Solana Co Q1 FY2024 Earnings Call

Thank you, Kevin. Welcome to the First Quarter 2024 Earnings Conference Call for Helius Medical Technologies. This is Michelle Bilski, an 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. 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, including statements regarding potential reimbursement pricing 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. 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.

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 that 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, composed 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 29th to support higher reimbursement rates. PoNS is different from any neuromuscular peripheral stimulation therapy, and so for the controller, we will advocate using the gap-filling methodology based on our list price versus mapping it out to other noncomparable neuromuscular stimulation devices. For the mouthpiece, we will argue that it's actually a supply that is applied to an individual's tongue. Therefore, the lump sum payment structure is more appropriate than the cap rental structure set in the preliminary determination. Thus, 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 U.S. 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 noninvasive 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 increases the healthcare cost burden for these patients, the 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 deficit 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. The 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 subject adherence to PoNS therapy in people with multiple sclerosis. 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 cost of the registrational program. We are targeting regulatory submission by early 2025 and 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 balanced 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 Sections Meeting where we had the opportunity to further highlight PoNS therapeutic benefits. 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 healthcare 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 healthcare 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 part 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 registrational program remain our top priorities and 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 providing us with a pathway to positive cash flow as we pursue authorization for stroke.

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 the U.S. and Canada. For the first quarter of 2024, the cost of revenue was $123,000 compared to $122,000 in 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 transition our focus to U.S. commercialization activities. The 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 $3.08 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 final reimbursement determination for the PoNS controller and the mouthpiece by CMS, if the stock price at that time is 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 help to take financing risk off the table. Turning now to our outlook. While PoNS sales remain on a cash pay basis and at a price point that is not feasible for the vast majority of patients in our addressable markets, we expect revenues will continue to be muted. However, as we have discussed, our recent access to VA patients through the Lovell 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 with a pathway to positive cash flow.

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? Kind of like where are you at with that agreement and if you're building out a sales team with them? Or just kind of give some more color on it?

Nick, thanks for your question and your comment. So, we're in the process right now of having our PoNS therapy be on contract with the FSS and the GSA contracts, the General Service Administration. This should go public very soon in the next days or weeks. By June 1, our team and their team will be all trained up internally, and we could start receiving prescriptions, invoices, and training VA rehab experts on PoNS therapy so that they could start treating their patients.

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

Oh, I'm sorry. I mean June 1.

Okay. So you expect to start receiving prescriptions on June 1?

Sometime in early June. There's 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.

Understood. And then kind of...

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

You mean the PT?

Correct. Yes. Physical therapists would be the ones to administer and help with the treatment.

And just to follow on that, yes. So if you remember, we modularize our PT training. So once they receive access to the modularized software, they could do it within 3 hours or less.

Okay, that brings me to my next question. What demand have you observed from new physical therapists enrolling in the training program for the PoNS therapy?

Yes, it's been consistent and growing, Nick, on both sides of the border. Let's start in Canada. We're seeing this because the commercial payers are looking to see more coverage. We've really expanded into British Columbia due to our initiatives there. If you recall, the study conducted by Pacific Blue Cross regarding back to work for traumatic brain injury was very successful. Eight out of the nine participants no longer had issues with balance and gait and were able to return to work. Additionally, they closed five long-term disability claims, saving $1.6 million. This is an exciting development for us. The payers want to see more registered PoNS trainers across Canada. We believe the same will be true in the United States. It's important to note that most patients prefer not to travel more than 30 minutes for their physical therapy, especially since the initial two weeks of PoNS treatment takes place in a clinic. The closer we can place registered PoNS trainers to patients, the easier it is for them to fulfill their physical therapy requirements.

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

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 to also be able to sit down with some of the regional, super-regional physical therapy chains. We'd like to partner with them to quickly fill in the map once reimbursement goes effective, hopefully on October 1 of this year. Great. Thanks, Kevin. 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 cusp. We're excited about our upcoming milestones and look forward to keeping you updated as we pursue coverage and reimbursement and authorization for stroke. Thank you again.

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