Helius Medical Technologies, Inc. (NASDAQ:HSDT) Q2 2023 Earnings Call Transcript August 10, 2023
Helius Medical Technologies, Inc. beats earnings expectations. Reported EPS is $-0.06, expectations were $-0.11.
Operator: Good day, and thank you for standing by. Welcome to the Helius Medical Technologies, Inc. Q2 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Bilski, Investor Relations. Please go ahead.
Michelle Bilski: Thank you, operator. Welcome to the second 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 our 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 the call are as of August 10, 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: Thank you, Michelle. Welcome, everyone, to Helius Medical's second quarter 2023 earnings conference call. I'm happy to report that we saw a significant increase in sales during the second quarter of 2023, with revenue up 115% compared to the prior year quarter and up 131% compared to the first quarter of 2023. Increased U.S. sales of PoNS systems under the favorable pricing offered through the PTAP program, which terminated on June 30, 2023, in part drove the higher revenues as did the ongoing addition of neurologists and trained PoNS certified therapists, recommending PoNS to their patients. PoNS Therapy is a groundbreaking treatment for people suffering from balance and gait impairment. Since the beginning, our goal has been to get this important neuro technology into the hands of many qualified patients as possible by eliminating barriers to use.
We launched PTAP one year ago to give qualified Americans suffering from balance and gait impairment due to MS, the ability to purchase PoNS at a significantly reduced price, lessening the cost burden while we initiated efforts to pursue reimbursement by third-party payers and CMS. PTAP was initially scheduled to expire on December 31, 2022, but due to the program's popularity, we extended it to June 30. PTAP was a great success. By subsidizing PoNS Therapy for participants, we meaningfully reduced the major barrier to use and brought relief to a great number of patients than we otherwise would have. PTAP also enabled us to add to our MS patient registry and collect important health economic information to establish the value of PoNS on key clinical and therapeutic outcomes.
This patient registry data is a key element to pursuing reimbursement. Going forward, sales of PoNS systems will be on a cash basis as we continually to aggressively pursue coverage while also helping patients navigate the reimbursement pathway. As I've mentioned before, we believe broad third-party payer reimbursement is needed to achieve our full revenue potential, and we remain very optimistic about CMS' Transitional Coverage of Emerging Technologies Program or TCET, which is a proposed accelerated coverage pathway for new and innovative medical devices. In June, the CMS announced its proposed TCET pathway and provided greater clarification on its approach to coverage reviews and evidence development. The proposed TCET pathway would expedite Medicare coverage of certain breakthrough devices by allowing manufacturers the opportunity for increased premarket engagement with CMS.
Through premarket evaluation of technologies and identification of important evidence gaps, TCET aims to reduce uncertainty about coverage options. Under the new guidelines, qualifying breakthrough designations would have temporary coverage within six months after FDA market authorization, allowing companies greater time to gather the necessary clinical data to prove efficacy of their products and address any evidence gaps. This is great news for Helius as PoNS has breakthrough designations in both MS and stroke in the United States. In addition, PoNS was recently awarded Durable Medical Equipment, Prosthetics, Orthotics and Supplies, or DMEPOS accreditation by the compliance team, which is authorized by CMS to accredit all DMEPOS products and services.
Organizations that wish to bill Medicare must have accreditation from an approved agency, and this certification is a key component in achieving coverage under TCET and if and when it's passed. As of now, we believe we are on a path toward achieving coverage in mid-2024, and we'll keep you updated on further developments. On our PoNS Therapeutic Experience Program, otherwise known as PoNSTEP is another way we're bringing our technology to a greater number of patients suffering from balance and gait impairment. As a reminder, PoNSTEP is a company-sponsored open-label observational trial with a targeted enrollment of 50 to 60 patients that was designed to evaluate the impact of subjects' adherence to PoNS Therapy in patients with MS in a real-world setting.
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Earlier this week, we announced the addition of Montefiore Medical Center in Nyack, New York to PoNSTEP. Dr. Christopher Langston, who is the leading -- who is leading the trial is a renown clinical researcher of current and advanced topics in MS management and was one of the first PoNS prescribers. We expect Dr. Langston and his team at Madlyn Borelli Multiple Sclerosis Center to be great contributors to the program. We now have six centers of excellence participating in PoNSTEP, with the goal of enrolling five to 10 patients per site. This is higher than the five patients per site we originally envisioned as several of our sites are fully enrolled and interested in adding more patients. Enrollment in PoNSTEP began during the fourth quarter of 2022 and will continue throughout 2023.
We recently announced the expansion of our Medical University of South Carolina stroke trial from 12 to 60 patients. This investigator-initiated study evaluates the effects of cranial-nerve non-invasive neuromodulation delivered using PoNS Therapy on gait and dynamic balance in chronic stroke survivors. In Canada, where PoNS is already authorized for stroke, we've seen significant improvement in gait and a reduced risk of falling. This meaningful real-world data and expanded study are significant steps forward in our efforts to leverage the breakthrough designation and pursue approval for stroke in the United States. As a reminder, we previously were able to use results from similar clinical studies in real-world data to receive authorization for MS in the United States.
Turning now to our Canadian activities. The timing of some orders and activity originally anticipated in the first half of 2023 have slipped into the second half of 2023, resulting in lower-than-expected Canadian revenues during the first six months of 2023. Having said that, we believe this timing difference will result in a stronger third quarter, which typically experiences seasonal weakness and a strong finish to the year because PoNS is authorized in Canada for three Indications: MS, stroke and TBI. The market could be much larger than the U.S. market in the near term. Now 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 for the second quarter of 2023 was $256,000, an increase of $137,000 compared due to the $119,000 in the second quarter of 2022, resulting from increased U.S. sales of PoNS systems, primarily due to the favorable pricing offered through the PTAP, which terminated on June 30. For the second quarter of 2023, cost of revenue was $184,000 compared to $88,000 for the prior year period, primarily attributable to the higher sales compared to the same period in the prior year. Selling, general and administrative expenses for the second quarter of 2023 of $2.6 million were comparable to the $2.5 million reported in the second quarter of 2022. Research and development expenses for the second quarter of 2023 decreased to $0.7 million compared to $1 million in the second quarter of 2022, driven primarily by a decrease in product development expenses and clinical trial activities as the company transitioned to U.S. commercialization activities.
Total operating expenses for the second quarter of 2023 decreased to $3.3 million compared to $3.5 million in the second quarter of 2022. Operating loss for the second quarter of 2023 was $3.2 million compared to a loss of $3.4 million for the prior year period. We reported a net loss for the second quarter of '23 of $1.6 million or a loss of $0.06 per basic and diluted common share compared to a net loss of $3.8 million or a loss of $0.97 per basic and diluted common share for the same period last year. Our cash burn from operations for the second quarter of 2023 was $2.7 million compared to $3.7 million for the second quarter of 2022, reflecting the results of our focus on managing cash burn and extending our cash runway further into 2024.
As of June 30, 2023, we had $8.6 million in cash and no debt. On June 23, 2023, the company entered into an agreement to create an at-the-market offering program or ATM, under which the company may offer and sell shares having an aggregate offering price of up to $2 million, providing Helius the ability to access additional cash opportunistically or on an as-needed basis. As of June 30, 2023, no issuances of securities have occurred in connection with the ATM. Turning now to our outlook. Management currently expects third quarter and full year 2023 revenue to be above the comparable periods in the prior year with a shift in sales mix to be more heavily weighted in Canada, offsetting an anticipated decrease in the U.S. following the end of the PTAP.
Future U.S. sales of PoNS are expected to be at our cash-pay price until we gain reimbursement by CMS and third-party payers. With that, operator, let's now open the call for questions.
