Good evening, ladies and gentlemen, and welcome to the Fourth Quarter of Fiscal Year 2019 Earnings Conference Call for Helius Medical Technologies. At this time, all participants have been placed in a listen-only mode.

Please note, this conference call is being recorded and that the recording will be available on the company’s website for replay shortly.

Before we began, I’d 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, including statements regarding the potential FDA marketing authorization of the PoNS device, the success of the company’s planned study, the future commercialization of the PoNS treatment, expected future clinical and regulatory time lines, the potential receipt of regulatory clearance of PoNS device in the United States and projected financial results..

Thank you, Kevin. Welcome, everyone, to Helius Medical’s fourth quarter and full-year 2019 earnings conference call. I’m joined on the call this evening by Joyce LaViscount, our Chief Financial Officer and Chief Operating Officer; and by Dr.

Sukhvinder Kalsi-Ryan, who is an Affiliate Scientist at the KITE Research Institute, the research arm of the Toronto Rehabilitation Institute and a Member of the University Health Network, or UHN. Let me provide you with a quick agenda for today’s call. We’ll begin by having Dr.

Kalsi-Ryan provide you with a brief overview of her experience with our PoNS technology and its potential role in the treatment of neurological condition.

I’ll then review our first quarter – fourth quarter revenue results and the operating progress that we’ve made during the quarter and in recent months, including updates on our early commercialization progress in Canada, as well as our regulatory strategies in Canada and in the U.S.

Joyce will discuss our fourth quarter and full-year financial results in detail and review our guidance for 2020, which we introduced in our earnings press release earlier this afternoon. I’ll then provide a few closing thoughts before Joyce and I open it up for the call for questions. With that, let me turn it over to Dr. Kalsi-Ryan. Over to you..

Good afternoon. Thank you for the opportunity to speak about my experience with PoNS. My name is Sukhvinder Kalsi-Ryan, and I’m an Affiliate Scientist at the KITE Research Institute in Toronto, Canada, as well as Assistant Professor in the Department of Physical Therapy at the University of Toronto.

I’m a physical therapist by training and have worked in the delivery of rehab to neurological patients for approximately 25 years. KITE is a part of the University Health Network and part of the largest Rehab Institute in North America. The KITE Research Institute is a driving force in rehab research worldwide..

Thank you very much, Dr. Kalsi-Ryan. We really appreciate your insight with respect to your experience with PoNS. I’m going to turn to a review of our fourth quarter revenue performance now. We reported total revenue of $152,000 for the fourth quarter of 2019, compared with $478,000 in the prior year period.

Our revenue in the fourth quarter of 2019 was driven by sales to clinics that have been authorized to provide our PoNS treatment in Canada, representing approximately 100% of the total revenue in the fourth quarter of 2019, compared to approximately 0% of the total revenue in the fourth quarter of 2018.

As a reminder for the reason for that, our revenue in the fourth quarter of 2018 was comprised of license fee revenues related to the strategic alliance agreement between HealthTech Connex and our wholly-owned subsidiary and their wholly-owned subsidiary, Heuro Canada or Heuro..

a little more than half of the total consideration was for the repayment of HTC’s investment in Heuro’s initial commercial infrastructure, including the establishment of five authorized PoNS clinics across Canada.

Approximately 35% of the total consideration was related to the outstanding receivable of CAD750,000 for exclusivity, which was signed as part of our original agreement in September of 2018. Finally, approximately 25% of the total consideration was related to 55 PoNS devices, which the company provided to HTC.

These amounts were partially offset by the sale of exclusivity rights granted to HTC to provide PoNS treatment in the Fraser Valley in Vancouver Metro regions of British Columbia.

More details on the agreement and related co-promotion agreements are available in our Form 10-Q for the third quarter ended September 30, 2019 and our Form 10-K filed earlier this afternoon. Let me now turn our review to our 2020 revenue guidance, which we introduced in our earnings release this afternoon.

For the full-year 2020, we expect total revenue of approximately US$2 million. For modeling purposes, the full-year 2020, we expect to treat approximately 300 patients. Our revenue guidance assumes an exchange rate of CAD1 to US$0.75. With that, I’ll turn the call back to Phil..

Thank you so much, Joyce. Okay. So stepping back, it’s pretty clear 2019 was a very difficult year. Through the adversity, however, of the 29 – of the 2019 FDA denial, we’re really proud of the significant accomplishments we’ve made during the course of this past year.

Our team was successful in bringing our PoNS technology to clinics and patients across Canada, and we were able to hone our commercial strategy as we better understand the dynamics of commercializing this innovative therapy. We were able to develop another path to U.S. regulatory clearance based on solid clinical evidence of efficacy and safety in MS.

Our team is focused on pursuing these opportunities as efficiently as possible and we look forward to providing updates on future progress. Before we open it up to questions, I’d like to close by thanking our employees for their exceptional effort and dedication in 2019. I’d also like to thank our customers and stockholders for their support.

And those on the call this evening for your interest in Helius Medical Technologies. I’m very thankful that you all have helped us provide this life-changing treatment to people who need it. Joyce and I are happy to turn it over to Kevin for the question..

Thank you. Our first question today is coming from Jeff Porter from Porter Capital. Your line is live..

Good evening, guys..

Hi, Jeff..

Hi.

You mentioned that there’s an approved MS drug, I think, you said it’s called AMPYRA?.

Correct..

Can you compare and contrast your data and safety with the data that drug was approved with?.

Certainly. So AMPYRA was approved about four or five years ago, was generating in the U.S. about $700 million a year. Their approval came on the basis of an improvement in what’s called gait speed. And so it’s a measurement of your ability to walk the speed with which you walk 25 feet.

Their data showed that about 35% of the patients overall had about a 20% increase in their gait speed, so fairly limited. And the side effect profile was – to neurological drug was quite significant. And the principal side effect and about 12% of patients was an increase in seizures.

If we compare that to the data that we have, both from our clinical trials and from our real world evidence, about 57% – 56.7%, to be precise of patients had a response to our treatment. And for us, we measure gait function, so it’s not exactly gait speed.

But in gait function, we saw a 56% – sorry, a 57% increase in in the functional capacity for your gait. So quite a bit more. And then the safety profile of our product after 42,000 treatments – individual treatments, we’ve not seen any side effects related to the device, serious adverse events of any kind.

And so let me also add that when we looked and audited what the – what other products had been approved through the same process, the data set that we have in MS is roughly similar to other data sets that have been supplied through the neuro division to be able to get approved.

And the biggest difference between this dataset and the TBI data set is right off the bat. We have statistically significant differences versus PT alone. That’s what FDA was looking for when – in their ask of us to give them new data on the TBI side.

So quite significant differences and we feel obviously pretty good about our opportunity to be able to get cleared..

So in a 510(k) de novo filing, is there part of that filing that allows you to bring to the FDA’s attention your data versus an approved drug out there, as well as your data versus potentially any other therapies that have been approved for this syndication?.

Yes, indeed. That will be part of the the preamble for our submission. So that’s all a fair game and that will be led by our counsel, who has an enormous amount of experience dealing with this division..

And will you be able to utilize the safety set and all the manufacturing parts of the previous 510(k) filing for the TBI? Can you just kind of lift those sections and include them in this one?.

Not quite, Jeff. What we have to do for the other sections is, we have to make sure that everything that we had said for TBI before is also true for MS.

And that’s why w – it’ll take us about three or four months to complete our filing, because ultimately, we have to compare and make sure that we prospectively compare human factors, if someone with MS similar to someone with TBI and all of these kinds of things, and then make sure that we update all of the files based on the experience that we have around the world and, obviously, mostly in Canada now..

And finally, you mentioned that, I think, was February 27, you filed for label extension in Canada..

Yes..

What is the expectation of the timeline for your response to that filing?.

So in a non-coronavirus world, it’s supposed to be 15 days. So I can only rely on what our experience has been, Jeff. Last time, our submission went in and two weeks later, or 14 days later, we got cleared. We submitted on the 27. We actually audited over the last couple of years in normal time. It looks a little more like 25 to 30 days.

But who knows with the coronavirus, what impact that has, if any, we really don’t know. So our best guess is that – but I’ve stopped predicting when our clearances come through. All I know is that, we had a really strong submission based on the questions that Health Canada asked us..

Okay. And just the last follow-up. We’re all aware that the addressable market for MS is large.

Do you feel like up in Canada assuming we get clearance there that your pace of PT and patient adoption will be accelerated from what you experienced in TBI?.

So yes, here’s a couple of dynamics that we’re looking at. First of all, patients with TBI and the therapy – the treatment cost is quite high. And so patients with TBI know that next year, they won’t be any worse. There’s no disease process going on there.

So essentially, their patients – or a lot of them are patients saying, “Hey, I’m going to wait for reimbursement.” The dynamics of an MS population are very different. They know that next year, the – they will be worse off – likely be worse off than they are today. Canada has the highest incidence of MS anywhere in the world.

So it has a really, really well-organized patients or patient support system, advocacy and all of these things. So we believe that those dynamics are going to be better for that.

And then, of course, we have the benefit of Montel – Montel Williams, who has MS and we’ll be able to go across the country and talk about – finally talk about what produced his recovery. So we think that those dynamics will certainly help us in making sure that we accelerate things.

But let me just conclude with, we do believe that the clinics that we just signed up with the new criteria are also going to make a really big difference regardless of that dynamic..

Okay. That’s it for me..

Thank you, Jeff..

Thank you. Our next question is coming from Anthony Lamport from Lambda Management. Your line is now live..

Could you comment on why the increase in revenues for this year is only maybe 30% over the revenues for last year, since you have so many more clinics operating?.

Yes. So the way we’re looking at that is the $2 million in the U.S. revenue guidance assumes approximately 300 patients will be treated. When we compare that to 2019, we had 122 patients that were treated over the course of the time. As we look at the number of clinics, the number of clinics has certainly increased.

It does take sometime to get those clinics up and running in terms of being operational. In general, from a clinic perspective, they’re usually booked about two months out. So even once they get authorized, it will take a little bit of time for them to work the PoNS treatment in and identify the appropriate patients for the treatment.

The other thing from an overall revenue guidance perspective, Tony, is that our model, we had a price reduction in 2020. And it’s basically, what we’re looking at is, we’re looking at CAD9,500 for the PoNS as opposed to it was closer to CAD14,000 in the past. So we have taken down our price.

We’re treating more patients than we were and we’ll continue to expand across. But we really want to focus on the number of patients that are being treated as opposed to looking at the number of clinics and clinic capacity and the rest..

Did you have a follow-up, Tony, or does that answer your question?.

Well, I guess, it seems to me that the – when you get the clearance for MS, are you also budgeting in those 300 patients treating people for MS, or are you saying you won’t treat anybody next year – this year?.

So right now, since we don’t have clearance, we don’t count on anything happening. So basically, this is a forecast based on our clinics with our existing framework. .

If you just gave a guess, this is not your official forecast. But you’ve indicated that people are – have a more – a greater urgency of getting treated in MS, because they’re going to deteriorate if they don’t.

I guess, if you get receive approval by the end of March, let’s say, or end of April, that make too much difference, what might revenues be in addition of revenues be from this new area?.

Look, I feel much, much more comfortable, Tony, and for everyone on the phone to make those predictions when we get our clearance and know exactly when it comes, how it’s going to come through, and we’ll update it as soon as that comes through. But right now, I just don’t feel comfortable speculating. We haven’t been able to promote.

We don’t know how people are going to come into the system. So there’s too many unknowns right now to be able to give – it would be a wild guess..

Well, so your wild guess is zero, right?.

Today, it is. It will be different once we get our clearance..

Well, I hope the stock doesn’t hit zero first.

What the second question obviously, is, how are you coming on financing?.

So as of the – as we said that we had a $5.5 million in cash as of year-end. We expect to burn about $5 million through April. And as we disclosed in our 10-K, we have cash to fund our operations into May. Based on our current strategic plan and what we’re doing is, we put an ATM in place in the first quarter of 2020.

And we’re thinking that our strategic plan has us that we need about $17 million for 2020, with an additional $3 million to fund the TBI trial. So when we look at all of those pieces, what we’d like to do is, we’re evaluating the different sources of capital.

We’d like to raise a portion of the $17 million that we feel that we need at a time rather than raising it all at once. And we plan to execute our plans to deliver milestones, so that we can create value during the year as we look to take additional funding in..

And your milestones are to basically show about $2 million of revenue and get clearance in Canada for MS?.

Right..

Well, we think that the – obviously, the $2 million milestone is a year-end one. We’d like to believe that we’re going to get our clearance for MS and that would signal strength with respect to our ability to get a regulatory clearance.

And then we expect that would – although we can’t guarantee, but we expect that, that will give us a good response for our sock and try to do the raise before then. All of that will depend on the timing, of course, of the MS indication when we hear from Health Canada..

Thank you..

You bet..

Thank you. Our next question is coming from , a private investor. Your line is now live..

Good afternoon, Randy..

Yes. Good afternoon. Great updates. Actually, my question was the same as the last caller. I was just curious about what the funding strategy is and more? And what’s your – kind of what’s your monthly burn is at right now? I think that was sufficiently answered by the previous caller. So….

Okay..

…I get kind of trying to raise capital in tranches as you move forward. I think, obviously, that’s really your only option at this point. And this approval would certainly be helpful in getting that done.

So, all of the shareholders have been through quite a roller coaster with some previous financings and obviously, we talked about what’s up ahead and there is no certainty.

But I think this new MS opportunity, both here in Canada does give us incidentally more upside and potential to raise capital at some more meaningful levels than what we’ve had to do in the past.

So I’m very encouraged by that and very thankful to hear that on the call today?.

Thank you, Randy. We certainly are, too, and I get to be the one that shares that information and I just want to use this opportunity to complement our regulatory team and our medical team.

It’s all due to their incredible expertise in our outside advisrsthat we were able to not the least of which is Joyce in putting together our real world validated database in Canada that allowed us to generate that data. Without those things, we would not have been able to submit for our clearance for MS.

So, we’re excited about in a very tough near, as you said, Randy, that we’ve tried everything we can to create value..

Yep. Great..

Thank you. We’ve reached the end of our question-and-answer session. Ladies and gentlemen, that does conclude today’s teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today..

Thank you..

Thank you..