Chris Tyson - Managing Director, MZ North America Francois Michelon - Chief Executive Officer Michael Thornton - Chief Technology Officer David Wells - Chief Financial Officer.

Analysts:.

Good day. And welcome to the ENDRA Life Sciences' First Quarter 2018 Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Chris Tyson, Managing Director of MZ North America, ENDRA Life Sciences' Investor Relations firm. Sir, please go ahead..

Good afternoon. I'd like thank you all for taking time to join us for ENDRA Life Sciences' first quarter 2018 conference call. Your hosts today are Mr. Francois Michelon, Chief Executive Officer; as well as Mr. David Wells, the company's Chief Financial Officer; and Mr. Michael Thornton, the company's Chief Technology Officer.

Francois and Michael will provide a business update which will cover partner announcements, product updates and operational milestones, while David will discuss the financial results. A press release detailing these results is across the wires today and is available on the company's website endrainc.com.

Following management's prepared comments, we will open the floor to questions for those of you who are dialing in for today's call. Before we begin the formal presentation, please take note of the Safe Harbor paragraph that appears at the end of the press release covering the company's financial results.

And that any forward-looking statements that we make only apply as of the date made and are subject to inherent risks and uncertainties including those described in the company's SEC filings and should not be unduly relied upon.

Except as otherwise required by the federal securities laws, the company disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements. We also would refer you to the company's website for more supporting industry information. At this time, I’d like to turn the call over to Francois Michelon.

Francois, the floor is yours..

Thank you, Chris. And welcome everyone to ENDRA Life Sciences' first quarter 2018 conference call. The first quarter of 2018 represented continued operational progress for ENDRA as we successfully renewed and extended the term of our existing collaboration with GE Healthcare, the global ultrasound market leader.

We also expanded our patent slate with the award of two U.S. patents for non-invasive fat assessment supporting our TAEUS clinical product targeting nonalcoholic fatty liver disease.

These two operational milestones position ENDRA alongside a well-established commercial partner and the necessary IP protection to commercialize a new tool in the fight against the global epidemic of liver disease in the European market in 2018.

Before I go deeper into these exciting achievements I’d like to provide those of you who may be new to the ENDRA story. A brief summary of our disruptive technology.

ENDRA is currently developing the next-generation thermoacoustic enhanced ultrasound or TAEUS as we call it, to enable clinicians to safely visualize human tissue composition, function and temperature in ways previously possible only with CT or MRI at a fraction of the cost and at the point of care.

TAEUS is a platform with multiple potential clinical applications which we plan to commercialize over time as individual software offerings along with potential future disposables and licensing revenue streams.

Our first application in partnership with GE Healthcare is focused on the assessment of fat in the liver for early detection and monitoring nonalcoholic fatty liver disease, also known as NAFLD, which affects over a 1 billion people globally.

NAFLD is often asymptomatic, has no currently practical diagnostic tools and can progress to liver inflammation, fibrosis, cirrhosis and cancer. ENDRA's overarching goal is to bring multiple new capabilities to ultrasound a $13 billion market opportunity and thereby broaden access to better healthcare.

In the case of fatty liver, we want ENDRA's point of care technology to become as ubiquitous as a blood pressure cuff but focused on liver disease.

Since our initial public offering in May 2017 we've been focused on the following areas; number one, building the ENDRA team, number two executing our operating plan; number three, growing our intellectual property portfolio; number four, adhering to an asset light business model by leveraging partnerships to minimize overhead and preserve cash; and finally, number five, expanding our investor awareness initiatives.

We believe progress in these core areas and the GE and IP achievements in the first quarter position ENDRA for healthy growth in the quarters to come.

In early February of this year, we announced the renewal of our collaborative research agreement with GE Healthcare until January 2020 based on positive market trends in the liver space and our progress achieved on the development front in 2017, we and GE Healthcare mutually agree to extend our partnership by two years to continue the development and commercialization of ENDRA's TAEUS fatty liver technology.

Under the terms of the agreement, GE Healthcare will continue to support ENDRA's efforts to commercialize its TAEUS technology for use in a fatty liver application by among other things providing equipment and technical advice and facilitating introductions to GE Healthcare ultrasound customers.

In return for this assistance ENDRA will offer GE Healthcare certain rights of first offer with respect to manufacturing and licensing rights for the liver application. On the IP front during the first quarter of 2018 ENDRA was granted two US patents for noninvasive fat assessment to support our TAEUS clinical product targeting fatty liver disease.

These are the first US patents issued to ENDRA for noninvasive fat assessment backed by strong pipeline of thermoacoustic intellectual property.

On the shareholder communication front in Q1 we launched a completely new corporate website endrainc.com which provides deeper information on ENDRA's clinical and laboratory technologies in an easier to navigate design. We've had over 5000 visitors to the site since February.

Turning to the recent quarter in the second quarter this year, we presented our TAEUS clinical technology and private sessions to radiologist and hepatologists at the International Liver Congress of the European Association for the study of the liver, also known as EASL. This Congress took place in April in Paris.

EASL evolved into a major European Association with international influence dedicated to liver disease. EASL has over 4000 members from all over the world and provides an annual platform the International Liver Congress for 11,000 liver experts to meet and discuss the latest scientific research.

Our EASL meetings with liver focus radiologist and hepatologists from Switzerland, France, Romania, the Netherlands, Italy and Germany allowed us to refine our understanding of clinical needs by segment, gather valuable market intelligence on adjacent liver diseases and technologies focused on such things as fibrosis and finally to establish relationships with several early adopters and thought leaders in the clinical liver space.

We look forward to leveraging the feedback and these growing relationships with these potentially early adopters to lay the groundwork for our commercialization efforts in Europe later this year.

Now I’ll turn the call over to our Chief Technology Officer, Michael Thornton who’ll provide a deeper update on our IP portfolio, and human study for our TAEUS clinical product targeting fatty liver disease.

Michael?.

Thank you, Francois. During the first quarter of 2018, we strengthened ENDRA’s total intellectual property portfolio to include a total of 39 issued patents, file patent applications and prepared disclosures, up from 33 at the end of 2017. Since our IPO, we have filed 10 new patent applications.

Over the past several months, ENDRA has focused on protecting key enabling methodologies and technical innovations related to our TAEUS fatty liver application. We continue to prepare additional filings related to our technology and first product.

As an early innovator of clinical thermal acoustic applications, capturing IP like space and our target in applications is essential to the future of our business. IP remains a core strategic area of focus for ENDRA Life Sciences.

ENDRA now has two registered patents agents on staff and we continue to work with an established network of patent law firms that will ensure that our innovations and products are protected in the global markets that we're targeting for our technologies. As Francois mentioned during the first quarter of 2018 we were issued two U.S.

patents for non-invasive fat assessment to support TAEUS clinical product targeting non-alcoholic liver disease. The two newly issued patents cover our system and method protected any fat transmission from human body with a single and multiple thermal piece of measurement.

The patent support ENDRA's proprietary approach processing fat content and tissue and support the company's commercialization of a clinical application for non-invasive assessment of liver fat. The method utilized ultrasound energy to target a volume of tissue and then obtain thermal acoustic measurements of tissue composition.

These two patents along with several filed applications directly support our plan to commercial the transformative clinical application in the second half of 2018 focused on NAFLD. In addition, we've also received notice of allowance for three U.S. patents that were issued in the second and third quarters of this year.

Moving on to key milestones achieved on the product development front in the first quarter of 2018, ENDRA has contracted it's engineering, manufacturing and regulatory activities to establish medical device service providers, which we believe is the most capital efficient and shortest time to market approach to bring new medical technologies to market.

ENDRA is working with the engineering service vendors to translate the company's prototype TAEUS device into clinical product meeting CE regulatory requirements in the second half of 2018 followed by a planned FDA submission for the U.S. market.

And we have previously announced our partnership with CIMTEC, a contract research organization based in Ontario, Canada to oversee the first in-human studies with our fatty liver imaging technology. CIMTEC is associated with the Robarts Research Institute, a globally recognized research center for advanced imaging technologies.

In addition to TAEUS, the studies will involve conventional ultrasound imaging and MRI. Technologies that are routinely used in fatty liver disease clinical work.

The principal aims for this first in-human study which we aim to complete by midyear but to better understand clinical workflow, adjusting clinical data for ENDRA's quantitative TAEUS methodologies.

In collaboration with our clinical partners we have prepared and submitted documents to Health Canada for review where the team at ENDRA has worked tirelessly to build the system that will be used for the first clinical study. Pending approval by Health Canada we are at disposition to complete the project by mid-year.

Now I would like to call out a couple of additional details for our investor audience. We understand that Health Canada is currently facing a backlog of project applications which has resulted no longer than normal review cycle, but unfortunately, we may push our study results out by a month to July.

Secondly, our study protocols prepared and once the ENDRA receives Health Canada approval, we will schedule the standard procedures that we expect to be completed over the course of approximately one week. Now I want to move on to our regulatory and approval.

The work fall in usability feedback from our clinical study is critical and we’ll inform our final product design as we look to securing our Class IIa CE regulatory mark in Q4, which we will proceed to the fulfillment of our initial commercial orders.

For those of you who may not be familiar with the considerations and it is timeline for achieving CE mark, I want to briefly provide a summary to map out, what this looks like over the next couple of months.

Classification, we completed a safety analysis of our proposed TAEUS fatty liver procedure and remain confident that will be classified as low risk as a Class IIa device for CE marking.

Once the product engineering phase is complete for the fatty liver imaging device, we’ll initiate testing with outside agencies and assemble the technical final for submission through a notifying body. We expect this review process will take approximately 10 weeks with expediting options.

In conclusion, the recent progress made with leading medical device development partners and the anticipated human studies mid-year, positions ENDRA for initial commercialization of our TAEUS fatty liver product in Europe in the second half of 2018.

We believe we have the technical infrastructure and a great strategic partner in GE Healthcare and a growing base of early adopters to support the rollout once we receive our CE Mark in Europe. I’ll now turn over the call to our Chief Financial Officer, David Wells, for his financial summary.

David?.

Thank you, Michael and thank you all for joining. I’ll now provide a summary of our reported first quarter 2018 financial results. Our revenue for the three months ended March 31, 2018 totaled approximately $6,000, compared to no revenue for the same period in 2017.

Revenue earned in Q1 2018 is composed of service revenue related to our existing Nexus 128 systems previously deployed for use in preclinical applications. Our operating expenses increased to $2.8 million in Q1 2018, from $360,000 for the same period in 2017.

The increase in operating expenses in the first quarter of 2018 as compared to 2017 was primarily due to increased research and development expenses related to the development of our TAEUS product as well increased general and administrative costs related to the increased headcount, and professional fees associated with being a public traded company.

Approximately $380,000 of our G&A costs were due to options issued for services and was therefore a non-cash expense. Our net loss for the three months ended March 31, 2018 was $2.8 million or $0.72 per basic and diluted share as compared to a net loss of $700,000 in Q1 2017.

Our cash balance as of March 31, 2018 was approximately 3.2 million, as compared to approximately 5.6 million as of December 31, 2017. We had no long-term debt at March 31, 2018. During the quarter we used approximately 2.5 million in cash which again was due mainly to continued development of the TAEUS product.

Our study remains on budget and on track with our internal projections. We’re continually evaluating our capital needs in real time to ensure adequate capital to support our clinical, regulatory and operational activities. And we’ll continue to do so as we prepare for EU commercialization.

As has been emphasized before and in summary we believe the combination of our asset light operating model, clean capitalization structure and continued effective and efficient use of cash will position ENDRA to commercialize our TAEUS liver product in the European Union as scheduled. I will now turn the call back over to Francois.

Francois?.

Thanks, David. 2018 is off to a good start as we’re beginning to see the early results from the 2017 organizational and product development initiatives that support ENDRA’s growth in the years to come.

We’re confident based on our conversations with clinicians and partners around the globe that the demand for TAEUS clinical product for fatty liver and other clinical applications is strong.

Our discussions at the International Liver Congress in April continue to support our belief that our TAEUS technology is well positioned to address the key global needs of patients, clinicians and insurers by number one, broadening access to high-quality care; number two, reducing costs in healthcare; and number three, improving safety in health care.

To remind our audience in terms of broadening access to higher-quality care, ENDRA’s liver application will enable clinicians to easily diagnose and monitor a disease that affects over a 1 billion people globally using broadly available ultrasound.

Whereas today there are no practical diagnostic tools except for risky surgical biopsy or expensive and time-consuming MRI. Second in terms of reducing healthcare costs ENDRA’s TAEUS technology leverages inexpensive ultrasound and can be brought to market with an estimated end-user price of $40,000.

That's 50 times less expensive than a $2 million CT or MRI machine. Finally, in terms of improving safety again here ENDRA’s technology leverages safe ultrasound which has no ionizing x-ray radiation nor potentially toxic intravenous contrast agents.

I think it’s essential for any business bringing a new technology to market to assure that its focus on those [core areas] of the multiple stakeholders, clinicians, payers and patients to be successful. So, at this time I’d like to open up the call for some questions from our listeners. Operator if you could activate that. Thank you..

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question is from Michael [Barrick] with National Securities. Please proceed with your question..

I have a couple of questions, the first one is on the insurance side of it. What’s the process to get on the list so to speak because [indiscernible] I think companies get approval for a drug and I know it's another drug and it can take a year or two before they can get approval.

What would be the proses for something like yours?.

Great question, Michael, and in our investor presentation we do an economic and payback analysis where we also highlight the medium-term playbook that I've applied and is well known within medical devices to securing that dedicated reimbursement for technology which would be an add on reimbursement to existing ultrasound.

And I think first of all your expectation that it's a one to two year cycle is probably a little ambitious, I think we estimated it to be a two to three year process and that really involves getting the product out, with early adopters driving human use, publishing that information and starting to advocate within you know the liver conferences that we mentioned, cancer societies and others and this is really the new standard of use to become adopted to in turn finally apply lobbying efforts to insurers to cover it, and that's the thing that I think is fairly straightforward, but as we also detail in our presentation, Michael the payback and the economics have to make sense in my opinion out of the gate.

And so, because of the attractive economic price point of acquiring our technology and the fact that it rides on top of ultrasound which is currently reimbursed, our clinicians have told over and over again that if they can in fact deliver more single visit diagnoses using their existing ultrasound and do something new now such as assess and monitor fatty liver disease it’s a very attractive option even without a direct reimbursement.

And by that, I mean clinicians have told us repeatedly that this really drives increased utilization of their existing ultrasound and so there's a payback analysis we walk through this quite conservative but we estimate it could be as short as six months for clinicians.

So, two take-aways, one we have a plan and there's a clear sort of roadmap to getting that dedicated reimbursements but until then we believe the economics and the payback for technology even without reimbursement are still very attractive to clinicians. I hope that's helpful..

I appreciate it, my second question is this Canada thing, you mentioned that's pushed back a month. Does that push everything back a month or do miss any deadlines and then it pushes it back six months or something like that.

And just in connection with that, I'm not really quite sure what the process is after you've done the scans, what happens then, how long does it take?.

Sure, great question I am going to ask Michael Thornton to jump in but the Canadian study certainly informs and supports some of the downstream milestones and activities that we planned through the second half of the year.

It does not however push us through or behind a window specifically, so I'll let Michael speak to that, we still believe we'll have the CE Mark this year and will be commercializing at the very end of the year.

Having already started discussing planted numerous seeds and built a pipeline interested parties in the technology that we believe we can convert very effectively once we have the CE Mark. Michael could you give a little more color to that please..

Sure, of course clinical studies are very important in the marketing effort to support the claims of devices and in terms of commercialization but in addition to that there is a piece required for the technical file that concerns itself with usability and workflow and having an actual clinical with volunteers so now defers in clinicians really helps pressure that part of the documentation, so it is something that we will leverage from the clinical study as part of our technical file for submission of our technical file review to the [new signed] body.

Hope that answers your question..

Yes, it does, but I have got one more. I think you are right. There are many countries around the world who accept the CE Mark, not just in Europe.

Does your marketing plan include those countries where once you gain the CE Mark it's acceptable in those countries?.

Well, so yes and no in the sense that look first and foremost Mike the focus on the top markets in Europe specifically so certainly overtime as we broaden our commercialization efforts we will go into more of Eastern Europe, Scandinavia and other markets that may be inferring but for us we've been trying to drive the business in a very focused way some of the people that we've met clinicians that recent liver congress happen to be in some of those key markets and why are we focused their, while some of the top markets the obvious ones like France and Germany have a high population that is suffering from liver disease and therefore we've got a larger potential patient population to target those markets are also economically well-developed and have a large installed base of ultrasound GE's and others, and we found that many of the key opinion leaders not all of them no exclusively in those top five EU markets, are often in those markets in France, in Germany elsewhere.

And our goal commercially is to as we've said and have begun to build relationships, drive some evaluation sites early in the process with those influencers and start drawing concentric rings around them through their influence through additional clinicians in those countries as well as beyond those countries.

So I hope that one, you hear in my tone and my words focus we don't want to spread ourselves to thin, the other thing is we're planning to compliment GE sales channel with a few ENDRA salespeople and my goal is to stay as lean as possible and where can I do that most effectively is probably by putting someone you know in the Benelux region so that I can target France and the Netherlands as opposed to potentially putting someone into the Europe or Scandinavia and also in Spain so were thinking very sort of operationally how do we get the biggest bank for the buck, and then certainly and overtime we will grow.

.

I was thinking more along the lines of I'm sure GE has relationships in those places and the typical place there that they can't really afford MRIs rather there. So, ultrasound would actually be a much bigger option for second and third level countries but I do understand what you are saying with not spreading. .

Yeah and I’ll just jump in by saying that of course, [indiscernible] is not technically part of the EU, but they accept the CE mark and that’s one of the key early adopter sites that we’re looking for as a reference site and are very strong, one of the sites that we’ll be talking about shortly..

Do you have a time frame of how long you think you may go from being early adopters to getting to some significant sales?.

Well, I view 2019 as really that ramp up, Michael. So, we’ll plant seeds there and as you can imagine as the year picks up as we also start making progress with the U.S. market and our 510(K) that will come online in 2019.

So, I believe through the reach and relationships with GE are, our good understanding of the clinical needs and our segmentation of the market, we're going to be going to radiologists first, because they're the ones doing most of the liver scans, but we've got our second ring of specialists, herpetologists that have an appetite for this technology but they're not using ultrasound as often for that case.

So, we believe that a strong commercial plan segmenting the market geographically, by clinical need, will allow us to ramp it up, and I hope that doesn't sound like a side pedal type of answer, but we defiantly feel that building it this way steadily and in a very concerted effort is the best way to come online and I would say material volume basis in 2019.

I hope that’s all right?.

Yes, you have been more than generous with your time..

No, thank you again Michael for your time..

This concludes our question-and-answer session. I would now like to turn the call back to Mr. Francois Michelon for his closing remarks..

Thank you, Rob. Just very briefly I want to thank everyone for joining our call.

We continue to work very hard and to be transparent with our investors and very excited about the feedback we're getting from the marketplace and I want to also thank our very hardworking team of ENDRA engineers, scientists, patent specialists and marketing people who keep our technologies evolving, could not do it without you.

Lastly if we weren't able to address all your questions on today's call, please feel free to contact our investor relations firm MZ Group listed here and we’ll be happy to answer them. We look forward to speaking with you at upcoming Q2 2018 financial results conference call and wish you all good day. Thank you..