Presentation

Operator

Good day, and thank you for standing by, and welcome to Helius Medical Technologies, Inc. Q4 2023 earnings conference call. (Operator Instructions)
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michelle Bilski, In-Site Communications. Please go ahead.

Thank you, operator. Welcome to the Q4 2023 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 Jeffrey Mathiesen, Chief Financial Officer.
At this time for his, but all participants have been placed in a listen only mode. 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 the 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 our most recent annual report on Form 10-K. Such factors may be updated from time to time in our other filings with the SEC, which are available on our website.
All statements made during this call are as of March 28, 2024. 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, and thank you to everyone joining us today on Helius Medical's fourth quarter 2023 earnings conference call. I'm happy to report that during 2023 and over the past few months, we've taken several meaningful steps towards two important milestones in the United States, achieving widespread reimbursement for PoNS and FDA approval for stroke.
I'll start with our pursuit of broad reimbursement for PoNS. As you know, PoNS is currently authorized in the United States to treat gait deficit due to mild-to-moderate symptoms from MS. We are thrilled that CMS recently assigned us unique HCPCS codes for both PoNS controller and the PoNS mouthpiece effective April 1, 2024.
These codes allow us to begin negotiating reimbursement with third party payers and gives us the option to submit claims on a case-by-case basis. We now expect to engage with CMS in the coming weeks and at the public meeting this summer with the objective of securing Medicare reimbursement for the PoNS controller and mouthpiece in their next cycle. If we are successful, reimbursement will be effective October 1, 2024.
To further support our reimbursement efforts, we anticipate getting primary endpoint data from PoNS step during the third quarter with preliminary study results, communication before year end.
As a reminder, PoNS step is a company-sponsored research trial designed to evaluate the impact of MS patients adherence to PoNS Therapy in a real-world clinical study. We expect data from this program to underscore the effectiveness of PoNS in treating gait and balance impairment as well as its long term therapeutic benefit.
Recently, we initiated efforts to target the Department of Veterans Affairs through their nationwide multiple sclerosis centers of excellence. The VA provides healthcare services to veterans with MS from the time of diagnosis and through the rest of their lives and more than 28,000 cases are reported to the VA annually. In fact, to establish a partnership with an authorized supplier to the VA in the near future.
Now onto the achievements, we made towards our goal of securing US commercial authorization for stroke. In the US, over 5 million stroke survivors are affected by walking and balance disability and falling is a prevailing concern for stroke survivors.
Clinical evidence out of Canada shows that patients treated with PoNS Therapy see substantial improvement in gait and balance. Furthermore, in the real world database analysis, the majority of the patients before starting PoNS Therapy were at risk of falling, while routine rehabilitation physical therapy provides about a 1% to 3% reduction in risks remarkably after 14 weeks of treatment with PoNS therapy. 28% of the patients were no longer at fault risk. This is a clinically meaningful and impactful improvement.
Fall related events are dangerous to the patient resulting in additional injuries and new or lengthened hospital stays, which presents a significant financial burden to the health care system. With the average treatment costs per fall estimated at $64,500.
If you compare that to the number two, our list price of PoNS system at $25,700, the health economic equation greatly favors the use of PoNS. With PoNS Therapy we have a huge opportunity to improve the lives of patients suffering from stroke, while also helping to reduce the considerable fall related economic burden to providers which totals an estimated of $50 billion per year.
In Canada, where PoNS is already authorized for stroke. The government and providers are already starting to see the clinical and economic benefit of PoNS. Early in the fourth quarter, we received a letter of intent from the Quebec Ministry of Health and Social Services to purchase 30 PoNS devices. We are currently working to establish five sites in five separate administrative regions as part of a government funded initiative designed to further validate the effectiveness of PoNS Therapy when used by patients suffering the effects of stroke.
We believe this program will not only accelerate adoption in Canada, but will also increase the body of therapeutic evidence toward our pursuit of market access and third party coverage here in the United States.
Also critical to achieving market access is our ongoing investigator initiated placebo-controlled study by Dr. Steven Kautz at the Medical University of South Carolina, which evaluates the effects of cranial nerve, noninvasive neuromodulation delivered using PoNS Therapy on gait and dynamic balance in chronic stroke survivors.
We also began an open-label study as part of our registration program, raising the total number of participants between the two studies to approximately 100. In January Brooks Rehabilitation Hospital joined the program as a second site to Dr. Kautz study and is now also the first site to have start enrolling patients in the open-label study.
We believe that bringing PoNS clinical experience to additional sites in the US through the open-label study will further support our stroke authorization efforts. We also recently aligned with the FDA on our stroke development plan. Through this plan, we could leverage the randomized control study at MUSC as part of the registrational program, along with the open label study and real-world evidence from Canada to significantly streamline the size, time line and the cost of the registrational program.
A more efficient path to approval is great news, not only for Helius, but also for the millions of stroke survivors in the US, who could benefit from PoNS Therapy. We are targeting regulatory submission by early 2025 with a goal of receiving marketing authorization utilizing PoNS breakthrough designation in stroke later in the same year.
If authorized to treat stroke in the US PoNS would be eligible for the proposed transitional coverage of emerging technologies or key set pathway, which would expedite Medicare coverage of certain breakthrough devices and allow for temporary coverage within six months after FDA market authorization. An estimated 90% of stroke patients in the US are covered by Medicare.
Turning now to our Canadian activities. Early in the fourth quarter Pacific BlueCross and Health Tech Connect published a white paper demonstrating PoNS Therapy can drastically improve return to work outcomes for patients suffering from traumatic brain injury or TBI. The program participants included patients at least two years post injury who did not respond to standard rehabilitation treatments and were not expected to return to work.
After 14-weeks upon therapy 89% of the study participants said that balancing gait was no longer a barrier to work, 56% returned to work, and 80% of those who returned were able to work full-time at their prior occupations for at least six months. As you can imagine, these were incredibly gratifying results.
PoNS Therapy is truly a game changer for people suffering from gait imbalance impairment. And we are optimistic that the findings from this white paper will advance our efforts to gain reimbursement by Canadian insurance companies and health care providers as well as demonstrating PoNS significant health economic benefit and cost effectiveness as we negotiate coverage with US payers.
As you've heard today, we see several upcoming milestones on the path ahead and expect 2024 to be another year of marching steadily toward our goal.
With a $1.3 million raised under our ATM program since year end, our cash runway has been extended into the third quarter of this year, allowing us to continue pursuing widespread reimbursement while making progress on stroke.
With that, let me turn the call over to Jeff to discuss our fourth quarter financial results in detail.

Thanks, Dan. It is a pleasure to be with you today. Total revenue for the fourth quarter of 2023 was $134,000 compared to $282,000 in the fourth quarter of 2022. The decrease was primarily attributable to the June 30, 2023 expiration of the PTAP program in the United States, along with lower Canadian product sales.
For the fourth quarter of 2023, cost of revenue was $90,000 compared to $150,000 for the prior year period, with the decrease primarily due to decreased revenues in the current year.
Selling, general and administrative expense for the fourth quarter of 2023 was $1.6 million, a decrease of $0.4 million compared to $2 million in the fourth quarter of 2022, primarily due to a decrease in compensation and related expenses.
Cash and research and development expenses for the fourth quarter of 2023 were $0.7 million compared to $0.8 million in the fourth quarter of 2022, resulting primarily from a decrease in clinical and product development expenses in the current year.
Operating loss for the fourth quarter of 2023 decreased to a loss of $2.2 million compared to an operating loss of $2.7 million in the fourth quarter of 2022. Net loss was $1 million for the fourth quarter of 2023 compared to a net loss of $4.9 million in the fourth quarter of 2022.
Basic and diluted net loss per share for the fourth quarter of 2023 was $1.47 compared to a net loss per share of $8.66 in the fourth quarter of 2022. Our cash burn from operations in the fourth quarter of 2023 was $2 million compared to $2.1 million in the fourth quarter of 2022.
As of December 31, 2023, we had $5.2 million in cash and no debt. As Dane mentioned, we generated $1.3 million of net proceeds from the sale of shares of our common stock under our ATM program since the end of the year. Sold at an average share price of $9.27 per share, which extends our cash runway into the third quarter of 2024.
In closing, PoNS sales are currently on a cash pay basis. And as a price point that is not feasible for a vast majority of the patients in our addressable markets. Until we receive reimbursement, we expect that our revenues will continue to be fairly anemic and fluctuate quarter-to-quarter.
With that said, however, we are right in front of several critical milestones, which Dane previously discussed that we believe will be significant value creators, putting Helius in a much different place by the end of this year and even more so by the end of 2025.
Once we secure reimbursement by CMS as soon as October 1 of this year, we believe that revenues will begin to significantly increase and grow sequentially. We expect to further augment and accelerate revenue growth by adding third party payer reimbursement and establishing a relationship with the VA to further penetrate the MS market in the US.
Add to that, the potential authorization in stroke in the US as soon as the second half of 2025 or which will already have HCPCS codes and expect to have CMS reimbursement. We believe will allow us to immediately address the much larger stroke market and grow revenues at an even greater rate.
With that, Justin, let's open up the call for questions.

Question and Answer Session

Operator

And thank you. (Operator Instructions)
Jonathan Aschoff, ROTH MKM.

Thank you, guys. Given the broad buy-in of for all the PoNS evaluations that are going on positive data you've shown and it certainly looks like positive data, more of that's coming. It kind of makes me focus on the key item of reimbursement. So once Medicare fully establishes the codes by October, what, if anything, are any remaining possible reimbursement hurdles for Medicare patients? And do you expect to encounter those? if they exist?

Hey, Jonathan, this is Dave. Thanks for your question. We don't see too many hurdles. There's two things we're going to be doing. We do have the codes, HCPCS codes right now. So they go effective April 1 and were able to begin negotiating with third party payers using those codes as well as submit claims on a case-by-case basis. All of this activity will provide further evidence for Medicare to establish price.

Okay.

And one other thing --.

I'm sorry, go on.

No one other thing that we'll be doing as well. We mentioned we're going to be establishing a VA distributor and be able to be a supplier for PoNS Therapy to the VA, there is four centers of excellence for MS in the VA. There's well over 250 hospitals, and we look forward to helping veterans with VA improve their daily activities using PoNS Therapy.

Okay. So is the open label stroke trial, the one that's starting on with the Florida center, is that two arms or is it one arm?

The open label is a single-arm study with the same primary, which again balance, but also the key secondary of the risk of falling and a durability effect as like the -- .

So again my question is, will you have any arm cannibalism from the MUSC lead trial, both of which you need for approval because, you know a patient would rather go into a single arm trial where they know they're going to get treatment. Do you expect that where you have overlapping sites like the Florida center. (multiple speakers)

We do not believe there will be cannibalization by any patients.

Okay. So will the OpEx track over the quarters of 2024 in line with the drop we see in just reported in 4Q 2023. Is that kind of a new much less OpEx plan for the time being?

Hey, Jonathan, I'll take that. This is Jeff.
So we typically have, as you can track on a quarterly basis, first quarter is typically the highest quarter expense, right. Because we have to have legal and audit fees and that type of thing go in and you see that start to step down a little bit in the second quarter, but there's still costs related to the Annual Meeting and those types of activities. And then it typically flattens out a little bit more in the third quarter and fourth quarter.
So you'll see that kind of overall trend in general. And beyond that, we don't see significant costs changes or increases in the near future on a quarterly basis as we move forward in the year, as we start to ramp up revenues, there will be some costs, but those costs should be relatively modest and compared to the revenue growth that will come.

Operator

Jeff Cohen, Ladenburg Thalmann.

So, two questions from my end. Can you give a sense on the Québec order deliveries and initiation with patients are expected in the second quarter, third quarter and fourth quarter?

Hey Jeff, I'll take that. This is Jeff. So right now, the contract requires that we identified five sites, five different regions. So that process is going on and we would expect that we will have those sites are kind of coming under contract here in the second quarter and then third quarter with deliveries following shortly thereafter. So there is there may be some activity here in the second quarter and more happening in the third quarter.
And but the idea is initially, what was originally agreed to was extended to the end of September as far as having them all in place. And so that is something that. When you're dealing with these types of centers, it's not a situation where you can walk in and within a week and they have relationships set up and the contract agreed to it, it becomes a process, and we've been doing that. We've got it. We've made some good progress and we've got some of those sites that we believe are close to being asked under contract, and we'll continue that process. So long answer to your question, but it should play out here over the next couple of quarters.

Okay, got it. And then second for us, maybe for Dane, could you talk about how things may look toward the end of the year as far as FTEs and personnel on your end and number of center, number folks trade out there and just a sense of what's gone on exist commercially from the company by end of the year?

Hey, Jeff, can you repeat that first part, I don't think the Internet have picked up that first part of your question.

My apologies, got it. Just trying to get a sense of how things look commercially as 2024 plays out as far as how you're measuring yourself with personnel and number of centers, number of trained folks out there, et cetera?

So what we've done, Jeff, we've laid a lot of leverageable areas in our business that the old model of hiring 50 people in going out on sales and another 30 in reimbursement and customer service support, that's not what we really need to do.
We're going to be able to with reimbursement, hopefully effective October 1 with CMS, we see three areas of leverage. First and foremost, we already have our manufacturer OEM and they could start producing very, quickly with this future demand. And we are collecting a lot of future demand with our inquiries in and folks wanting PoNS therapy.
The second area of leverage, Jeff is just our hub, our telemedicine, tele appointment, e-commerce, e-prescribing hub that is highly leverageable. A patient can come in there and our greatest advocate is the patient right now and they could come in there with a prescription and get that sold in the PoNS device is sent to that patient within two days and they bring their device PoNS Therapy straight to their registered PoNS physical therapists and start training for the first two weeks.
Another leverage point in our model is and right now, it takes almost three months to get a neurologist appointment post-COVID. It used to take 30 days on average now three months if a patient wants to come to our site. And we have partnered with UpScript and a third party group of neurologists and prescribers. If they're willing to be diagnosed, they could have an appointment for at $25 and meet with a neurologist and have that basically in online meeting and if they are diagnosed with gait deficit, that neurologists will fill out a prescription and e-prescription for PoNS and it will be fulfilled and they'll start their process.
The last place where we see a lot of leverage is our online PoNS module training for physical therapists for them to become registered PoNS physical therapists. And right now, all they have to do is send us an email, their clinic, their name, their number. And once we validate their PT number, OT number, they are now they gather access to the software and it's free to them. And within three hours or less that they are, they become registered PoNS strains.
So we could fill in the map very quickly with demand for patients so that they do not have to drive 30 minutes, 40 minutes for a registered PoNS trainer. They could either have their own be trained up if they already use a PT or they could look at our map and see the closest PT registered PT trainer. So that their first two weeks can start very quickly.

So Dane, could you give us a sense of a number of PT that you anticipate being trained this year or during this quarterly update as it plays out throughout the quarters?

Jeff, we haven't given those numbers out for investors just yet. We are looking to eventually plan to do that with reimbursement so that analysts like yourself can track all are our financial numbers that could track sales. And that include the prescribers, PTs and the like.

Operator

(Operator Instructions)
Anthony Vendetti, Maxim Group.

Thank you. Good afternoon. So it's, my questions about surrounding the therapeutic experience program. How many centers of excellence did you add in 2023 and any updates on the goals for the program? And then, if you had specifically, how many added in the fourth quarter?

That would be the PoNS step clinical trial you're referring to? Correct, Anthony?

Yes.

So we have six total sites of centers of excellence for the PoNS. And I believe, -- I think we believe we've announced all six of them.

And in 2024, how many would you like to add?

We are at full enrollment for now. We will not be adding any more. -- And I think we announced third quarter and fourth quarter, we'll be providing them additional information on some of those results for the first 14 weeks.

And I don't, -- I may have missed this because I was on another call, but I know you went to the Physical Therapy Association conference last year in San Diego and this year in Boston. I was wondering if you could talk about the recruitment efforts, how that went, and also new potential, whether it's physical therapists or what else you were able to learn -- from the company?

So, the APTA is one of our best conferences that we present. We have a wonderful boost our mechanism of action is on the TV. It usually brings in a lot of people that never heard of PoNS. So they become very curious. We are the only prescribed treatment there for all of these PT clinics, both nationally super regional regionals and also mom-and-pops.
There's roughly 17,000 APTA members and the like that show up in the conference in Boston, we've had a tremendous amount of increase from the PTs. One big notice this year was a lot of VA rehab specialists, neuro rehab PTs, given that veterans do have a tremendous amount of balancing gait issues. And that's not only in MS, but that's in traumatic brain injury. And the number one indication that the VA treats he's in stroke.

Operator

Thank you. And I'm showing no further questions. I would now like to turn the call back over to Dane for closing remarks.

Thank you, everyone, for following Helius Medical Technologies. As you just heard, we are very excited to be right in front of some very significant milestones, and we look forward to keeping you updated as we pursue coverage and reimbursement and continue bringing PoNS Therapy to the millions who need it. Thank you

Operator

And thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.