Ladies and gentlemen, thank you for standing by, and welcome to the Helius Medical Technologies Earnings Results Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Michelle Bilski. Thank you, please go ahead..

Thank you, Cherry. Welcome to the Q4 and full year 2021 earnings conference call for Helius Medical Technologies. This is Michelle Bilski of In-Site Communications, Investor Relations for Helius. With me on today's call are Dane Andreeff, Helius Medical's President and Chief Executive Officer; and Jeff Mathiesen, Chief Financial Officer.

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 current expectations of management.

These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the risk factors section of most - of our most recent annual report on Form 10-K and quarterly report on Form 10-Q.

Such factors may be updated from time to time in our filings with the SEC, which are available on our website. All statements made during this call are as of March 14, 2022. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

I would now like to turn the call over to Dane Andreeff, President and Chief Executive Officer of Helius..

Thanks, Michelle. Welcome, everyone, to Helius Medical's fourth quarter 2021 earnings conference call. This past quarter was one of remarkable achievements for the company as we prepared for the first quarter 2022 U.S. commercial launch of PoNS therapy for treatment of mild-to-moderate multiple sclerosis.

PoNS, which stands for Portable Neuromodulation Stimulator, is the first and only patented therapy combining trigeminal nerve neurostimulation with physical therapy to reduce symptoms of neurological disease or trauma.

The mechanism of action works through neuromodulation or the modification of the nervous system by targeted stimuli, and the PoNS device is designed to induce trigeminal nerve neuromodulation via the tongue.

During the quarter, we were issued a patent for a version of PoNS, which will allow us for a wireless connection between the mouthpiece and controller.

In subjects with gait deficit due to mild-and-moderate symptoms of MS, 14 weeks of PoNS therapy has shown significant gait improvement compared to physical therapy alone, meaning it's both safe and effective. This is particularly noteworthy because until now, other treatments have had significant limitations. Though the current U.S.

indication is for MS, we believe PoNS has the potential to improve dynamic gait and balance deficits across a variety of indications. As mentioned, the commercial launch of PoNS for MS was planned for Q1 of this year, and I'm pleased to report that the first prescriptions were received earlier this month.

From what we've observed, patients and physicians are excited about the therapy, especially since the PoNS device sits on the tongue and no procedure or implant is involved. They also appear receptive to the price. During 2021, we contracted with an industry consultant to conduct a health economic study of PoNS therapy.

Based upon the results of this study and comparing PoNS to other neurostimulation devices utilizing similar patented technologies, we established a U.S. list price for the PoNS device of $25,700, comprising of $17,800 for the controller and $7,900 for the mouthpiece.

We are actively pursuing coverage under commercial and government reimbursement programs. However, we expect that process will play out well into 2023, if not longer, for some payers. In the interim, we expect U.S. sales to be cash paid.

Accordingly, we will be offering discounts to these patients, with net cash pay price targeted to be modestly below the estimated reimbursement levels we expect CMS will ultimately establish. PoNS is the only medical device approved in the U.S. for treatment of balance and gait deficit due to MS.

We're thrilled to bring this treatment to 1 million Americans suffering from the disease. And soon, patients in Australia will have access to this groundbreaking therapy.

During the fourth quarter, we received marketing authorization from the Australian Therapeutic Goods Administration, or TGA, for the sale of PoNS as a Class IIa medical device to be used by health care professionals as an adjunct to a therapeutic exercise program to improve balance and gait, which is the broadest possible scope.

We've begun the path towards commercialization, and we are working to identify a distribution partner in Australia.

In order to facilitate the commercialization of PoNS in the U.S., we have initiated our Therapeutic Experience Program, or TEP, a company-sponsored open-label observational trial designed to evaluate the impact of subjects' adherence to PoNS therapy in patients with MS.

We set up the TEP study during the fourth quarter, and enrollment is set to begin in the spring with NYU Langone Health as our first clinical trial site. The goal is to treat 40 to 50 patients across 10 to 12 planned centers of excellence in 2022, in parallel with our commercial launch.

When selecting future partners, we will target the neurologists and neuro rehab centers we've identified as having the greatest potential to be early adopters of technology, focusing on the 10 states that comprise more than 50% of MS patients.

As I mentioned in last quarter's call, in 2021, PoNS was granted breakthrough designation for the treatment of dynamic gait and balance deficits following a stroke.

During the fourth quarter, we launched a partnership with the Medical University of South Carolina for a pilot trial in stroke, which will allow us for observation of PoNS therapy in a real-world clinical setting, with an expected enrollment of 12 patients.

At the same time, pending receipt of additional funding, we will initiate a pivotal clinical trial in stroke patients with the aim of obtaining FDA clearance in a second indication. If the PoNS therapy is approved by the FDA for stroke following the pivotal trial on a timely basis, we would target a commercial launch during the first half of 2024.

Of the estimated 7 million Americans who suffer from the physical effects of stroke, 80% experience gait impairment, and we see this as a tremendous opportunity for Helius. Turning now to a brief update on our commercial activities in Canada.

In Canada, PoNS is authorized for the treatment of gait deficit due to symptoms of MS and chronic balance deficit due to traumatic brain injury. As of December 31, we had 37 authorized PoNS clinics in Canada, up from 31 at the end of 2020, a nearly 20% increase despite headwinds from COVID-19.

Fourth quarter revenue increased by 35% year-over-year and more than doubled compared to the third quarter. Though we are pleased with these results, Canadian revenue still remains uncertain due to the ongoing impact of COVID-19.

Clinically, we are continuing our clinical experience program with Toronto Rehabilitation Institute, which is part of the University Health Network, and hope to publish those results in 2022. We also plan to publish the real-world evidence we've seen from our Canadian commercial activities in MS.

With that, let me turn the call over to Jeff to discuss our fourth quarter financial results in more detail..

Thanks, Dane. It is a pleasure to be with you today. Total revenue was $258,000 for the fourth quarter of 2021 compared to $191,000 in the fourth quarter of last year. And fourth quarter product sales this year increased by 149% sequentially from the third quarter of 2021, an increase of 146%.

Revenue in both periods was driven by sales to neurotherapy clinics in Canada that had been authorized to provide our PoNS therapy and remained impacted by the significant business disruption in Canada related to the COVID-19 pandemic as well as reduced introductory pricing.

However, beginning late in the third quarter of 2021, some of the COVID restrictions in Canada were loosened, creating an uptick in activity. For the fourth quarter of 2021, our gross profit increased to $129,000 versus a gross loss of $10,000 in the prior year, which was impacted by an increase in the inventory reserve.

Operating expenses for the fourth quarter of 2021 increased to $4.2 million compared to $3 million in the fourth quarter of 2020, an increase of $1.2 million. The planned increase primarily resulted from increased clinical and development activities preparing for the U.S. commercial launch of PoNS.

Operating loss for the fourth quarter of 2021 was $4.1 million as compared to $3 million for the prior year period. We reported net loss for the fourth quarter of 2021 of $4.1 million or a loss of $1.31 per share compared to a net loss of $2.9 million or $1.70 per share - $1.77 per share for the same period last year.

Turning to a discussion of our balance sheet condition and recent financing activities.

Our cash burn from operations for 2021 was $13.4 million compared to $11.7 million during 2020, adding $3.5 million during the fourth quarter, which was only slightly above the average quarterly burn rate through the first three quarters as we manage spending while preparing for our U.S. commercial launch.

As of December 31, 2021, we had $11 million of cash and no debt. In addition, we have $14.4 million available under our equity line of credit with Lincoln Park Capital, subject to the terms and conditions therein, ensuring a source of equity capital, if and as needed, which could significantly extend our runway. Turning to our outlook.

We currently expect first quarter 2022 revenue to range from $150,000 to $170,000, approximately double the first quarter revenue in 2021. We expect subsequent quarterly revenue to increase sequentially each quarter throughout the year as the U.S. commercialization of PoNS takes hold.

To date, we have been successful in securing our first PoNS prescriptions, and we currently expect the first U.S. shipment to occur in April. With that, operator, let's now open the call for questions..

Your first question comes from the line of Jeffrey Cohen from Ladenburg Thalmann. Your line is now open..

This is actually Destiny on for Jeff this afternoon. I guess - and maybe a little too soon for you to give me this metric, but I thought I would ask anyway. Of that $150,000 to $170,000, what percentage should we assume is from Canada? And what percentage would you expect from the U.S.? I would think it would be very little in Q1, but you tell me..

So as I concluded my comments, I mentioned that we expect our first shipment in the U.S. to be in April. And as such, our first quarter revenues will be entirely from Canada..

Okay. Got it. And then going back to supply chain. I know that you guys put a lot of effort before this commercial launch to ensure you have sufficient inventory.

Are you seeing any issues with supply chain? Or it's not impacting you currently because you put all that effort forward way before the commercial launch?.

Yes. Jeff, I'll take that. So the great thing that we had, we had inventory for the next two years, Destiny, in our parts and being able to manufacture. But unfortunately, OEMs ran into COVID labor issues. They - also, just timing of being able to produce our product, both for our Canadian orders and also U.S. orders.

So we - like most people, we were affected. Thankfully, it wasn't on supply, but it was mostly on labor due to our OEMs..

Okay. And then I'm curious about some of your R&D activities. I know that you received that patent for a wireless device.

Is there a chance that there could be a next-generation device or any other technological updates?.

At the moment, there's no R&D update at the moment. We were excited to receive that patent for our wireless mouthpiece, you can imagine, to understand the consequences of having Bluetooth related to the mouthpiece versus the controller. So we are looking at that as a future pathway going forward..

Okay. And then last one for me. With your investor - investigator-initiated study, how much insight do you have into that study? I know sometimes when they're run by an investigator, it can be a little blurry on the information you get.

But will you have insight into some of the timing, treatment protocols, enrollment end points, et cetera?.

Destiny, are you talking about the TEP program?.

No. I was actually talking about the stroke trial, the pilot study..

Yes. So the pilot study is ready to go and to be implemented. It has already been designed. We've had some input, but we've also put a stroke advisory panel of experts together to help us get the results that we want to see so that it will help us with our pivotal clinical design for the FDA and that application for stroke..

Your next question comes from the line of - okay, I am showing no further questions at this time. I would now like to turn the conference back to Dane Andreeff..

Thank you, operator. As you've heard today, we're already pleased with the perception of PoNS in the U.S. marketplace and are looking forward to the results of the open-label trial with the Medical University of South Carolina and our pivotal trial in stroke.

Our technology has the potential to help a large population across a variety of indications, and we have more faith than ever in our ability to unlock the full potential of neuromodulation and become the standard of care for gait deficit in the U.S., Canada and Australia, while at the same time, bringing value to our shareholders.

I just want to thank you for your time and your interest in Helius Medical Technologies tonight. Thank you..

This concludes today's conference call. Thank you all for your participation. You may now disconnect..