Pulse Biosciences, Inc. (PLSE) Q2 2021 Earnings Call Transcript

Greetings and welcome to Pulse Biosciences' 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. I would now like to turn the conference over to your host, Philip Taylor of Investor Relations.

Thank you, operator. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today, August 9, 2021, only and will include forward-looking statements and opinion statements including predictions, estimates, plans, expectations, and other information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission. Our SEC filings can be found on our website or the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures can be found in the press release. Please note, that this conference call will be available for audio replay on our website at pulsebiosciences.com on the News and Events section of our Investor Relations page. With that, I would now like to turn the call over to President and Chief Executive Officer, Darrin Uecker.

Hello and thank you all for joining us this afternoon. On today's call, I will share with you our key accomplishments and business updates from the second quarter that have positioned us for success as we begin the second half of the year. Ed will then provide details from the field on the status of our controlled commercial launch. Sandy will share our detailed financial results, and then I will conclude and open up the call for a question-and-answer session. Our goal at Pulse Biosciences has always been to offer bioelectric medical solutions that deliver clinically differentiated outcomes for unmet needs of patients and clinicians. As of the first quarter of 2021, the commercial launch of the CellFX system is underway, and we are in the process of implementing our technology in select leading aesthetic dermatology clinics. We continue to build on the positive momentum from previous quarters and are excited by the progress of our interactive and collaborative Controlled Launch program with clinicians. We ended the second quarter with 49 clinics participating in the Controlled Launch, following onboarding 34 new clinics across the US, Europe, and Canada during the quarter. We are on track to complete onboarding for the program in the third quarter. At this point, we believe up to 80 participating clinics will enable us to achieve our Controlled Launch program objectives. Clinics are actively treating patients, and the transition of clinics from Controlled Launch to commercial use by opting to acquire the CellFX system after completing the Controlled Launch program has recently begun. Another highlight in the quarter was the receipt of Health Canada approval for the CellFX system. We are very pleased that we now received approval in the three key geographies we targeted for initial commercialization. Our team was prepared to expand the Controlled Launch into this geography quickly, and we now have our first Canadian Controlled Launch participant performing CellFX procedures. To remind you, on our first quarter earnings call we laid out two priorities for the year. These include execution of the Controlled Launch program for the CellFX system, with the goal of driving adoption among key opinion leaders, or KOLs, within aesthetic dermatology. Our second corporate objective for 2021 is to continue to expand the CellFX System's applications in the US to take full advantage of the diverse benefits of Nano-Pulse Stimulation technology. We continue to make progress on both the clinical and regulatory fronts, and I am confident in our team's ability to deliver on this objective over time. Before we dive deeper into these objectives, I would like to take the opportunity to inform and remind our listeners today about our technology's novel and proprietary capabilities and what differentiates our CellFX system over what is currently available for clinics and their patients. The CellFX System is a multi-application platform that delivers our proprietary Nano-Pulse Stimulation or NPS technology. NPS is a nanosecond pulse nonthermal energy-based modality that directly affects cellular structures, sparing the noncellular collagen-rich dermis of the skin. When compared to other thermal modalities currently on the market, we believe our cell-focused NPS technology provides improved lesion clearance with beneficial aesthetic outcomes. The CellFX System is a software-enabled cloud-integrated tunable console that powers a handheld treatment applicator. With highly customizable configurations of treatment applicators and NPS energy settings, physicians are able to treat a wide range of dermatologic conditions in accordance with the needs and wants of their patients, with procedure session times as quick as 15 minutes to fit into the clinic workflow. Integrated into the CellFX System is our proprietary cloud connected software that links the system to our cloud-based internal resources. We have named this cloud-enabled infrastructure CellFX CloudConnect. This development is the backbone of our innovative utilization-based business model, aligning our interests with those of our physician customers and their patients. CellFX CloudConnect offers clinics an array of services that integrates the CellFX System, our e-commerce customer portal, and practice management tools to track utilization data and other metrics. Having the software connected to our internal customer relationship management system and enterprise resource planning system provides us and the clinics with crucial insights into the productivity and profitability of the CellFX System. Circling back to our top priority for the year, CellFX Controlled Launch program. The Controlled Launch was initiated in the US and Europe during the first quarter of 2021 following FDA clearance and the receipt of a CE Mark, a methodical and calculated introduction of our system to the market paired with the feedback we will receive from clinicians will shape the long-term success and broad adoption of the CellFX System not only for our currently approved applications but also for those currently being developed. Our experienced team has a thorough understanding of the aesthetic dermatology market, and we incorporated our shared knowledge into best practices for the introduction of our CellFX System into the market. The goal of the Controlled Launch program is to provide patients with exceptional experiences, tracking their progress from the initial procedure to resolution of the treated lesion and a positive cosmetic outcome, in order to fine-tune our onboarding and treatment process. As planned, we are partnering with top aesthetic dermatology KOLs throughout the Controlled Launch and are collecting their critical feedback on the integration of the CellFX System and CellFX CloudConnect into their practices and the experiences of their patients. Following the completion of the Controlled Launch, we anticipate these KOLs will become trusted advocates of the CellFX System and CellFX CloudConnect infrastructure, promoting the adoption of our technology among their peers. Participating clinics in the Controlled Launch program were carefully selected, and our partnership represents mutual investments from them and Pulse Biosciences. In exchange for data gathered throughout the Controlled Launch program, clinics will earn incremental credits towards the cost of the CellFX System shipped to them for use in the program. The time invested by these clinics on numerous virtual and practical training sessions indicates their level of commitment to becoming CellFX System franchises and introducing the benefits of NPS to patients. On our first quarter call, we had outlined that our original estimate was that it would take clinics on average approximately three months to complete the Controlled Launch commitment. We are finding that our initial Controlled Launch clinics are taking a vast approach, treating an initial cohort of patients and then evaluating the healing process, followed by a second group of patients, and so on. With each group of patients, physicians are applying their experience in patient and lesion selection to build confidence, helping to refine a clear set of best practices for the introduction of this novel energy modality. As a result, our initial clinics are taking approximately five months to complete the Controlled Launch process. That said, we are seeing that clinics coming into the program more recently are benefiting from the learnings and experience of the early clinics, and so we expect these clinics will complete the program closer to the original three-month estimate. We continue to be on track for the majority of clinics to complete the program by the end of 2021 and to begin our initial commercial sales in the fourth quarter. Overall, the feedback we have received with the Controlled Launch program has been positive. We are receiving consistent feedback that our training program is among the best that clinics have experienced for a new technology introduction, and the physician and patient experience continues to improve as we work through our clinic partners. I will let Ed provide a more detailed update on the mechanics of the launch in a few moments. I will now turn to our other priority for the year, the advancement of specific applications for our CellFX System on the research and regulatory fronts. Currently, our system is approved for general dermatologic procedures in the United States. As we have stated previously, we have implemented a stepwise regulatory strategy in the US under which we are pursuing specific indications for high-value applications. First, specific indications for the treatment of sebaceous hyperplasia, a small benign lesion that develops primarily on the face and currently lacks acceptable treatment options with desirable aesthetic outcomes. During the first quarter, we concluded follow-up of 60 patients in an FDA IDE-approved comparative study, comparing the use of the CellFX System against electrodessication to treat sebaceous hyperplasia and began the data analysis process. While we plan to file the 510(k) by this time, we are still completing the necessary steps to do so. This IDE-approved study FDA requested a number of safety and efficacy endpoints, including a blinded independent review by three dermatologists using photographic images of the treated lesions. The process of developing this blinded photographic review can only occur after all the patient follow-up is completed, and its subsequent analysis continues. We anticipate having the analysis completed this quarter and expect to pursue a 510(k) submission at that time. The second specific indication we are targeting is for cutaneous non-genital warts. We have enrolled 127 of 150 patients and expect to complete enrollment in our FDA IDE-approved pivotal comparison study this quarter. We continue to plan for a 510(k) submission for this indication as early as the end of 2021 or possibly early 2022 depending on follow-up timelines. The feedback from clinicians on work procedures using the CellFX System has been extremely positive. We continue to believe this is an exciting application. We will continue to pursue additional benign lesions to grow the CellFX System's application portfolio. We will focus our efforts on applications that can be achieved through single specific indications, which provide clinics greater flexibility to market such applications to their patients. We have early data sets for a number of additional benign lesions, including syringoma, nevi or common moles, and acne. As our treatment portfolio expands, we are targeting the most prevalent and compelling lesions in order to realize the true potential of the CellFX platform and maximize the value of NPS technology. So, there are clinical and regulatory works to be done before we are able to commercially launch these applications, but we believe it is beneficial to our patients to invest our resources towards these applications. We look forward to providing more detailed timelines for these benign lesions as we approach clinical, regulatory, and commercial milestones. Outside of our benign lesion pipeline, we are also happy to update that we have enrolled 18 of 30 patients in our FDA IDE-approved treat and resect basal cell carcinoma feasibility study, keeping us on track for enrollment to be completed by the end of the third quarter. Basal cell carcinoma or BCC is the most frequently occurring form of cancer in the US, with an estimated 3.6 million diagnosed cases every year according to the Skin Cancer Foundation. The current treatment of BCC is wide margin surgical excision, which often results in undesirable scarring. We believe that NPS technology and the CellFX System can be used to treat smaller BCC lesions with improved outcomes in cosmetically sensitive areas, such as on the face. We believe that this new application would be beneficial to a large number of patients, and we look forward to addressing their unmet needs, but the current standard-of-care is unable to meet. The goal of the feasibility study is to demonstrate that the CellFX System can safely be used to eliminate BCC lesions with a potentially superior cosmetic outcome when compared to wide margin excision. During the study, BCC lesions will be treated with the CellFX system, and approximately 60 days following the treatment, the treatment area will be examined for the cosmetic outcome. The lesion will then be excised using the current standard-of-care wide margin excision procedure analyzed by the study pathologist to determine whether there are any remaining basal cells present in the treatment area. We believe that the study will yield the required evidence to support a follow-on pivotal study in the first half of 2022 that could then lead to a specific indication for the treatment of BCC using the CellFX System. We have demonstrated that NPS technology can be used across a wide range of applications. We believe that we have still only unlocked a portion of its true potential. We will always look to advance new therapies and applications for the CellFX System to bring to patients. We are continually investing in the early development application areas in and outside of dermatology. As we learn from our patients and clinicians, we will use their feedback to support and inform our strategy. Our development and clinical teams remain steadfast in their commitment to bringing our technology to patients, and we will support them in all aspects of their endeavors through necessary investments. I'm excited to give more details on these novel application areas throughout the remainder of the year potentially at an Investor R&D Day, which will have more robust information on our ever-expanding application pipeline. For more detail on the current rollout and initial earnings of the Controlled Launch program, I will now turn the call over to Ed Ebbers.

Thank you, Darrin. I'm very pleased to report we are making great progress with the Controlled Launch program, and I'm excited to share the details with you today. Following initial use of the CellFX System, over 1,000 procedures have been completed at over 49 participating clinics across three geographies globally. Key opinion leaders or KOLs continue to add to our body of knowledge about the capabilities of our unique cell-specific NPS technology for a wide variety of common lesions. The scientific groundwork laid by the investigators who spearhead the clinical research studies with the CellFX Systems did a tremendous job providing clear evidence that has been published in peer-reviewed medical journals that support the unique safety and efficacy profile of NPS in clearing difficult-to-treat lesions in a controlled clinical study setting. Our global Controlled Launch program is achieving our intended goals by providing real-world validation of clinical and commercial best practices as well as the value of the CellFX System that they will share with the next wave of likely early adopters. Our Controlled Launch experience with these leading aesthetic dermatology clinics around the world is setting the stage by transitioning to a broader commercial introduction of the CellFX System to early adopters of energy-based technologies. In the second quarter, we expanded the Controlled Launch initiative to selected Canadian key opinion leaders soon after receiving our medical device license for the CellFX System from Health Canada. Like our US and European Controlled Launches, our first KOLs in Canada were poised to lead the way in their respective markets and provide their peers with the benefit of the early clinical and commercial experience, working closely with our direct distribution sales team in Canada. You may recall that the primary objective of our Controlled Launch is to ensure early positive patient and physician experiences and to establish clinical and commercial best practices for each region, as we prepare to scale up the commercial implementation of CellFX to the first wave of early adopters in each global region. Our commercial team's experience and extensive primary marketing research has shown that in the aesthetic procedure specialty market, the acceptance and adoption of a new energy modality like the CellFX System is dramatically accelerated by the trusted influence of key opinion leaders in their respective geographies. Positive KOL experiences build a foundation for the next phase of our commercial rollout when we transition from a controlled launch to prospecting the next wave of commercial early adopters. At this next phase, we expect that the trusted advice and influence of Controlled Launch participant KOLs and their best practices guidance established in this controlled launch program will solidify the clinical and commercial foundation for the adoption and subsequent commercial success needed to grow CellFX System franchises in these high-end aesthetic practices. The mutual investment of time and resources is representative of a partnership and commitment to offering patients a unique procedure that addresses common skin conditions that are not well addressed by older technology modalities. From a tactical perspective, our early experience in onboarding leading dermatologists has offered a wealth of knowledge that has accelerated our refinement of commercial processes internally and that accommodate the needs of clinics as we scale up our commercial launch team. Onboarding a new physician customer typically includes the entire staff at a clinic and includes a detailed overview of the CellFX procedure and NPS technology, followed by didactic sessions and learning modules on the mechanism of action as well as the operation of the system and the CellFX CloudConnect software. Just as importantly, our team is able to share the key learnings of respective dermatologists and encourage direct peer-to-peer communications. As you might imagine, these peer care communications are powerful accelerants for the viral adoption of a paradigm-changing technology like the CellFX System. Our experience with the early Controlled Launch sites is that our selected KOLs gradually ramp up their first quarter of patients and directly observe lesion clearance in skin healing. Our clinical and commercial team closely collaborates with our Controlled Launch sites to accelerate the mutual learning curve and shares that experience with their peers and colleagues to refine and optimize both clinical and commercial best practices as we prepare to scale up for broader commercial usage. This evolution of a learning curve for newly implemented sites has allowed us to ramp up the learning curve with more recently onboarded Controlled Launch sites, as we optimize our training curriculum. Controlled Launch participants who were onboarded more recently are progressing through their initial patients more quickly. We see this acceleration as a clear indication of the value of our Controlled Launch program that greatly enhances the success of a broader scale-up of our commercial activity. Looking to the future, as we complete onboarding of the remaining Controlled Launch participants, there will be an organic progression into a broader commercial launch, on track for the fourth quarter, involving cellular technology to early adopters that we have identified, as well as fielding inbound interest that our KOLs would generate through their peer networks. This gradual transition to a broader launch will leverage the experience of Controlled Launch participants, which will be bolstered by their willingness to share their experience with peers. In parallel, with our Controlled Launch, we continue to build on our scientific foundation at major meetings of key opinion leaders in dermatology and aesthetic medicine. As you know, our engagement in the scientific community has always been a priority for Pulse Biosciences. And we are especially excited that our Controlled Launch participants will have live in-person venues to discuss their recent experiences together. Our first is next week, a meeting called scale, which stands for the symposium for cosmetic and laser education, and several of our Controlled Launch participants are among the faculty of this meeting. This SCALE meeting is co-directed by Dr. Michael Gold, who will be covering the differentiated benefits of NPS technology from the podium, and by Dr. Brian Biesman, both of whom are participants in our Controlled Launch program. Dr. Biesman is the lead investigator of our Syringoma clinical study feasibility study and will be presenting clinical data results of that feasibility study in October at the annual meeting of the American Society for Dermatologic Surgery or ASDS. Dr. Biesman's live podium presentation of the Syringoma study results will appear in the best of cosmetic oral abstracts session at the ASDS. At the same SCALE meeting, we are also looking forward to our sponsored session in which Dr. Vic Ross of Scripps Clinic in San Diego and Dr. Joel Cohen of AboutSkin Dermatology in Denver, Colorado, will be taking attendees on a deep dive of the importance of cell specificity and what makes NPS technology non-thermal to further drive home how the uniqueness of our technology can change the way aesthetic physicians address benign lesions. Just a few days prior to the SCALE meeting, Dr. Thomas Rohrer of SkinCare Physicians of Boston, Massachusetts and past President of the American Society for Lasers in Medicine and Surgery, will be on the virtual podium, discussing NPS technology at the controversies and conversations in laser in cosmetic surgery, which is an advanced annual symposium. In the area of published clinical research, we are pleased to share that clinical results of NPS technology in the treatment of nongenital cutaneous warts was published in the May issue of Lasers in Surgery and Medicine, which is the peer-reviewed Journal of the American Society for Lasers in Medicine & Surgery. This clinical publication of our pivotal multi-center warts study reports the high efficacy of NPS to clear common nongenital warts by 60 days, with the majority of warts clearing with one and sometimes two procedures. Almost half of the warts treated in the study were recalcitrant, meaning that they had been treated in the past with other traditional methods and had failed these prior modalities. In the 120-day observation period of our study, none of the cleared warts had recurred, which is a big advantage for the CellFX procedure. In summary, our progress with the Controlled Launch program combined with our focus on continuing to build on the clinical data on the use of the CellFX System to expand applications positions us well to offer a leading solution for unmet needs of patients and dermatologists worldwide and propel our future growth. I will now turn the call over to Sandy.

Thank you, Ed. For the second quarter of 2021, operating expenses were $14.8 million compared to $11.4 million for the prior year period, an approximate $3.5 million increase year-over-year. Operating expenses for the three months ended June 30, 2021, and June 30, 2020, included $2.4 million of non-cash stock-based compensation. The year-over-year increase in operating expenses was primarily driven by the expansion of commercial and operational infrastructure including increased headcount to support commercialization activity. As I move into the discussion of our operating expenses, I'll focus my comments on our adjusted or non-GAAP results to provide insights into the underlying trends in our business. Please refer to today's press release for a detailed reconciliation of non-GAAP measures with the most comparable GAAP measures. Research and development expenses consist of salaries and related expenses for manufacturing research and development personnel as well as clinical trials and consulting costs related to the design, development, and enhancement of our potential future products. Non-GAAP research and development expenses increased by approximately $1.5 million to $6.4 million for the three-month period ended June 30, 2021, from $4.9 million during the same period in 2020, primarily due to increases in personnel, facility-related costs, and consulting and outside services in support of our FDA submissions and new application development. We expect the incrementally elevated research and development expenses compared to the prior year period to remain at approximately these levels for the remainder of the year, as we continue to invest in CellFX System application expansion initiatives. Sales and marketing expenses consist of salaries and related expenses for commercial personnel including marketing and commercial operations, as well as professional fees, trade shows, sponsorships, and other promotional activities. Prior to receiving FDA clearance, CE Mark, and Health Canada approval for the CellFX System, sales and marketing expenses were included in general and administrative operating expenses. Non-GAAP sales and marketing expenses increased by approximately $1.4 million to $2.6 million for the three-month period ended June 30, 2021, from $1.2 million during the same period in 2020, primarily related to increased personnel, consulting, and outside services to support commercialization activities not conducted in 2020. Sales and marketing expenses for the three-month period ended June 30, 2021, also included approximately $400,000 in non-cash expenses related to the Controlled Launch of the CellFX System. We expect sales and marketing expenses will continue to incrementally increase throughout the year, as we invest in activities to support broad commercial operations, including the Controlled Launch of the CellFX System. General and administrative expenses consist of salaries and related employee expenses for executives, finance, legal, human resources, information technology, and administrative personnel, as well as professional fees, patent fees and costs, insurance costs, and other general corporate expenses. Non-GAAP general and administrative expenses increased by approximately $500,000 to $3 million for the three-month period ended June 30, 2021, from $2.5 million during the same period in 2020, primarily related to increases in personnel facility-related costs and directors and officers insurance. Non-GAAP net loss for the second quarter of 2021 was $12.6 million compared to a net loss of $8.6 million for the second quarter ended June 30, 2020. Cash, cash equivalents, and investments totaled $47.4 million as of June 30, 2021, compared to $59.9 million as of March 31, 2021. Cash used in the second quarter of 2021 was $15 million excluding net proceeds received under the at-the-market or ATM equity offering program. Cash used in the second quarter of 2021 included the payment of $2.5 million to our Chairman, Robert Duggan, in accordance with the terms of the May 2020 letter agreement, whereby Mr. Duggan provided indemnity coverage on substantially the same terms as our prior year directors and officers’ liability insurance program. On June 30, 2021, we also strengthened our balance sheet through a $50 million common stock private placement with Mr. Duggan. The private placement included the extinguishment of the principal balance and accrued and unpaid interest of the March 2021 term loan, as well as the investment of $8.4 million of new capital. The $8.4 million of new capital was received in July, and therefore is not reflected in our cash balance of $47.4 million as of June 30, 2021 but instead is recorded as a related party receivable at the end of the period. We will continue to use our best discretion in authorizing distribution of shares under the ATM program. During the three-month period ended June 30, 2021, we issued and sold 130,748 shares of common stock under the ATM. During the six-month period ended June 30, 2021, we issued and sold a total of 288,490 shares of common stock under the ATM. The shares were sold at a weighted average price of $27.73 per share for aggregate net proceeds of approximately $7.8 million, after deducting sales commissions and offering costs. Cash usage will continue to increase incrementally, as we invest in activities to support broad commercial operations, including building a commercial team in Europe, increasing inventory levels, and conducting additional studies to support indication expansion with the FDA. Inventories were $2.7 million at June 30, 2021. We remain focused on our controlled launch strategy and its implementation through calculated investments to drive long-term adoption and growth. As such, incremental revenue-generating systems will come online throughout the back half of the year, as systems transition to commercial use following completion of Controlled Launch program commitments. Reflective of this cadence, revenue in 2021 will be weighted to the fourth quarter, as we anticipate initial commercial utilization as well as system sales to the first wave of early adopters. Now, I'll turn the call back to Darrin.

Thank you, Sandy. This is an exciting time for Pulse Biosciences, as we are entering the third quarter of our Controlled Launch program. As part of the program, our participating clinicians are learning more about our technology every day. And we are actively supporting them in any way we can. The initial feedback that we've received from our KOLs so far into the rollout has been incredibly positive, and we are looking forward to hearing additional success stories in the coming months. We have begun the commercial transition of select sites, marking an immense milestone for Pulse Biosciences on our journey to recording our first revenues and broader commercialization in the fourth quarter. The positive clinical data that continues to come in reinforces our commitment to developing new applications for the CellFX System for the benefit of our patients. We are capitalizing on the strong momentum that we have gained within the last few quarters, and we are well on our way to establishing widespread adoption and utilization of the CellFX System and NPS technology, and towards our mission of building a viable company. Joining me now for Q&A are Edward Ebbers, Executive Vice President and General Manager Dermatology, and Sandra Gardiner, Executive Vice President and Chief Financial Officer. Operator, please open the call for questions.

Thank you. We will now begin the question-and-answer session. Our first question is from Chris Cooley with Stephens. Please proceed.

Good afternoon. And thank you for taking my questions. And congratulations on the continued progress there with the CellFX System. Just two from me...

Thank you, Chris.

Hi. Thank you. Just two for me, here at the outset, I appreciate the additional color you provided about the ramp-up of your KOL sites. And that's leading to the five months versus the initial three months' conversion time. I'm curious though if you could maybe go a little bit deeper there in terms of the types of lesions where they're initially utilizing the system, if there's any variability there in terms of just the initial usage, the wait time, when we think about indications for use? And then, maybe that could then help us kind of better understand how these additional protocols and learnings would apply to the second wave of adopters. And then, as just a quick follow-on if I may for Sandy, I'm not sure if you're willing to do this at this juncture, but any additional color that you could provide in terms of the expectations for the EU commercial team build-out, either in terms of the scope of that but also the related costs and just kind of the timing on that build-out would be greatly appreciated. Thank you.

Thanks, Chris. Those are great questions. Let me start off by responding to your first point. The Controlled Launch has gone very much as we anticipated, with clinics experiencing this technology for the first time in a commercial setting. We have substantial clinical data and peer-reviewed publications regarding the treatment of sebaceous hyperplasia, seborrheic keratosis, and cutaneous non-genital warts. Initially, the launch sites predominantly focused on these lesions, which align well with the clinical data we have and the mechanism of action of our NPS technology and the CellFX System. As these early clinics began treating patients, they were thoughtful and methodical in their approach, taking around 30 to 45 days to observe the clearance of lesions and the healing process before treating the next group. This process resulted in an overall timeline of about five months for the Controlled Launch program. However, we are now seeing this timeline accelerate as we transition from clinical to commercial use and early adoption. The initial clinics are being careful and observant with their patients, which we appreciate. We have added 34 clinics in the second quarter, and these new clinics are operating more rapidly, utilizing the learnings we've gained. We expect to continue seeing good utilization of the lesions we discussed, but physicians are also frequently proposing new applications that they are excited about, which we want to explore further and generate clinical data on. Ed, would you like to add anything?

Yes. From the very beginning, we recognized that our mechanism of action to target cells would lead to these initial applications but also would cause physicians to lead to other types of lesions that have the same kind of architecture. That is the composite cells that sit on top of the dermis. So it sort of developed confidence with our initial lesions that quickly went to other difficult-to-address lesions and are seeing the same type of mechanism of action benefits with these other kinds of lesions that we saw with the top three that we've done our studies. So we expect more of that in the future, again as we anticipated with our mechanism of action-based messaging.

And then Chris, the second question I think I'll hand that one over to Sandy in terms of the European build-out.

Hi, Chris.

Hey, Sandy.

During the first six months of this year, we have primarily developed our European team. We currently have around seven individuals in Europe within the commercial organization, including both leaders and clinical application specialists who will drive utilization. This team spans key regions such as Germany, France, and Spain. While we might add a couple more team members for the remainder of the year, I believe that with the seven we have, we are prepared to transition from controlled launch to commercial launch by the end of this year. Therefore, I don’t anticipate any significant expansion since we filled many positions in the first half of the year.

Thank you for that color. I misunderstood. I thought you were implying that you were accelerating there in your comments. My mistake. Congrats on a great quarter.

Thanks a lot, Chris. Appreciate it.

Thanks. I was wondering if you can give us an update on the FDA, IDE approval for the feasibility study for BCC. I know – maybe I missed this in the beginning but you were going to enroll 30 patients. And is that still on schedule? And are you expecting completion of that by the end of 3Q?

Yes. Hey, Anthony, yes thanks, good question. Yes, we are on track in that BCC study as I mentioned in the prepared remarks, we have now enrolled 18 patients out of the total 30 and we are on track to enroll those up to 30 patients by the end of the third quarter here.

Okay. And then the pivotal study is to follow. And is that still scheduled for the first half of 2022? And any more details on what that pivotal study may look like?

Yes. Well we don't have any more detail right now. I think our current plan is to first complete this feasibility study, which as I mentioned is 30 patients. The patients get an initial treatment then there's an excision approximately 60 days later. And then that tissue is analyzed by the study pathologist. So we will complete enrollment in the third quarter. You can imagine then at 60 days until that excision is done and then there'll be some time to analyze that tissue. And so our estimate is still I think that in the first half of 2022, we hope to start a pivotal trial in BCC. Now that being said there's a lot between here and there in terms of completing the feasibility study and also collaborating with the FDA which we will certainly do as it will be an additional IDE-approved study. So there's still work to be done with the FDA. We have not talked about any of the parameters of the pivotal trial at this particular point. But we're really excited about this particular application and the quick start that we have here in the feasibility study. There's a lot of interest with all of our physicians that we're working with on this including all the Controlled Launch sites are really kind of excited to see how that application progresses through the regulatory and clinical process. So it still looks like the first half of 2022, but a lot of work to be done between now and then.

Good to now. That's a great update. And obviously, that's a large market as well as some of the ones that you said you're still growing a pipeline for including acne and overactive benign growth caused by overactive sweat gland. So I was just wondering are those still very much in the early stage of sort of mapping out your strategy there, or is there any other detail you can give on some of those other markets?

Yes. That's a great question. So yes, I would say those are early in the process. As you know we've done some early feasibility work in some of those things that you've mentioned, and we're really sort of mapping our strategy and beginning to talk to the FDA about some of these additional applications and indications. And I think what we're trying to do is sort of as we have kind of regulatory and clinical milestones upcoming around those or having for example an IDE approved then we can begin to share more detail on exactly what those studies look like, how long we think they'll progress, and then what potentially comes after them like we've done with BCC. But we certainly have a number of other things in the pipeline and we really do look forward to sharing some of the milestones that will be coming with those in the not-too-distant future.

Okay. Great. And then, I guess, just lastly it seems like everything is on track with the 75 KOLs. I know by the end of the year or before the end of the year expect to generate revenues is there any more detail on the timing? And in terms of the feedback that you're getting from the KOLs are there any tweaks that you're already making either to the protocol or the device in any way or anticipating to make, or is it too early? Are you going to wait for the feedback from all 75?

So, Anthony, let me comment first just on the feedback we're getting and any tools we're making. So I would generally say the feedback we're getting is great. I would say also we're learning stuff every day and every week and every month that we're in this Controlled Launch program. And those learnings are certainly leading to us tweaking various things we're doing that includes training. It includes conversations with physicians around patient selection and lesion selection. As you can probably imagine we're in over 50 clinics at this particular time. And we work with some really talented physicians and they have new ideas and new thoughts about technique and different things that they would like to try and should try based on the mechanism of action of our system. So I think that this Controlled Launch program is all about that. It's all about learning and tweaking. As far as the system goes, I would say largely, no, we haven't made any substantive changes to the system. The system has been functioning really well. All the systems in the field have operated really well, no issues with anything as far as we're concerned. So we have lots of ideas about how to improve things all the time. But I think as far as that goes the Controlled Launch has been going very well, and we're taking all the feedback we get and putting it into new training programs and education programs and other things. So with regard to revenue, I'll let Sandy jump in.

Hey, Anthony. So in the prepared remarks, you've heard Darrin say that we're starting now to see the transition from the Controlled Launch clinics participants into commercial. So we'll start to see some of the utilization revenue from that in the third quarter. But in terms of commercial revenue that would actually be heavily weighted towards the fourth quarter. We're still on track to begin the full commercial launch in the fourth quarter of this year.

Okay, great. That’s great. That’s a lot of good color. Thanks. I’ll jump back in the queue.

Thanks, Anthony.

Good afternoon, guys, and thanks for taking my questions. Congratulations on a great quarter. Just maybe a little bit more on the upcoming 510(k) applications for extension work. So I was wondering with the data analysis expected to finalize this quarter and next quarter, would you be releasing some of those data ahead of your submissions?

Ahead of the submissions, most likely not. I mean, I think a lot of the data rollout follows the cadence of some of the meetings, some of the big meetings in this area. But I think as it relates to clinical data that's going to go into a submission to the FDA, it's typical to get that to FDA and get that through the process before going out publicly with it.

I understand. My second question pertains to the educational aspect because enhancing KOL support and education is crucial for the wider commercialization of the device. I'm curious about the long-term strategy for this. Will it mainly consist of KOL symposiums and presentations at major meetings, or is there a broader approach to engage smaller specialty clinics?

Yes, that's a great question. I want to emphasize that our company remains deeply committed to physician and patient education and training. We believe that for a new technology to succeed and achieve high adoption rates in the market, education and training are crucial. Our organization will be specifically focused on this area. We take pride in ensuring that our team is well trained and capable of educating clinicians and their staff about the technology and its applications in their clinics. We are dedicated to this approach and will continue to prioritize it. Currently, we are working under a Controlled Launch program, which aims to help us establish best practices for training and education in the field moving forward. Ed, do you have anything to add?

Just that we've had our first evidence of Controlled Launch sites submitting abstracts based on the Controlled Launch experience at meetings coming up later in this quarter. So that's certainly what we had hoped for as part of this Controlled Launch is to see increased trafficking in new data from something other than our controlled clinical trials, which is really a good sign with the new energy-based technology. The other observation is that physicians are really used to the world of Zoom calls, so the opportunity for us to connect physicians in the Controlled Launch both with each other as well as with prospective purchasers to convey their experiences is something that we plan on in the third and fourth quarter. So this cross-fertilization that's the whole point of the controlled launch is very much an ongoing growth stage of the company and something that our sales team is very used to catalyzing with the Controlled Launch sites and the respective physicians that tend to follow them. So, I expect to see more of that in the coming quarters.

Thanks for the additional color and those helpful mix I have.

All right. Thanks a lot, Sean.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Darrin Uecker for closing remarks.

Thanks, operator, and thank you everybody for joining our call. We very much appreciate the support always and the great questions, and we look forward to our upcoming calls.

This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation and have a great day.