Q4 2023 Heartbeam Inc Earnings Call

Participants

Branislav Vajdic; CEO & Founder; HeartBeam, Inc.

Rob Eno; President; HeartBeam, Inc.

Deborah Castillo; VP of Regulatory Affairs; HeartBeam, Inc.

Rick Brounstein; Consultants CFO; HeartBeam, Inc.

Ben Haynor; Analyst; Alliance Global Partners

Presentation

Operator

Greetings, and welcome to the HeartBeam fourth quarter and full year 2023 financial results conference call. (Operator Instructions) As a reminder, this conference is being recorded. And before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates or other information that might be considered forward looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise our or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors, a press release detailing these results crossed the wire this afternoon and is available in the Investor Relations section of our company's website, heartbeam.com.
Your host today, Branislav Vajdic, Chief Executive Officer and Founder; Rob Eno, President; Deborah Castillo, Vice President, Regulatory Affairs; and Rick Brounstein, consulting Chief Financial Officer, will present results of operations for the fourth quarter and full year ended December 31, 2023.
At this time, I will turn the call over to HeartBeam's Chief Executive Officer, Branislav Vajdic.

Branislav Vajdic

Right. Thank you, operator. I'd like to start by giving a brief overview of heartbeat and our technology is really important to understand how we see the technology is different and vastly more powerful than the most common personal ECG technology that are out there in the marketplace today, a 12 VECG. in one of the most commonly performed diagnostic tests. And this is actually a standard in hospitals and clinics. There are many digital technologies that can be used by patients, telco or consumers at home. You can see a couple of examples on this slide. There are not WDCG.s. Instead, there are only three lead or six fleets, and this is adequate for the affected many years, but it is not sufficient for the second half of that or complex arrhythmias. In contrast, there have been 80 go. Is it easy to use their card size system that says decided about the DCGRT. six handheld device the noise. So electrodes are buyers and it is easy for the patient to apply.
The key aim of the heart of this technology is to quickly and accurately tell for initial exerted by the full range of chronic conditions, including a heart attack and outside of a medical facility. Our proprietary ZEVETG. technology offers higher resolution monitoring by capturing a higher activity in key objections, X, Y and Z, we can provide for many cardiac conditions, a more complete view of the heart than a standard. Certainly ACT. The AiMI GO device, coupled with a smartphone app and cloud based diagnostic software, enables remote evaluation of cardiac centers by physicians, and we believe it could reduce the critical time to put I-vation for heart attack patients die every patient base three to four hours before seeking care, shortening that time from symptom to the door or medical institution will reduce complications can save many lives. In addition, more than 80% of patients with chest pain who go to the emergency room are not having a heart attack an effective triage tool in the hands of the patient would reduce the number of unnecessary emergency room visits. It does cost the health care system.
So why do we think that an ease-of-use value? ECGC. patients is a transformational well, first, having the ability for patients to take frequent early readings over time and in a variety of real-life situations potentially has huge diagnostic rights whenever a patient is feeling symptoms. They can get us verbally reading that will be reviewed by a physician. Secondly, 28, fairly DCG., both symptomatic and asymptomatic over time will allow physicians to gain insights to help guide target care frequency. We ECGs two pages. A trendy is simply not feasible today. And finally, as we will discuss in more detail, combining deep learning algorithms with a large number of longitudinally phase VCG.s has the potential to create an unparalleled predictive diagnostics. Operator, we have the opportunity to address not only partly a three-player market, but also coronary artery disease market, which is about six times larger than the United States. There are approximately 3 million of 18 patients, representing a $2 billion market. There are approximately 20 million total coronary artery disease patients, which is a 12 billion market. So the overall opportunity in the US only is about $14 billion online.
With that now turn the call over to Rob Eno, our President.

Rob Eno

Thanks for the five. We wanted to give an update on our progress related to AMI go. Our initial clearance for the Amigos system will be a major milestone for the company, and it's important for many reasons to start. We expect this to be the first patient held three DVECG. device to be cleared by the FDA. Also, this clearance will be the basis for further FDA submissions for hard beam switch, the cornerstone of our efforts, the three DVECG. approach is an excellent platform for AI algorithms. We have a major high effort underway. We're encouraged about the progress and the initial results we presented at scientific meetings in Q2. In the longer run, we believe that applying AI algorithms on top of the rich TECG. data, especially with longitudinal datasets from patients taking readings monthly weekly or even more frequently could result in unsurpassed predictive and diagnostic capabilities. In addition, there is significant clinical research over several decades that demonstrates the diagnostic value of the VCG. approach by capturing the heart vectors in three dimensions. There's even more diagnostic information available than in the standard 12 weeks. And our landmark study summarized here that was published in Jack advances in August of last year showed that the AiMI go. The ECG technology had similar diagnostic ability as a 12 VDCG. in detecting coronary occlusions and adding a baseline reading for comparison, which is a crucial part of our system, resulted in significantly better accuracy than a single 12 lead ECG.
And with that, I'd like to introduce Debbie Castillo to give an update on our regulatory efforts, Debbie HeartBeam's Vice President of Regulatory. She holds a PhD in biomedical engineering from Johns Hopkins University and has extensive experience in regulatory affairs and industry and also with the US Food and Drug Administration, where she held various roles, including senior lead reviewer, lead scientific reviewer and Acting Chief of the cardiac devices brand.

Deborah Castillo

Thank you, Rob. As a reminder, we have expecting the application under review with the FDA for any dose three DDCG. system. This application includes our three DVCG. credit card sized device that records cardiac activity from the XYD. projections and displays the signals for clinician review. The system also includes a patient application, a physician portal and wireless communication among the elements. As Rob mentioned, this is the cornerstone commission for Harton and will be the basis of future regulatory efforts. We submitted this five 10 K application in the second quarter of 2022. The review remains active with FDA as we have successfully passed the acceptance of the filing and have completed the initial substantive review fees with questions and requests received from FDA.
As we continue to navigate the progress towards clearance, we have taken advantage of all available regulatory tools and opportunities to work interactively with FDA gaining valuable official communication and feedback on our proposed response approach, including our testing protocols. We have conducted the agreed-upon testing addressing these open questions and are in the process of preparing our official responses. Once these are submitted, the FDA will complete the review of our five 10 K. We currently are anticipating clearance by end of quarter two of 2024 I also want to touch on our second FDA submission following, of course, the clearance of Indigo three DVCG. system.
We will be working to obtain a second five 10 K clearance. The second five 10 K will be focused on the ability to offer physicians a pair of baseline and symptomatic 12 lead ECGs, both of which are sensitive to synthesize from the three DVCG. signals to XYZ. We coded by the heart being a MeeGo device. This approach leverages recently issued patents for a personalized system for synthesizing 12 lead ECG waveform. Second 5-10K application is planned to be submitted to FDA by Q3 of 2024. A key part of this submission will be a pivotal study named our valid ECG. study, which will demonstrate the similarity between the synthesized 12 lead output from Indigo and a simultaneously recorded standard 12 lead ECG. To date, we have held two pre-submission meetings with FDA on this 12 lead synthesis submission. These meetings have been focused primarily on the performance goals or proposed pivotal clinical studies. Rob will now discuss the details of the pivotal study.

Rob Eno

Thanks, steady. Based on feedback from FDA and our clinical experts, we've designed our clinical study, the valid ECG. study. As we announced last week, we've enrolled the first patients in this study, which is designed to validate the go 12 lead ECG synthesis software. By comparing its results with those of a standard hospital-based FDA cleared 12 lead ECG using both quantitative and qualitative assessment methodologies. We plan to enroll approximately 198 patients presenting to an outpatient cardiology clinic or arrhythmia center with symptoms suggestive of cardiac arrhythmia or for routine checkup of previously diagnosed arrhythmia. The study is expected to include up to five sites in the US.
The primary objective is to demonstrate the similarities of ECG waveforms between AMI goes, synthesize 12 lead ECG and a standard 12 lead ECG recorded simultaneously in each subject by assessing intervals and amplitude in preparation for this pivotal study we completed an 80 patient pilot study, which mirrors the pivotal study. Based on these pilot results, we initiated the valid ECG. study. We anticipate completion of enrollment in the Valley ECG. study in Q2 2024 and submission of the second five 10 K application by Q. three 2024. We continue to anticipate that our limited launch of AMI GO will occur by the end of 2024.
For now, I'd like to turn it back to Branislav solve for an update on our AI efforts.

Branislav Vajdic

As we discussed last quarter, we have an active artificial intelligence program underway. Our AID. includes five years. These are the leaders who has deep experience expertise, experience, including positions at Apple, Microsoft and Google. We have acquired approximately 1,000,012 VDCD.s from various sources, a key element in our fast-paced development efforts. We have developed initial deep learning algorithms focused on the ability to detect various cardiac arrhythmias. And we have data with this deep learning algorithms accepted for presentation of the Boston in May, but we believe that when combined with our credit card cited, Amy go ZDVCG. technology, Harvey's A., I will provide additional value to patients and physicians in a number of ways including providing automated classification of cardiac conditions, including carbon, has the potential to further enhance the user experience and simplify the onboarding process. And finally, in the longer run, we believe that applying deep learning algorithms on top of the bridge, we see G. data that we obtained from our AMI GO device, especially that one 22, the dataset from patients taking a PTC recordings could result in an unparalleled predictive diagnostics capability.
Turning to our IP, we have recently received two additional US patents, enhancing our already strong IP portfolio. As you have for our current focus is on the credit side, our AMI system, a legal system with the ability to create a three DVGGFC. low in a small, easy to use easy to carry four factor. This will be followed by a second clearance of the ability to synthesize a 12 lead ECG from these signals. In addition, there are additional four factors covered by our IP first in in an on demand through our lead extended package. We have a lot of opportunity to take the usual one lead singer of this obtained through the back is much further along through our press release. This would operate similar to current extended wear target monitors such as extended Holter for Volvo project on to notice and costs as well. But using the AMI go technology, a patient would simply placed two fingers on the top of the device, which will enable advanced lead ratings, sometimes something that is really not possible today with any kind of Patch that's in the marketplace.
Secondly, our integrated system combines AMI, go with a continuous monitor. We have multiple patents granted to our lead more watch, which is the first FDA-cleared prescription wearable for continuous cardiac monitoring. And finally, our IP allows it well, we watch that is actually a combination of functionality while our variable ECG. that provides continuous monitoring with an on-demand Valley DCG. Our patents cover it fairly DCG. watch solid lender, watch the tact of their analysis the patient can remove the water and simply plated on the jet activity, the 12 BDCG., we plan to pursue all options in the development of these products, including the possibility of collaborating We are leaders in the ECG. and variable fields.
I'd like to now turn the call over to our consultants CFO, Rick Brounstein.

Rick Brounstein

I think well, Steve, thank you very much. I'll Turning now to our financials. I will give a brief review of our financial results. A full breakdown is available in our regulatory filings and the press release that just crossed the wire after the close of market today.
General and administrative expenses for the fourth quarter of 2023 and 2022 were both $2.1 million for the year ended December 31st, 2023, G&A expense increased $1.2 million to $8.5 million compared to $7.3 million in the same period of 2022. The increase is primarily related to non-cash stock-based compensation expense amounting to $1.6 million that was associated with additional awards granted since December 31st, 2022, resulting primarily from the issuance of employee stock options following the May 2022 refinancings. Our cash spending is actually down in fiscal 2023 compared to fiscal 2022 of note, in 2022, we had invested in the commercial team and due to our change in our near term focus in early 2023. We are not currently emphasizing commercial activities as we proceed through the FDA clearance process for our Pinnacle for research and development expenses for the fourth quarter of 2023 were $2 million compared to $1.6 million for the fourth quarter of 2022. For the year ended December 31st, 2023, research and development expenses, which increased $1.1 million to 6.8 million compared to $5.7 million in the prior year are also due to the increase in non-staff costs and sorry, in non-cash stock-based compensation expense, as well as the increase in headcount and professional services supporting the FDA clearance process, primarily offset by completion of initial development in 2022 of the platform for IndiGo, our cash and cash equivalents are conservatively invested in treasuries with a duration of up to three months with 2023 interest rates in the short-term markets around 5%. We earned $675,000 in interest income in fiscal 23 compared to 66,000 in fiscal 2022 as a result of our increased cash balance following the $26.5 million financing in May of 2023. Coupled with these higher interest rates, net loss for the full year of 2023 was one $14.6 million compared to a net loss of $13 million for the full year 2022 we ended 2023 ahead of plan with $16.2 million in cash and cash equivalents as of December 31st, 2023, compared to $3.6 million as of December 31st, 2022. As mentioned in May, we closed on a sound financing with gross proceeds of $26.5 million as cash is anticipated to last into early 2025, we anticipate to begin the limited launch of AMI go by the end of 2024. Net cash used in operating activities in the fourth quarter of 2023 was approximately $2.9 million. We remain confident that we have sufficient funds to deliver on our milestones and get prepared to move into commercialization phase of our G&A MeeGo.
And finally, I've said this before it's worth emphasizing that the May 2023 refinancings were common stock. Only. Financing's did not include any warrants on our balance sheet as a result has a very simple and straightforward capital structure with approximately 26 million shares now outstanding.
I'm now going to turn the call back over to Bratislava for his closing.

Branislav Vajdic

So in conclusion, this is an exciting time for Part B and 2044 is a pivotal year in our company's evolution. I want to reiterate that our FDA clearance of the AMI system will be foundational for the Company then cleared. It will be the first patient health three DVTG. device to be cleared by the FDA, which will also serve as a robust and IP protected of validation for many future developments. As Debbie noted, we have made significant progress on the AMI go clearance, having successfully passed the acceptance of the file and the filings and have completed the initial review phase. We have taken advantage of all available regulatory tools and opportunities to work interactively and intensely with the FDA and we are finalizing our testing and our formal responses to questions raised by the FDA was complete responses as submitted, the FDA will complete their review. We currently anticipate clearance by the end of Q2 two of this year. This initial clearance is foundational for a number of reasons. First, it will be the basis of our second submission of the algorithm that will generate 12 leads synthesized ECG. And as we've discussed, I believe we will have a completed 80 patient pilot study. And once we have completed it, we have actually engaged in the pivotal study. That's in progress as we speak.
Second, we are developing deep learning, artificial intelligence elevators using our three DVPDC. lots for inputs we are very much encouraged by the progress and the early results, and we look forward to presenting the initial clinical data on AI. at scientific meetings in Q2 of this year. Finally, we will build upon the initial AMI go clearance as a foundation with both established synthesis algorithms and AI efforts. So we will continue to advance our robust product pipeline that includes It enables advances to expand indications as well as patient friendly form factors such as the on-demand service package. And that's above the hub we want. We ended 2023 ahead of plan, with 16.2 million in cash and cash equivalents as of December of last year. We anticipate that our strong cash position provides runway to early 2025. We remain confident that we have sufficient funds to deliver on our limited launch of AMI go as it is currently anticipated to occur by the end of this year. I look forward to providing our shareholders with further updates in the near term.
I thank you all for attending and now have a team would like to ask your questions. Operator, thank you.

Question and Answer Session

Operator

(Operator Instructions) Ben Haynor, Alliance Global Partners.

Ben Haynor

And good afternoon. Good afternoon, guys. Thanks for taking my questions. I'll first off for me, W. Just curious on the official responses that you're formulating some with your FDA had on I guess how would you characterize the questions that you've gotten? Are they fairly straightforward or meal? Any sort of showstoppers? Any surprises on that front?

Branislav Vajdic

Yes, Debbie, would you please comment on that?

Deborah Castillo

Yes, certainly. So first, there seems to be a as we see the number of questions similar to this from many participants. So what I can share is that the current status and process of requesting case submission is within expectation, definitely from my perspective and experience from being on both sides of the fence. This is a typical process, refined takeover five country reviews where FDA provides they're open questions that must be answered prior to their final assessment and submissions. So for me, this is a pretty standard process and sort of questions from the agency.
So in doing that to address this as best we can, as we've mentioned, we're using the regulatory tools available to industry where we have leveraged all opportunities to engage with the agency in order to align with our responses and approach to these open questions. This will help us ensure that our responses will meet FDA expectations. And of course, then allow us to make refinements assessment of our submission.

Ben Haynor

Okay, that's helpful. And then on the fund future FDA submissions through the AI. applications, if you have any sort of time line on when we might sort of start to expect those submissions going in? Or is that kind of open-ended at this point?

Branislav Vajdic

Yes. As you know, we have engaged in the full speed, AI development technology development for a I know So are we have made incredible progress over the last six months and we are at this point assessing really what the schedule will be. So we are, at this point not ready to share anything, but we are intensely in the in the face of estimating, therefore start to get that five 10-K submission, we've actually cleared.

Ben Haynor

Okay. Got it. And then lastly for me on commercialization. You know, kind of once you get that second AMI go clearance, is that kind of the time to ramp up or ramp up excuse me, the commercialization folks and begin adding to the team again? Or would that be kind of later on after you make potentially some of these may submissions crop?

Rob Eno

Yes, I'll take that. No, we on as we said, we're planning on doing a limited launch by the end of 2024. So we're currently pretty deep in work with our current team of defining the go to market strategy and our plans. And as we get closer with the first clearance of the opportunity to get some beta testing and experience with the device. We plan to be ramping up the commercial team in conjunction with that, with that limited launch towards the end of the year.

Ben Haynor

Okay, got it. Very helpful. Congrats on all the product progress guidance, and I'll jump back in queue.

Operator

And there are currently no questions for the telephone Q&Asession. Therefore, I'll now I'll hand the call over to Brook Hamilton for any questions on the webcast.

Thank you, operator. First question asks, could you describe the valid ECG. study in more detail specifically as it relates to patient follow-up or endpoints, but our share on So first to reiterate, the goal of this study is to demonstrate that are synthesized 12 lead ECG is similar.

Rob Eno

You clinically comparable to a standard hospital-based 12 lead ECG, and we're doing that by taking simultaneous recordings of both the 12 lead and the Indigo device there literally simultaneous while the patient has the electrodes from a standard 12 lead, we also place the Aimco device. As far as endpoints, we've worked closely with FDA to define the endpoints. The primary endpoint is looking at a series of ECG. measures that are called intervals and amplitudes on. And we've also defined what the performance criterias. In other words how similar these measurements need to be between the synthesized at 12 lead in the standard 12 week. There's also a secondary endpoint, which physicians will categorize all the arrhythmias that they see in the 12 lead in a blinded manner, and we'll analyze the similarities and differences between the two.
As far as follow-up, there's no patient follow-up in this study. So only analyzing the simultaneous recorded ECGs during a single visit. And you know, just I think what I'd add on to that, as we mentioned, we're rolling 198 patients and up to five sites. They're leading US research centers, but also high volume on and because they're high volume. And these are of Rhythmia clinics where there's lots of patients coming in every day, we expect to be able to see a range of revenues, which helps us in the study and also and we expect to enroll patients quickly. And that's why we anticipate enrollment being completed in Q2 of this year.

Excellent. Thank you. Next question. I mean, it seems like you're developing AI tools internally, but so many of them are already developed by academia, why not late?

Branislav Vajdic

Yes, we are clearly following everything that's been published and there is a lot of it in the literature these days, and that's relevant, however, and luckily for us, our signals are three VECGC. Those they're very much a data rich source for input if you want to the AI. And so for us. It's key that we develop our AI tools and methods based on this data set of X Y and Z signals. So that's a key differentiation. And of course, the single couple of device, any device, it's always with the patient. So all in all, that's the key why we are following what's happening in the field. But our unique situation is that we have even more data rich set of signals, and that's why we'd like to take full advantage of that. Those centers, some of that come out of a medical device.
Secondly, based on the fact that this technology will be with the patient 24 seven in very many ECGs will be taken by the by the patient and users over time. This longitudinal data that's normally not available in either hospital ET. TV environment. It is an extremely important source of differential singles. There's a I we really can't comprehend and shed additional light on the kind of the position of that patient.
And lastly, we have thirty seconds recordings, right? He and I and scanned all these tools that you see published results given our for ten seconds, it recorded. So having thirty seconds before Alex, who will make a positive impact on the accuracy as well.
So all in all, in summary, we are following but our unique situation, and we have a set of signals a set of features that go beyond what everybody else has. So that's the main reason why we are developing the Turtle Beach. On the other hand, we plan actually to engage some of these academic institutions in the future for some of the predictive algorithms perhaps. And so you wouldn't be surprised if we actually engage one of them because they have many, many more signals. And secondly, in some of the areas of prediction, they might be well ahead of everybody else.

It's the next question is where will the Indigo device be manufactured?

Rick Brounstein

And this is a picture that was not as high as we want to do that. So eight hours on it right? Sure. So thank you. So the we've been working in Silicon Valley with triple ordering has been helping us with the development of the hardware and they Lincoln or with a group called evolve. Manufacturing of all of those are discussed in the 10 K and evolve. We'll do the initial manufacturing quality systems interlinked. We are looking forward to an easy transition from ultimately when we get into higher volumes will likely be moving off site. But in the initial on, we will we can probably make 10,000 a month ourselves. So I think it'll get us going for some period of time.

If you are next question, are you able to deal with cyber security aspects? I hear that the FDA and the SEC are very much focused on that.

Branislav Vajdic

Debbie, please.

Deborah Castillo

Sorry, I can take that. So certainly, cyber security is clearly an important area for FDA, but also for our team as we strive to keep our systems secure To that end, our internal teams in conjunction with working with cyber security experts in the field, we feel confident that we are able to meet all regulatory expectations, both from the FDA and the FCC side. And I'll also point out that we've we've included our cybersecurity policy, it's in which is disclosed in the 10-K for additional information.

Thank you. Next question, medical studies are usually very expensive and did you fully account for the cost of your valid ECG. study within your final financial projections? And if you stick to the cost of of this study, they have resumed marketing.

Rick Brounstein

And when get home, it actually is not so expensive as people might believe there is no intervention required. There's no follow-up required. So it is much less expensive. We've actually signed the contracts with a clinical research organization on the first of our expected five sites in the footnotes in the financials. If you go to the very end and the subsequent events, we quantified it and you can see that the commitment to the CRO is about $0.5 million and the cost of the enrolling the approximately 200 patients, one 98 were predicting it's going to be about 200,000. So the full cost of the study is going to be about 700,000.

Thank you. There are no more questions at this time, so I'd like to now turn the call back over to Dr. Vajdic for dessert closing remarks.

Branislav Vajdic

Thank you, operator. I would like to thank each of you for joining our earnings conference today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR or MZ Group who will be more than happy to assist Again, thank you very much for your participation to today.

Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.