had a net loss of $2.5 million in the prior year period or a loss of $4.42 per basic and diluted common share. Our cash burn from operations for the first quarter of 2024 decreased to $3 million compared to $3.2 million in the first quarter of 2023. As of March 30, 2024, we had $3.6 million in cash and no debt.
Last Thursday, we closed on a $6.4 million public offering and received net proceeds of approximately $5.6 million, which will extend our cash runway into 2025. Importantly, this financing also includes one year warrants for an additional $6.4 million of gross proceeds that are callable by the Company within 30 days of announcing the first excuse me-- the final reimbursement determination for the PoNS controller in the mouthpiece by CMS.
If the stock price at that time at or above $2.25 per share, we expect final determination to be announced in late summer to be effective October 1 of this year. If exercised, the additional proceeds from the exercise of these warrants will fund our operations well into the second half of next year. And helps to keep-- take financing risk off the table.
Turning now to our outlook, PoNS sales remain on a cash pay basis and as a price point, that is not feasible for the vast majority of patients in our addressable markets. We will expect revenues will continue to be muted.
However, as we have discussed, our recent access to VA patients through level government services and the expectation of CMS reimbursement by October 1, which will facilitate our efforts to expand reimbursement across third-party payers. We believe will position us to significantly boost our revenues beginning later this year and provide us a pathway positive cash flow.
With that, Kevin, let's now turn the call over for questions.

Question and Answer Session

Operator

(Operator Instructions) Nicholas Sherwood, Maxim Group LLC.

Nicholas Sherwood

Congrats on the quarter. Can you just go into a little bit more on the timeline with the Lovell Government Services, agreement that you signed. And kind of like where are you at with that agreement and generally build out a sales team with them or just kind of get some more color on it.

Dane Andreeff

Yes. Hey, Nick, thanks for your question and your comment on. So, we're in the process right now of having our PoNS therapy on contract with the FSS and the GSA contracts, the general service administration. This should go public very soon in the next days-- weeks. And then by January 1, our team and their team will be all trained up internally and we could start receiving prescriptions and invoices and training VA rehab experts on PoNS therapy so that they could start treating their patients.

Jeffrey Mathiesen

So Dave, I think you misspoke. You said January 1.

Dane Andreeff

Oh, I'm sorry-- I mean, you offer after June 1. Yes, sorry with that.

Nicholas Sherwood

Okay. So, June 1, you'll start you expect to start receiving prescriptions?

Dane Andreeff

Sometime in hopefully early June. There some training on both sides, but we do have-- a couple of the VAs, looking at PoNS therapy for their MS patients right now. So it's very exciting, they've already targeted at least we know one VA of 25% of their MS population at that VA.

Nicholas Sherwood

Understood.

Jeffrey Mathiesen

And then just to clarify, as I was just going to say, so there's a little bit of an order process. So, as they are looking to do write a prescription, they need to make sure that they've got someone trained there before the order to get the place with us. So, there's a little bit of a order process that plays out as we're developing a new relationship.

Nicholas Sherwood

(multiple speakers) if you remember you mean a PT?

Dane Andreeff

Correct? Yes, physical therapists. That would be the one to administer and help with the treatment.

Jeffrey Mathiesen

And just to follow on that. Yes, sir. If you remember, we modularize our PT training. So, once they receive access to the modular software, they could do it within three hours or less.

Nicholas Sherwood

Okay. That kind of leads into my next question. How-- what demand have you seen from new physical therapists taking the training program for the PoNS therapy?

Dane Andreeff

Yes, it's been steady and upwards, Nick, on both sides of the Board. What we're seeing-- let's start in Canada we're seeing this because the commercial payers want to see more of the map filled in. So, we've really pushed into British Columbia because of what we're doing there.
If you remember, the Pacific Blue Cross study and back to work for traumatic brain injury. We had a very successful study that was performed by Pacific Blue Cross. 8 of the 9 had no longer an issue with balance and gait and returning back to work and of course, we they closed out five of their long-term disability claims to save $1.6 million.
So that is really an exciting time for us and the payers do want to see us fill in the gap with registered PoNS trainers in Canada. And in the United States we believe that is-- will be a part of the process as well. And remember, most patients don't want to be driving more than 30 minutes to and from their PT because the first two weeks are at PoNS is performed in clinics. So, the closer we can get registered PoNS trainers to the patients. It makes it much easier for the patient to meet their PT.

Nicholas Sherwood

Are you targeting specific locations like physical therapists to make sure that you have that geographic coverage in the United States if and when the CMS codes, that reimbursement is approved?

Dane Andreeff

So actually what we're seeing, Nick, is we're seeing a lot of patients wanting to file claims that are coming from existing registered PoNS trainers, which is a good thing. And these are one-off claims for MS for their gait deficit. And we could be helpful there.
We're excited to help them with the commercial payers and start their PoNS therapy as soon as possible. But our goal with reimbursement is also be able to sit down with some of the regional, super-regional physical therapy chains. And we'd like to partner with them to quickly fill in the gap once reimbursement goes effective, hopefully on October 1, of this year.

Nicholas Sherwood

Understood. Well, that takes care of all my questions. Thank you for providing all that detail. And I'll hop back into the queue.

Dane Andreeff

Great. Thanks, Nick.

Operator

(Operator Instructions) I'd like to turn the call back over to Dane for any closing remarks.

Dane Andreeff

Great. Thanks, Kevin. And thank you, everyone, for following Helius Medical Technologies. Before we go, I just want to thank the team at Helius for their hard work and dedication to bringing PoNS therapy to the millions who need it. We're right on the cost.
We're excited about our upcoming milestones and look forward to keeping you updated as we pursue coverage and reimbursement and authorization in stroke.
Thank you again.

Operator

Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.