Pulse Biosciences, Inc. (NASDAQ:PLSE) Q1 2023 Earnings Call Transcript May 11, 2023
Pulse Biosciences, Inc. misses on earnings expectations. Reported EPS is $-0.23 EPS, expectations were $-0.22.
Operator: Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the Pulse Biosciences First Quarter 2023 Earnings Conference Call. At this time all participants lines are in a listen-only mode [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Trip Taylor, Investor Relations. Thank you. You may begin.
Trip Taylor: Thank you, operator. Before we begin, I would like to inform you that comments and responses to your questions during today’s call reflect management’s views as of today, May 11, 2023, only and will include forward-looking statements and opinion statements including predictions, estimates, plans, expectations and other information. Actual results may differ materially from those expressed or implied, as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission. Our SEC filings can be found on our website or on the SEC’s website. Investors are cautioned not to place undue reliance on forward-looking statements.
We disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures including reconciliations with the most comparable GAAP measures can be found in the press release. Please note that this conference call will be available for audio replay on our website at pulsebiosciences.com on the News & Events section on our Investor Relations page. With that I would now like to turn the call over to President and Chief Executive Officer Kevin Danahy.
Kevin Danahy: Thank you, Trip. Good afternoon, everyone and thank you all for joining us. On today’s call, I’m excited to highlight a significant addition to our executive team, as well as discuss how the team plans to advance and achieve our corporate objectives. I will then turn the call over to our, Chief Technology Officer, Darrin Uecker, to share updates regarding our product development and regulatory initiatives. Mike Koffler, Vice President of Finance, will review our first quarter financial results, before I conclude and open the call for a question-and-answer session. I want to open this call by highlighting our leadership team. We are proud to have assembled a world-class team and organizational structure designed to accelerate and broaden the application of our innovative technology.
Just this month, we announced the appointment of Dr. Gan Dunnington, as Chief Medical Officer focused on our cardiothoracic applications. Dr. Dunnington is a renowned cardiothoracic surgeon, specializing in complex minimally-invasive procedures. He is a leader in pioneering novel less-invasive technologies that improve the lives of patients with atrial fibrillation. Dr. Dunnington complements our leadership team at a critical point for our technology. We look forward to his guidance, as we advance the clinical and regulatory programs for our portfolio of cardiac devices. Dr. Dunnington will work closely alongside, Chief Technology Officer, Darrin Uecker and Chief Strategy Officer, Mitch Levinson. Mitch is a medical device industry veteran with a track record of successfully bringing new technologies and products to market across a variety of medical specialties.
He is on the call and will participate in Q&A. Pulse Biosciences is on a path to deliver beneficial, first-in-kind therapeutic effects that have yet to be achieved within the current pulsed field ablation market. The platform nature of our technology enables multiple clinical possibilities. We continue to look, listen and evaluate opportunities outside of cardiac. If and when something important manifest, we will share it with you our shareholders on a timely basis. Our top focus remains developing a cardiac ablation catheter and surgical ablation clamp utilizing nsPFA for the treatment of atrial fibrillation or AF. There is a clear emerging consensus from treating physicians that PFA is safer and faster than RF and cryo and we believe that we can take this a step further by creating a more advanced treatment that will benefit both patients and clinicians.
Preclinical evidence suggests nsPFA can potentially offer a leading safety and efficacy profile in comparison to traditional thermal ablation modalities and even newer PFA technologies. The ability to penetrate this $8 billion market will lead Pulse towards long-term value creation for patients, providers and shareholders. We are working to develop several devices that will deliver nsPFA to cardiac tissue. On our last call, we unveiled two goals that aligned with our heightened corporate focus: one, to develop and advance our cardiac clamp through the appropriate FDA regulatory path; and two, to complete all catheter products and regulatory milestones required to treat initial clinical study patients. Achieving these goals should lay the groundwork for a long-term success in the cardiology space and support a viable business model.
We plan to accomplish these milestones during the first half of 2024. We are proud of our achievements throughout the first quarter. We recently completed the pre-submission meeting with the FDA for our cardiac ablation clamp and they’re in the process of finalizing our regulatory pathway. We are continuing our preclinical studies to support first-in-human trials with our catheter device and we have three related abstracts accepted at the 44th Annual Heart Rhythm Society Meeting. I will now turn it over to Darrin to discuss the technology and the product road map.
Darrin Uecker: Thank you, Kevin. On our last call, we overviewed our current priorities to advance preclinical work with our nsPFA surgical clamp and catheter. As a reminder, both of these devices are intended to treat AF but with different approaches. The clamp will be used during open or minimally-invasive heart surgery by cardiac surgeons. The catheter will be navigated into the heart using standard minimally-invasive catheter techniques through large blood vessels by electrophysiologists in the EP lab. As a quick reminder, nanosecond pulsed field ablation or nsPFA is a novel platform technology that utilizes nanosecond duration electrical pulses of energy to ablate cells while sparing surrounding acellular tissue. The non-thermal mechanism of action of nsPFA can lead to beneficial differentiated outcomes in applications where ablation is performed today.
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We developed our proprietary CellFX System as a platform to deliver nsPFA across a number of applications including cardiac ablation. NsPFA differs from standard PFA and that the pulse durations for nsPFA are much shorter, typically 10 to 10,000 times shorter, which translates to appropriate energy exposure and an energy-efficient mechanism. In turn, less energy per nsPFA pulse, allows us to design larger footprint electrodes that can treat more tissue faster with substantially reduced risk of thermal damage that is of concern with standard PFA. Appropriate controlled energy and shorter duration pulses stimulate less muscle contraction and nerve stimulation during treatment and as such, reduce the need for stronger sedation and paralytics that are often used with standard PFA.
Overall, we believe nsPFA will provide meaningful benefits in both efficacy and safety over standard PFA and thermal modalities. Turning first to our cardiac ablation clamp. We continue to believe nsPFA can offer a significantly faster, more precise, safer and easier way to perform a surgical ablation procedure for AF than current technologies. We believe our nsPFA clamp will replace radiofrequency ablation claims being used today, because the clamp is similar in physical design, physicians with experience using radio frequency ablation clamps should be able to easily transition to our nsPFA clamp and immediately appreciate all the benefits of nsPFA, including speed of procedure with ablations being up to 10 times faster as well as increased precision of ablation and overall improvements in ease of use.
We recently met with the US Food and Drug Administration or FDA, to discuss the regulatory requirements for a potential FDA clearance as part of the FDA’s standard Q-submission process. This initial discussion with the FDA was productive and further communication will now be ongoing with the near-term goal of finalizing requirements for a 510(k) clearance for our nsPFA clamp. The discussion will include agreeing on the requirements for a preclinical study known as a Good Laboratory Practices or GLP preclinical study in support of a 510(k) clearance. Once this is agreed upon with the FDA, we would expect to be able to quickly execute the GLP study and any other testing required and submit a 510(k) to FDA during Q1 2024. We continue to be encouraged by the preclinical testing we are doing.
Dr. Dunnington has been involved in our preclinical testing since the beginning of the year, as a consulting cardiac surgery key opinion leader, using our clamp and experiencing first-hand speed, precision and safety of nsPFA when treating cardiac tissue. His decision to join our team is both a validation of the potential of this application for nsPFA and a major boost to our team that will help ensure we achieve our goals of delivering a highly differentiated patient and physician-friendly device to cardiac surgeons. Turning to our second product in development, the cardiac catheter ablation device. We believe our unique mechanism of action and device design will enable a full circumferential ablation in a single treatment, resulting in better efficacy, safety and shorter treatment times compared to traditional modalities.
We believe our current design is well suited for a first-in-human clinical study, following the completion of several ongoing preclinical studies. To effectively market and distribute the device in the US, we anticipate the catheter will require an FDA pre-market approval or PMA. This process will likely take several years and we look forward to sharing updates on our progress along the way. The preclinical data we have produced continues to validate the unique design of our nsPFA devices. To further increase awareness of our technology, our team will be participating in several key conferences throughout the year. Notably, this month our team will be presenting three abstracts at the upcoming Heart Rhythm Society Meeting in New Orleans, Louisiana.
The Annual Heart Rhythm Society Meeting is one of the premier scientific meetings for AF in the United States and is attended by top physicians from around the world. Having three abstracts on our preclinical work is very encouraging and speaks to the excellent work done by our team and physician collaborators. Additionally in June, Dr. Dunnington will be giving an oral presentation at the International Society for Minimally Invasive Cardiothoracic Surgery Meeting and will be providing information on our nsPFA clamp to the audience of minimally-invasive cardiothoracic surgeons. Now, I’ll turn the call to Mike Koffler for an update on our financial results.
Mike Koffler: Thank you, Darrin. Moving down the income statement, I’ll focus my comments on our non-GAAP results. I encourage you to review today’s earning release for a detailed reconciliation of non-GAAP measures to the most comparable GAAP measures. In the first quarter of 2023, we reduced non-GAAP total cost and expenses by $6.3 million to $8.3 million compared to $14.7 million in the prior year period. The decrease in operating expenses was driven by the virtual discontinuation of commercial dermatology activity and the prior headcount reduction and restructuring. Non-GAAP net loss for the quarter ended March 31, 2023 was $8.6 million compared to $14.2 million for the quarter ended March 31, 2022. Cash, cash equivalents and investments totaled $54.1 million as of March 31, 2023 compared to $61.1 million as of December 31, 2022.
Cash used in the first quarter of 2023 totaled $7.2 million and was reduced compared to both $15.9 million used in the same period in the year — in the prior year and $8 million used in the fourth quarter of 2022. Cash used in the first quarter excludes $200,000 of net proceeds from the exercise of warrants. As a result of the tightened corporate strategic focus, in 2023 we expect quarterly cash burn to average approximately $9 million. This month we entered into a stock purchase agreement with Robert Duggan, Pulse Biosciences’ Executive Chairman for the purchase of approximately 10 million shares of the company’s common stock at a price of $6.51 per share, a slight premium over the closing price of the previous business day. We successfully closed this private placement transaction earlier this week which resulted in the issuance of the shares and the cancelation of all indebtedness owed by the company to Mr. Duggan including the principal balance of $65 million and the accrued unpaid interest of approximately $0.25 million.
This private placement transaction should provide us the runway capital we need to oversee our first-in-human clinical trials. As recently announced in other efforts to strengthen our balance sheet, we have decided to take the opportunity presented based on the strong share performance of late to redeem the outstanding warrants from the company’s June 2022 Rights Offering which raised $15 million of capital. The redemption of warrants in 2023 represents an opportunity to raise up to an additional approximately $15 million. The company has chosen Friday, June 16 2023 as the final redemption date at which time any unexercised warrants will be redeemed by the company at a price of $0.01 per warrant. As a reminder, the warrants have a $2.05 per share exercise price.
The exercise of all of the still outstanding warrants would meaningfully extend our cash runway. I will now turn the call back over to Kevin.
Kevin Danahy: Thank you, Mike. Now I will provide some closing remarks. With a now even more accomplished veteran leadership team in place, a strengthened balance sheet and our preclinical and regulatory progress, we are confident we are on the right path forward. Our novel nsPFA technology differentiates us from others in the cardiac PFA space. We are excited to advance our clamp and catheter devices and it ultimately advance the treatment for AF patients. We look forward to providing progress updates on the next call. Joining me for the question-and-answer session today are Executive Chairman of the Board, Robert Duggan; Chief Technology Officer, Darrin Uecker; and Chief Strategy Officer, Mitch Levinson. Operator, please open the call for questions.
Operator: Thank you. [Operator Instructions] At this time, I will turn the call back to Kevin Danahy while we are polling for questions.
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