Greetings, and welcome to the electroCore Second Quarter 2021 Earnings 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. It is now my pleasure to introduce your host, Rich Cockrell. Thank you, sir. You may begin.

Thank you all for participating in today's call. Joining me today are Dan Goldberger, Chief Executive Officer; Brian Posner, Chief Financial Officer; and Dr. Peter Staats, electroCore's Chief Medical Officer. Earlier today, electroCore released results for the second quarter ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during the call that include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our examination of operating trends and our future financial expectations are based upon the company's current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list of descriptions of the risks and uncertainties associated with the company's business, please see the company's filings with the Securities and Exchange Commission. ElectroCore disclaims any intention or obligation, except as required by law, to update or revise any financial predictions or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information that is accurate only as of the live broadcast today, August 5, 2021. And with that, I'll turn the call over to Dan. Thank you.

Thank you, Rich. Hello, everybody. And thank you for joining us today. I'm excited to report that Q2 2021 revenue was a record $1.3 million. Gross margins have expanded to more than 70%, and net cash used in operations decreased over 20% to $3.2 million for the second quarter of 2021 from $4.1 million for the first quarter of 2020. For the second quarter of 2021, total revenue of $1.3 million increased approximately 69% from $753,000 in the second quarter of 2020. Revenue from the government channel increased 88% to $779,000 for the quarter ended June 30, 2021, as compared to $415,000 in the second quarter of 2020. A total of 85 VA and DoD military treatment facilities have purchased gammaCore products through June 30, 2021, as compared to 79 through the first quarter of 2021 and 67 through the second quarter of 2020. Note that there are approximately 1,300 VA healthcare facilities and 475 military hospitals and medical clinics. So we still have plenty of growth ahead of us. Revenue from outside the United States through direct channels increased 50% to $369,000 in the second quarter of 2021 as compared to $247,000 during the second quarter of 2020. These figures do not include newly appointed stocking distributors, which contributed $18,000 of revenues from Canada and Western Europe during the second quarter of 2021. During the quarter, we expanded gammaCore's global availability through our international distribution relationships. In April 2021, the company announced that East Agency will serve as the exclusive distributor of the gammaCore Sapphire nVNS in Qatar. In June 2021, we announced an exclusive distribution agreement with Kromax International Corporation to serve as the exclusive distributor of the gammaCore Sapphire nVNS in Taiwan and ultimately, China. Net revenue from the U.S. commercial headache channel was $104,000 for the second quarter of 2021 as compared to $91,000 in the second quarter of 2020. I'm going to take a few moments to explain our initiatives in this important opportunity. We currently service approximately 12 million covered lives through pharmacy benefit managers, including CVS Caremark and Express Scripts, for patients that have a benefit design that does not differentiate between drugs and devices. These patients are subject to a co-pay of between $25 and $75 per month, depending on their specific benefit plan. We also have a small number of patients that are paying cash for access to gammaCore therapy. Our unique Level II Healthcare Common Procedure Coding System, or HCPCS, code K1020, non-invasive vagus nerve stimulator, became effective April 1, 2021. This is an important milestone in our quest to obtain reliable insurance coverage for gammaCore therapy. Previously, all of our prescriptions were coded as miscellaneous, which made for an easy initial coverage denial for an insurance company. Armed with our unique code, we are ramping up discussions with insurers. We've engaged a policy reporter to help us negotiate with an initial list of 30 regional and national benefit providers. Highmark Blue Cross Blue Shield was our first positive benefit determination, and we are now negotiating their fee schedule. I look forward to sharing news of additional payer wins in coming months. More and more Americans have high deductible insurance plans, which means that patients are likely to be faced with a cash pay obligation even when coverage is available. To fill that gap, we've been carefully testing cash pay business models and direct-to-consumer promotions. We had a small amount of revenue in the second quarter from these pilot programs, and we hope to see accelerating growth from our cash pay consumer initiatives in the second half of the year. Mitch DeShon joined us in May 2021 as our new sales leader to leverage his long-standing success with cash pay business models. We've also established a customer experience team in New Jersey, led by Lisa Martin, BSN, RN to support physicians and their patients in taking advantage of our cash pay programs. At this point, I'm going to ask our Chief Medical Officer, Dr. Peter Staats, to provide an update on our various clinical initiatives. Peter?

Thanks, Dan. We've had progress across our trials on various fronts this quarter. In April of 2021, we announced the publication in Nature Reviews Neurology of a peer-reviewed article highlighting the role of non-invasive vagus nerve stimulation or nVNS, as an emerging treatment for cluster headache. This is the second peer-reviewed publication suggesting nVNS as a first-line therapy for cluster headache. As you may recall that in July of 2020, Cephalalgia recommended nVNS as a first-line treatment for both the acute and preventive treatment of cluster headache and a highly relevant treatment option for patients suffering from migraine. In May of 2021, the U.S. Department of Veterans Affairs announced an investigator-initiated trial on the use of gammaCore Sapphire or nVNS for the treatment of post-traumatic headache. Post-traumatic headache or PTH accounts for approximately 4% of all symptomatic headache disorders and is one of the most common consequences of mild traumatic brain injury, also known as TBI or a concussion. In June of 2021, the company announced the publication of a peer-reviewed paper entitled 'Non-invasive Vagus Nerve Stimulation Improves Clinical and Molecular Biomarkers of Parkinson's Disease in Patients with Freezing Gait' in the journal Nature Partner Journal or NPJ Parkinson's Disease. This paper reports the results of a randomized, double-blinded, sham-controlled, crossover trial conducted at the Institute of Neuroscience in Calcutta, India, in collaboration with the Department of Medical Science at Newcastle University in England using gammaCore Sapphire. The study provides preliminary evidence supporting the safety and efficacy of nVNS in treating motor and non-motor symptoms of Parkinson's disease. Most patients were able to self-administer nVNS, and subjects were reportedly satisfied with the treatment. Also in June, the company announced the publication of a peer-reviewed paper entitled 'Effect of Transcutaneous Vagus Nerve Stimulation on Cognitive Performance Under Sleep Deprivation Stress'. This was published in the journal Communication Biology, a Nature publication. The paper reports the ability of gammaCore to reduce fatigue and increase performance in a randomized, double-blind, sham-controlled trial conducted at Wright-Patterson Air Force Base, using gammaCore and sponsored by the United States Air Force Research Laboratories, or U.S. AFRL. At this point, I'll turn the call over to Brian for a review of our financials and other guidance items.

Thank you, Peter. For the second quarter ended June 30, 2021, electroCore reported net sales of $1.3 million as compared to net sales of $1.2 million in the first quarter of 2021. This 5% sequential increase in revenue was in line with previously stated guidance and was driven by growth in the channels where we reliably get paid, the VA, DoD, and United Kingdom. Gross profit for the second quarter of 2021 was $895,000 as compared to $840,000 for the first quarter of 2021, and $480,000 for the second quarter of 2020. Gross margin for the second quarter of 2021 was 71% compared to 70% in the first quarter of 2021 and 64% in the second quarter of 2020. Total operating expenses in the second quarter of 2021 were approximately $6.1 million, a reduction of approximately $126,000 or 2% from $6.2 million in the first quarter of 2021, and a reduction of $306,000 or 5% from $6.4 million in the second quarter of 2020. Research and development expense in the second quarter of 2021 was $825,000 as compared to $500,000 in the first quarter of 2021, a change of approximately $326,000 sequentially. The increase in R&D expense during the quarter was primarily driven by the initiation of the GAP-PTH program. R&D expense decreased by $206,000 or 20% from $1 million during the second quarter of 2020. Selling, general and administrative expense in the second quarter of 2021 was $5.3 million as compared to $5.7 million in the first quarter of 2021. SG&A expense was flat as compared to the second quarter of 2020. GAAP net loss in the second quarter of 2021 was $2.9 million compared to first quarter of 2021 GAAP net loss of $5.4 million, primarily due to the extinguishment of debt associated with the forgiveness of our PPP loan, and a tax benefit from the sale of our New Jersey NOL tax carry forwards. GAAP net loss decreased by 39% or $1.8 million as compared to a GAAP net loss of $4.7 million in the second quarter of 2020. Adjusted EBITDA net loss in the second quarter of 2021 was $4.1 million as compared to $4.2 million during the first quarter of 2021 and as compared to a loss of $4.3 million in the second quarter of 2020. The company defines adjusted EBITDA net loss as GAAP net loss excluding depreciation and amortization, stock compensation expense, restructuring and other severance-related charges, legal fees associated with stockholders' litigation, total other income and expense, extinguishment of debt, and benefit from income tax. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss has been provided in the financial statement tables included in today's press release. Net cash used in the quarter ended June 30, 2021, exclusive of cash proceeds from the sale of NJ NOL carry forward was approximately $3.2 million as compared to $4.1 million in the first quarter of 2021 and $5.2 million in the second quarter of 2020. Cash, cash equivalents, and marketable securities at June 30, 2021, totaled approximately $23.7 million as compared to approximately $25.5 million at March 31, 2021. Subsequent to June 30, 2021, the company raised net proceeds of approximately $18.8 million through a public offering of 20,700,000 shares of its common stock. Looking ahead, for the third quarter of 2021, we expect net revenue to be at least $1.5 million and net cash usage, exclusive of financing activities, to approximate $4.5 million. The expected increase in net cash usage is largely due to the annual renewal of our insurance policies. And now I'll turn the call back over to Dan.

Thank you, Brian. We're pleased with our results this quarter and look forward to improving our performance during the third quarter. We're in a strong financial position with a pro forma cash balance of $42.5 million as of June 30, 2021. We look forward to further penetrating the VA, DoD channel and the growth of our United Kingdom business as the MedTech Funding Mandate continues rolling out through the year. The recent publication in pharmacoeconomics reiterating the evidence supporting a first-year benefit of GBP 450 per patient when gammaCore therapy is used in conjunction with standard-of-care provides further support to our payer negotiations. Longer-term, clinical indications beyond cluster and migraine headache supported by the ongoing clinical developments that Dr. Staats discussed could greatly expand the market for nVNS therapy. I want to recognize our dedicated staff for their work and commitment in these trying times and thank the healthcare professionals and their patients for their loyal support of gammaCore therapy. Finally, I want to congratulate Dr. Peter Staats on his Lifetime Achievement Award announced at the annual meeting of the American Society of Pain and Neuroscience in July 2021. At this point, I'll ask the operator to open the line for questions.

Thank you. And the first question is coming from Jeffrey Cohen from Ladenburg Thalmann. Jeffrey, your line is live.

Hi, Dan, Brian, and Peter. How are you?

Good. Thank you. Thanks for the opportunity, Jeff.

So a few from our end. So Dan walk us through the geographical setting now outside the U.S. I heard the eventual addition of Taiwan and I'm pretty familiar with what's going on in the UK. Where else are you currently and expect to be over the coming months?

So Jeff, as you know we've got a wholly-owned subsidiary in the United Kingdom, and that business is growing nicely now that we have transitioned to the MedTech Funding Mandate. We're also starting to explore some more traditional pharmacy-based channels in the United Kingdom. We announced earlier this year distribution arrangements in Australia and in Canada, several distribution arrangements in Europe, more recently in Qatar, which is the first of what we think will be a few more in the Middle East. And most recently, Kromax in Taiwan, and ultimately in China. We're going to continue to look for stocking distributor relationships in other parts of Europe. We also have initiatives for national healthcare reimbursement in a few specific target markets in Europe, and we may - if we do get those coverage wins, we may choose to go direct in those countries as opposed to distributor, but one thing at a time.

Perfect. Got it. And could you talk a little about - I know you mentioned Mitch and some of the other folks here. Could you talk about the DTC channel? So maybe walk us through how that could play out logistically and what that could mean as far as money flow, DTC?

Yeah. So we really think that this initiative is going to be the future of our commercial headache channel. We're going to continue to work with the payers to establish reimbursement for a larger number of covered lives. And in the meantime, develop these opportunities for cash pay business where the patient works directly with their insurance company. You've seen this model in a variety of home healthcare devices similar to what goes on in diabetes therapy, supplemental oxygen therapy, and sleep apnea therapy. So we're following a well-worn path in terms of offering a very competitive cash pay opportunity while continuing to develop more traditional insurance coverage options in the background.

Got it. And then lastly for us, Peter, walk us through timelines on when we may see some podiums, presentations, new trials or Investor Day initiated, or FDA for that matter, over the balance of this year and '22? Anything specific that we should watch stretch our head out for?

Yes. I mean, I think that the big issues are going to be coming in 2022. We've announced the completion of one of the stroke studies, and we anticipate that this will be submitted and hopefully presented at the International Stroke Conference next year. I think that will be one of the upcoming meetings. There's not too much coming in 2021 for the remainder of this year, as I'm trying to think through the various issues; a lot has been published and came out with the data on Parkinson's, as I've mentioned, and other interesting areas are coming out. But I don't see many more presentations coming out in 2021.

Got it. Okay, perfect. That it does our selves. I'll jump back in queue. Thank you.

Thank you. And the next question is coming from RK from H.C. Wainwright.

Thank you. Good afternoon, all, Dan, Peter and Brian. So in terms of some of the growth drivers that we are looking at in the sales, this - in the second quarter, more VA clinics have started prescribing gammaCore. You say it's 85 compared to the previous number of, I think it's 79 in the first quarter. So how much of this are repeat customers, and how much of this is the opening of the VA centers? And I mean, obviously, if COVID-19 is coming back in certain states, to what extent do you expect this growth to continue into the second half from 79 to 85 and beyond?

Yeah. So great question, RK. There are two ways to grow our business in the VA hospitals. One is to generate additional prescriptions from an existing hospital customer to go deeper into existing customers, and the other is to open up new hospital customers, and we're doing both. And as the pandemic receded in the second quarter, we saw both of those initiatives really start to gain traction. There's lots of noise, as you mentioned, about the Delta variant. That may be a headwind in the current quarter, too early to tell. But we're very excited about being back in the field, being able to open up new hospital customers, and as you saw, we opened up six new hospital customers in the three months ended June 30 and really nice growth compared to the previous year. But most importantly, we're just scratching the surface. Out of more than 1,000 facilities, we still have less than 100 of them as customers. So there's lots of room for upside growth as the pandemic recedes, and then we get back to selling.

Okay. And in terms of the HCPCS Code that you received on April 1 and some of the discussions that you're having with payers, what has been achieved in the last few months since you have had the code? And do you think '21 would see some growth from that, or is it more of a '22 event?

Yeah. So it's more of a '22 event. Highmark Blue Cross Blue Shield was our first favorable coverage determination. And now we're negotiating a fee schedule with them. We have conversations going on with the obvious national players, including Kaiser, but more likely is that we'll be able to announce a few more of these smaller regional players, the Blue Crosses, over the course of this year. We really see the insurance reimbursement kicking in, in 2022, but we have to do the legwork in the back half of this year.

Okay. So one last question for Brian. On the OpEx, obviously, you've been able to bring in as much efficiency as you can from the operations. And you still brought it down by 2% compared to first quarter with some of the VA hospitals opening up and some of these sales expenses potentially going up. Do you think you've reached the maximum efficiency that you can get out of the operating lines or do you think there there is still some more efficiency to see growth of the system?

Hi, RK, another good question. I think there's always potentially ways to cut costs, but I think right now, the focus is on growing the top line and with our balance sheet being strong. We're looking to make the appropriate targeted investments to help generate that growth. But again, we're always looking for ways to cut costs where appropriate.

Thank you, gentlemen for taking the questions.

Thanks, RK.

Thanks, RK.

Thank you. And the next question is coming from John Vandermosten from Zacks SCR. John, your line is live.

Hey. Good morning, guys or good afternoon. Gosh, I don’t know what time it is. We're most excited about a lot of the distributor agreements that you have. I mean, that seems like a really great way to get out there, and obviously, you had the Taiwan and China arrangement that was just announced recently. How long is it expected to take until they can go through the regulatory process? And will Kromax only be pursuing headache or is there a broader opportunity than that in the near term?

Yeah. So that's a good point, John. In the United States, we are FDA-cleared for prevention and treatments of cluster headache and migraine. But outside the U.S., we have a much longer list of indications through the CE-mark, and our international distributors that aren't explicitly covered by the CE-mark system. Generally, they mimic the indications on our CE-mark, which include depression, epilepsy, reactive airway disease, and bronchospasm. Really, quite a long list showing the future of what non-invasive vagus nerve stimulation could be in the United States. The regulatory process in Taiwan is pretty bureaucratic, unfortunately. We're dealing with document requests right now. I don't have good visibility on exactly what the timing is just, but it is a paperwork-intensive process. So I'll know more in a few days.

Okay. Great. And obviously, that is the access to the largest populations in the world, China. Taiwan, I think, is a lot smaller. I think 20 million, 30 million, something like that. But a little bit higher wages there, a little bit higher economic status. I mean, what kind of penetration do you think you can get into these areas? And I mean, is this the most material arrangement that you have out there just based on the population, or is it another one, perhaps Western Europe? How do you rank these, I guess, in terms of...

Yeah. So long term, if we can get through the regulatory issues, then obviously, Asia is a larger opportunity. It just has a larger middle class that can afford these kinds of therapies. That's going to take quite a bit of calendar time. I think '22 and even into '23, Europe and the Middle East will probably be more substantial revenue contributions, while Asia is a long-term big win for us.

Okay. Okay. And I saw that you announced $18,000 in sales to distributors. And I'm assuming that was RSK Medical and Silver just based on the geographies there. Does that mean that they have clearance to the market or are they just stocking up in anticipation of that happening soon?

So Canada and Australia have clearance, regulatory clearance, and Europe, obviously, through the CE-mark, gets clearance.

Okay. So those are sales that may emerge in the very short-term, great. And then the last question for me is just on opportunities. You recently announced a sleep deprivation study, and there's like 10 or 12 more. I can't always keep track because you have so many. And with the recent capital raise, does that mean that you would want to pursue some more of these? I mean, there's just so many opportunities out there. It just seems like you could take two or three of the best ones and run with them. Is that something you may alter now, now that you have a little bit more cash in the balance sheet?

And I think the sequencing, and Peter alluded to some of it, but the sequencing is a secondary headache in traumatic brain - sorry, headache associated with traumatic brain injury or concussion. The work that Dr. Bremer has been doing on PTSD and opioid use disorder, the work that Dr. Chapman published in the U.K. around Parkinson's. I think that those are the closer in opportunities for us to get expanded indications.

If I could just add one little comment there. There's the ileus work with Dr. Chapman, and there's, of course, the Mondal work in Parkinson's. But some of the really interesting things that you're seeing in the Parkinson's work, it's really significant changes in some biomarkers, which are adding, in my mind, validity to the entire field of non-invasive vagus nerve stimulation. So when we pair those types of activities with the papers that are coming out on cost dominance for our therapy for cluster headache and first-line therapies that we alluded to earlier, there is a momentum that I hope that will be palpable going forward.

And the next question is coming from Jeremy Pearlman from Maxim. Jeremy, your line is live.

Hi, thanks. I'm actually calling on behalf of Anthony Vendetti. How you guys doing?

Good. Thank you...

So most of my questions are answered so I just have two quick ones. One is, we're halfway through Q3 now. Is there any more visibility you can give to us? I know you guided towards an increase sequentially on year-over-year revenue, is there any headwinds you're seeing as the Delta variant is unfortunately gaining traction, especially in parts of the country where there are no such high vaccination rates? Or are your sales reps or the VA hospitals, is everything open as usual? Or as much normal as possible?

I don’t see a significant impact from the Delta variant based on the daily dashboard we monitor. Appointments in our sales efforts are still being held. However, when we try to meet with insurance companies regarding reimbursements, they are using the situation as an excuse to avoid meetings. On the other hand, clinicians remain open-minded, and our activities in the VA channel are not impacted by the insurance companies. I hope this situation resolves soon so we can return to a normal life.

Okay. I have one more broader question. We discussed your numerous ongoing studies and the capabilities of gammaCore. Could you provide more clarity on the timeline for when we might expect, possibly in 2022, another 510(k) submission and potential clearance for a new indication, and what that indication might be?

Yeah. We specifically haven't given any guidance on expanded indications. You're likely to see a clinical publication before we say anything about regulatory approvals.

Okay. All right. That’s all I have. Thank you so much.

Thank you. And that's all the questions we had. I will now hand it back to Dan Goldberger for any closing remarks.

Thank you, operator. And thank you all for joining our call. We greatly appreciate your time and attention, and look forward to better things in the future. Good night.

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time. Have a wonderful day. Thank you for your participation.