Pulse Biosciences, Inc.
Q1 2018 Earnings Call Transcript

Published: 11 May 2018

[Operator:]

Good afternoon. My name is Julie and I will be your conference operator today. At this time, I would like to welcome everyone to the Pulse Biosciences Investor Update Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions]. Thank you. Mr. Brian Dow, Pulse Biosciences Senior Vice President and Chief Financial Officer you may begin.

[Brian Dow:]

Thank, you and good afternoon, everyone. And welcome to Pulse Biosciences quarterly investor update call. On the call with me today are Darrin Uecker, our President and Chief Executive Officer and Bob Duggan, the Chairman of our Board of Directors. Before we begin, I would like to remind you that on today’s call, we will be making forward-looking statements. These include statements regarding our plans and expectations relating to our operational, scientific, clinical and financial projections, products including the uses and applications of such products and other future events. You should not place undue reliance on such forward-looking statements, which are subject to a number of assumptions, risks and uncertainties, and may differ materially from actual results. These results and uncertainties are more fully described in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K and quarterly report on Form 10-Q. Investors are encouraged to reference these risk and uncertainties and other disclosures in those reports. Pulse Biosciences undertakes no obligation to update forward-looking statements as a result of new information or future events. In addition, please note that today’s call is being recorded and will be available for audio replay on the Investors section of our Web site at www.pulsebiosciences.com, shortly after the conclusion of this call. Investors electing to use the audio replay are cautioned that forward-looking statements made on today’s call may differ or change materially after the completion of the live call. I would now like to turn the call over to our President and Chief Executive Officer, Darrin Uecker.

[Darrin Uecker:]

Thanks. Brian. Good afternoon, everyone, and thank you for taking time to join us on today’s investors call. Although, it has only been a few weeks since our last update, we continue to make steady progress advancing our NPS technology. On today’s call, we will be recapping the progress made during the recent weeks, since, our last call, along with a brief discussion of our first quarter operating results and financial matters. We will close with an update on progress we made in drawing clarity around our forward trajectory for 2018 and beyond. As background for those of you who knew Pulse Biosciences and a reminder for those of you who have joined our previous calls, at Pulse Biosciences, we are developing a proprietary tissue treatment technology based on Nano-Pulse Stimulation, where ultrafast electrical pulses with nanosecond pulse widths from billions up to a millionth of a second are used to stimulate cellular effects that can lead to positive therapeutic outcomes. A nanosecond pulse is an incredibly fast pulse to give a sense of the scale light travels roughly 1 foot in a nanosecond and 186,000 miles in a second. When these incredibly fast pulses are applied to cells, they have demonstrated a unique ability to enter the cell and disrupt the functions of the intracellular organelles, the smaller operational structures within a cell, such as the endoplasmic reticulum, Golgi complex, and mitochondria. The disruption of the function of one or more of these cellular organelles can result in a change in function of the cell as a whole and initiate programmed cell death. We believe it is the ability to initiate programmed cell death through the temporary formation of pores and permanent disruption of the intracellular organelles that differentiates Nano-Pulse Stimulation from other energy-based therapies such as irreversible electroporation and radiofrequency ablation. NPS induced transient pores allow ions to pass through them, resulting in the release of calcium ions from the endoplasmic reticulum to termination of the mitochondrial membrane potential and disruption of the Golgi apparatus, all of which in-turn results in a signaling cascade that we believe results in programmed cell death in benign noncancerous lesions and immunogenic cell death in malignant cancerous lesions. Immunogenic cell death is a form of programmed cell death by which cells are induced to die in a manner that activates the immune system to both clear the treated tumor cell and enroll immune system cells, such as cytotoxic T cells, to recognize and eliminate cells of the same tumor type. The ability of NPS to get inside the cell with a nontoxic application of electrical energy, while preserving the integrity of the outer cell membrane is the cornerstone of this unique technology and we believe will lead to a number of compelling tissue treatment applications, in particular, in the treatment of cancer. Our mission at Pulse Biosciences is to build a viable company that designs, produces and commercializes Nano-Pulse Stimulation technology to improve and extend the lives of patients. Our strategy to achieve this is to develop a therapeutic tissue treatment NPS platform, demonstrate the unique medicinal benefits of the platform in a number of compelling treatment applications and commercialize NPS systems to deliver the benefits of NPS to physicians and their patients. Within each application area or vertical market, we are working with key opinion leading physicians to develop and execute pilot studies to determine where this technology has the highest value to clinicians and patients from a patient outcome market need and time to market perspective. We’ll then determine the optimal path to deliver those applications to the market. We have ambitious plans for NPS therapy. And to drive the development forward, we have recently added two key members to Pulse Biosciences team. First, we are pleased to announce the appointment of Jeff Kmetz as our Chief Business Officer. Jeff brings over 30 years of experience within the pharmaceutical industry, specializing in oncology. Jeff’s career started in sales at Berlex laboratories, and from there he moved into a variety of management roles, including sales training and marketing roles within the oncology segment with Berlex. After Bayer’s acquisition of Schering AG Berlex, he took global hematology role. He was the commercial lead responsible for rolling over the commercial hematology franchise agenda. The last six years, Jeff was at Pharmacyclics where he started as Director, CLO Marketing and most recently was the Head of Commercial Development. Jeff’s successes at Pharmacyclics, including building, managing and executing the launch of IMBRUVICA and leading initiatives in medical marketing, advisory board, corporate partnerships and business development. Jeff joined Pharmacyclics when the company had 50 employees and help build it to over 600 employees when it was acquired by AbbVie in 2015. Jeff will play a key role at Pulse Biosciences as we deliver NPS into the oncology market. We’re also pleased to announce the arrival of Bill Knape as Vice President of Clinical, Regulatory and Quality. Bill has 25 years of experience in life sciences where he has been involved in worldwide clinical and regulatory affairs with a track record of introducing novel technologies to the medical field. With deep experience in overseeing and managing clinical trials and developing regulatory strategy, he has been involved in numerous successful regulatory filings with FDA, including 510(k)s, PMAs and NDAs. Bill will play an instrumental role in helping to bring NPS to the market. We are pleased welcome Jeff and Bill to the Pulse Biosciences team and look forward to their many contributions. I would now like to provide updates on our recent progress, turning first to our dermatology program. NPS’s non-thermal mechanism of programmed cell death disrupts the intracellular structures of targeted tissue with minimum inflammatory response, promoting favorable patient healing and cosmetic outcomes. We believe there are several applications for which NPS represents a significant opportunity for skin-based lesions. During the recent American Society for Laser Medicine and Surgery Annual Meeting, we announced and presented the results of our first benign lesion treatment study, a multicenter clinical study evaluating the safety and efficacy of NPS in the treatment of seborrheic keratosis. Dr. Tom Rohr the current president of the American Society of Dermatologic Surgeons presented the data from the podium during a very well attended session. Our study follows the progression of a 174 treated SKs on 58 patients for 106 days post NPS treatment of the SK lesion. And in initial study like this, we’re interested in understanding the safety of the system and the procedure, patient tolerability of the procedure, system ease-of-use for the physician and of course, the clinical results. In this case, being the clearance of the SK lesion as reported by the physician and the overall patient satisfaction as reported by the patient. By all accounts, the results of this study were positive with regard to all criteria. Starting with safety, there were no reported adverse events, zero, through 58 procedures comprising 472 applications of NPS. Patient tolerability was also positive. All procedures were quickly performed in an office setting with minimal patient discomfort reported as part of an overall favorable patient experience. The physicians had no signs -- the physicians had no issues operating the PulseCX in their standard in-office environment and all treatments were successfully delivered to patients. As far as the clinical result is concerned, investigators reported 82% of the treated lesions as clear or mostly clear at the 160 assessment point. At the same time point, patients rated 78% of lesion outcomes as satisfied or mostly satisfied, closely nearing investigator ratings. Blinded independent photographic review assessments rated 71% lesions clear or mostly clear. In some cases, the occurrence of residual hyperpigmentation was reported, and we elected to enroll patients for an additional six month follow-up. To-date, we have seen a favorable reduction in pigmentation and our clinical investigators felt its complete resolution is likely. We are incredibly pleased with these initial results, both in the patient outcomes and the exceptional safety profile exhibited during the study and believe this is a great first step in building a portfolio of benign lesion treatment targets for NPS technology. In addition to the SK data being presented at the ASLMS meeting, Pulse Biosciences’ Chief Science Officer, Dr. Richard Nuccitelli presented the data from our earlier NPS dose-response study. Rich’s presentation drew excellent attention from participants at the completion of the multiple presentations during the session, the majority of the participant questions were directed towards Rich and NPS. After the presentation, Rich accepted the award for best-in-session for basic science and translational research for clinical therapeutics on behalf of Pulse Biosciences. As we have discussed on previous calls, we intend to develop a portfolio of benign skin lesion applications based on clinical data in advance of a commercial launch and to facilitate and drive utilization of NPS in dermatology. We believe we need multiple proven applications to drive specific regulatory indications and serve as a foundation to commercially introduce NPS in dermatology. And we are actively initiating additional clinical studies at this time. Building on the success for SK study, later this quarterly, we plan to initiate first of multiple additional studies in treating benign skin conditions. We plan to conduct these studies in parallel to accelerate the evaluation of NPS across a broad range of conditions. We intend to report on these in more detail as we advance in these studies. As we have reported previously, they may include the treatment of lesions such as warts, keloid scars, sebaceous hyperplasia, actinic keratosis, and syringoma. We’re in the final stages of establishing the details of the protocols and working with our clinical partners to initiate these studies, and we look forward to sharing the study designs, objectives and details after enrollment commences. In the coming quarters, we will share progress on these clinical applications, as well as regulatory and commercialization plans as we get closer to those events. Turning now to our immune-oncology program. We believe NPS may afford a completely new immunotherapy treatment modality in certain cancers, either as a standalone therapy or in combination with other therapies currently available and in development. Preclinical research is demonstrated that NPS can eliminate treated tumors, disrupt the tumor microenvironment of treated tumors and induce immunogenic cell death. As we have reported in previous calls, we continue to make investments and progress in preclinical oncology research, veterinary medicine oncology research that we believe has human translational benefit and the development of an initial human pilot study to demonstrate NPS's ability to initiate an immune response. These efforts are all aimed at further demonstrating the medicinal benefits of NPS in the treatment of cancer, and are specifically focused on showing two key attributes; first, the ability to treat a local tumor; and second, to induce a systemic immune response in humans. We believe NPS has potential to offer patients and clinicians improved treatment outcomes as a standalone or in combination with other immunotherapeutic agents. We continue to drive our preclinical research, providing evidence to support the unique potential of NPS in treating cancer. As mentioned previously, this year we will continue those preclinical efforts focused on demonstrating the optimal NPS parameters for driving an adaptive immune response, which we believe will pave the way to successful early feasibility studies in humans. We expect to make these results public in conjunction with publication of the data in the coming quarters. Following on the late stage canine oral melanoma study conducted last year that demonstrated excellent safety, patient tolerance, ease of application and evidence supporting the potential to eliminate oral melanoma tumors, we will soon be starting a follow-on multicenter canine study, evaluating NPS in the treatment of stage 1 and stage 2 canine oral melanoma. Based on earlier results and the strong safety profile of NPS, our veterinary medicine partners believe treating earlier in the disease progression will provide enhanced opportunities to demonstrate the potential of NPS in this disease state. This study is being conducted with our veterinary research partners at veterinary centers of America. We look forward to enrolling our first patient and reporting on the study as we progress. In parallel, we continue to move forward with our plans for a human pilot study, demonstrating the new response, following treatment with NPS. We continue working with our KOLs and regulatory staff and advisors in a most efficient manner to obtain clinical data, reflecting NPS's ability to initiate immunogenic cell death of these through a clinical benefit, either in combination with therapeutic agent or on a standalone basis. This is an area where we have significant focus, and we are excited about where we are headed. At this time, we will not provide additional details on this pilot study, primarily for competitive reasons, but expect to communicate them over the next couple of quarters. Before Brian discusses our financial results for the first quarter, I would like to turn the call over to, Bob, briefly to provide an additional update.

[Bob Duggan:]

Thanks, Darrin and good afternoon, everyone. I want to take a moment to briefly comment on a matter disclosed in our Form 10-K and update in our current Form 10-Q. During February of this year, Pulse Biosciences and certain directors my-self and one other, received subpoena opinion from Securities and Exchange Commission relating to a non-public back-funding inquiry being conducted by the commission. Documents provided by the SEC, to Pulse Biosciences state and I quote, we are trying to determine whether there has been any violations of securities laws, the subpoena and investigation do not mean that we have concluded that you or anyone else has violated the law. Also, the investigation does not mean that we have a negative opinion of any person, entity or security. As chairman, I want to point out that, we have and are fully cooperating with the SEC and based on our current understanding, I do not believe this matter will have a material or meaningful adverse effect on our business. As a matter of fact, it has required time and attention and I believe most of that is behind us now. Based on our commitment to shareholder transparency, we will give updates when and if additional relevant data is known, verified and appropriate to make public. I’d now like to turn the call back to Darrin. Darrin?

[Darrin Uecker:]

Thanks Bob. I will now turn the call back to Brian to discuss our financial results for the first quarter of 2018.

[Brian Dow:]

Thanks, Darrin. During the first quarter of 2018, we continued to make significant investments in the development of our NPS technology, our NPS delivery system and related clinical and preclinical studies. Cash and investments as of the end of the first quarter of 2018 totaled $33.4 million compared to $38.1 million at the end of the fourth quarter of 2017. Cash used for the first quarter totaled $4.7 million compared to $3.9 million for the fourth quarter of 2017. Cash used during the quarter reflects the operating losses incurred for the period presented, and excludes non-cash stock-based compensation, amortization and depreciation. Turning to operating results. Net loss for the first quarter of 2018 totaled $8.7 million, which is consistent with the net loss realized during the fourth quarter of 2017 and $5.5 million higher than the first quarter of 2017 net loss of $3.2 million. The year-over-year increase of $5.5 million reflects operating expenses for G&A, which increased by approximately $4 million due to increased stock-based compensation of $2.5 million. This increase in stock-based compensation reflects significant equity grants made during the second half of 2017 and during the first quarter of 2018, higher Black-Scholes valuation that increased right prices, which reflect our stock price on the date of grant and expense associated with the employee stock purchase plan that was approved by shareholders and implemented during the second quarter of 2017. Further, G&A related expenses also increased due to an increase in headcount from six full-time employees in the first quarter of ‘17 as compared to 11 full-time employees in the first quarter of 2018, resulting in higher compensation costs. In addition, consulting and professional expenses in the G&A function increased by approximately $850,000 as compared to Q1 ’17, primarily from increased operational activity, increased public company reporting costs and increased legal costs related to our intellectual property. G&A expenses are expected to increase during 2018 due to increased compensation related to expenses from additional headcount, and from expanding general and administrative activities to support the expected overall growth of the company in 2018. Turning now to research and development. R&D expenses for the first quarter of 2018 increased by approximately $1.4 million as compared to the first quarter of 2017. The $1.4 million increase includes 700,000 attributed to increased compensation cost, resulting from headcount increasing from 13 full-time employees to 26 full-time employees. Along with higher stock-based compensation of $700,000, reflecting the same drivers for stock comp that I commented on a few minutes ago in G&A, sizable Q2, ’17 grants, higher valuations and the employee stock purchase plan. Research and development expenses are expected to continue to increase during 2018 as we are expanding our clinical study activities by initiating additional trials, continuing to develop and enhance our system in preparation for trials, as well as pursuing regulatory clearances for our technology. Consistent with our previous guidance, we expect cash used for 2018 to total approximately $22 million. That concludes my comments on the financial results. I will now turn the call over to Darrin.

[Darrin Uecker:]

Thanks, Brian. I would now like to take another look forward to reiterate what investors can expect during 2018. First, to recap our first milestone achieved in 2018. We announced the positive results from our SK study at the ASLMS Annual Conference on April 13. Next, we’ll be commencing additional dermatology indication studies during second and third quarters of this year, and I look forward to sharing the targets for our next studies on the future call. We will advance our work in veterinary studies by commencing a second investigatory study in stage 1 and 2 canine oral melanoma. And finally, we’ll make significant progress this year towards the initiation of a human immune response clinical study in oncology. We continue to make significant progress towards our long-term objective of demonstrating the clinical utility of NPS in dermatology and its unique ability to stimulate an immune response in oncology application. That concludes our prepared remarks. Operator, we would now like to open the call to questions.

[Darrin Uecker:]

Thanks, operator. And thanks again to everyone for joining us on today’s call and allowing us to share our continued progress. We all forward to sharing our progress on our next investor update call. Thank you very much.

[Operator:]

That concludes today’s conference call. You may now disconnect.