Helius Medical Technologies, Inc.
Q3 2020 Earnings Call Transcript

Published: 12 Nov 2020

[Operator:]

Please standby. Good evening, ladies and gentlemen, and welcome to the Third Quarter of Fiscal Year 2020 Earnings Conference Call for Helius Medical Technologies. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded, and that the recording will be available on the company's website for replay shortly. 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 and quarterly report on Form 10-Q.

[Dane Andreeff:]

Great. Thank you, operator, and hello and welcome to everyone to Helius Medical's third quarter of 2020 earnings conference call. I'm joined on the call this evening by Joyce LaViscount, our Chief Financial Officer and Chief Operating Officer; and Mark Leno, our Vice President and General Manager of our Canadian Operations. Let me provide you with a quick agenda of what we're going to focus on today as part of our strategy to reposition the company, to create intermediate and long-term shareholder value. First as the recently appointed President and CEO of Helius, I'll begin my remarks with a brief introduction. I'll then discuss our U.S. regulatory strategy and progress we have made in recent months. Following this discussion, I'll hand it off to Mark, who will provide you with an update on our commercial activities in Canada. Joyce will then briefly review our third quarter financial results, as well as the recent progress we have made to secure additional capital and enhance our balance sheet condition. Following Joyce's remarks, I'll conclude with some thoughts on our near term and longer term outlook before we open the call for questions. Before delving in to the update for the quarter, I'd like to take a moment to just introduce myself, provide a few summary points on my background and share where I focused my time since joining the executive leadership team. I joined Helius Medical with over 30 years of experience in the financial industry. The majority of my career has been with Maple Leaf Partners, a hedge fund, a value-based hedge fund that I founded in 1996 and subsequently grew to over $2 billion in assets under management. I also held Board of Director positions for multiple companies in the medical device and Medtech sub-sector including here at Helius Medical. Three years ago, I joined the Board of Directors at Helius after conducting my diligence because I was fascinated by the PoNS technology and the opportunities in store for this organization. With its potential to improve the lives of patients with chronic neurological conditions by empowering the natural healing processes of the brain, I believe the PoNS device and treatment and ultimately Helius is uniquely positioned to address one of the last frontiers in health.

[Mark Leno:]

Well, thanks very much, Dane. Good evening everyone. For the third quarter, we reported total revenue of $131,000 compared to $150,000 in Q3 of last year. Our revenue in both periods was driven by sales to the neurotherapy clinics in Canada that have been authorized to provide our PoNS treatment. Our third quarter sales performance contributed – continued to be impacted by the significant business disruption that has been experienced here in Canada as a result of the COVID-19 pandemic. I'll take a moment now just to provide you with some updates on the business trends we've been seeing during the quarter and in recent months. Entering the third quarter, we were pleased to see that almost all of our PoNS authorized clinics had reopened to outside non-emergency patients, the remaining clinics opened in July. Despite this positive trend, the clinics continued to be constrained by the effects of the pandemic and the protocols implemented to ensure patient health and safety. First and foremost, the clinics continued to be impacted by federal and provincial requirements that limit their capacity to approximately 50% of normal services. In addition to these formal restrictions, we believe that clinic capacity and productivity was significantly lower during the third quarter due to a couple of factors, the impact of clinic specific protocols that have been implemented to ensure social distancing and the impact of COVID on patient willingness to seek in-clinic treatment. Specifically, it's important to note that multiple sclerosis patients often take disease modifying medications, which can suppress their immune systems and this potentially could increase their risk of being infected with COVID. So therefore, as a result of these factors, we estimated on our earnings call in August that the average clinic across our network was currently operating at about 30% of their normal capacity. In this challenging environment, we focused our efforts on expanding access to PoNS treatment by building a broad foundation and positioning Helius to drive strong growth once the situation begins to normalize. So as a result, we began 2020 with an enhanced commercial strategy to drive three things

[Joyce LaViscount:]

Thanks so much, Mark, and good evening everyone. Since Mark covered our revenue results, I'll begin my remarks by continuing down the P&L. Our gross profits for the third quarter of 2020 increased by $48,000 or 79% year-over-year to $109,000, due to a temporary reduction in manufacturing activity in the current quarter, primarily resulting from resource availability. Operating expenses for the third quarter of 2020 decreased by $2 million or 35% year-over-year to $3.8 million, reflecting the continued benefits of the cost reduction initiatives that we have implemented during the past year.

[Dane Andreeff:]

Thank you, Joyce. Stepping back, I couldn't be more proud of our team's ability to rise above the challenges presented by COVID and continue to drive strong progress on our regulatory and commercial initiatives. While the near-term environment is likely to remain challenging, Helius is committed to operating as efficiently as possible and driving continued progress on our key growth initiatives, working towards obtaining regulatory clearance in U.S. and facilitating the commercial adoption of our PoNS treatment in Canada. Success in pursuing these two key initiatives would position us to bring our PoNS treatment to the large underserved population of MS. Patients in the U.S. and Canada, which we believe represents the best path to creating value for our shareholders. Longer-term we look forward to leveraging the potential of our PoNS device as a platform technology and continue our important work on the last frontier healthcare by expanding its existing indications for use pursuing new indications in stroke and cerebral palsy and exploring new potential applications, including applications in wellness, cognitive development, and human performance. Before we open up the call for questions, I would like to thank our existing and new shareholders, including those that participate in our October private placement. We appreciate your confidence and support as we repositioned Helius for our next phase of growth to create shareholder value. I'd also like to thank our employees for their hard work and continued dedication to our mission, our customers, and existing shareholders and everyone on tonight's call for their interest in Helius Medical Technologies. With that operator, let's now open the call up for questions.

[Operator:]

Thank you. Our first question today is from , a Private Investor. Please proceed with your question.

[Unidentified Analyst:]

Hi, thank you. As a PoNS user myself as well as a shareholder, I'm wondering why you haven't considered Parkinson's, the PoNS for Parkinson's? Hello?

[Dane Andreeff:]

Joyce, do you want to take that please?

[Joyce LaViscount:]

Sure. Yes. So, we're working through – as we've seen, there's a lot of potential with the PoNS device, and Parkinson's is certainly on the list of those items that are under consideration going forward. We're tending to focus right now on the indications that we named are the ones that we have a lot of current data on from treatments that we have in the scientific research that's been done historically. But certainly that is something that we will continue to put on the list. And hopefully at some point in time, we won't have to approach every single disease state separately rather we would be able to get a broader indication across multiple disease state, but that would be something that we could work towards in the future.

[Unidentified Analyst:]

Great. Thank you.

[Operator:]

We are currently showing no additional participants in the queue. That does conclude our conference call for today. Thank you for your participation.