Q2 2023 Heartbeam Inc Earnings Call
Participants
Branislav Vajdic; Founder & CEO; HeartBeam, Inc.
Rob Eno; President; HeartBeam, Inc.
Rick Brounstein; CFO; HeartBeam, Inc.
Ben Haynor; Analyst; Alliance Global Partners
Presentation
Operator
Greetings and welcome to the HeartBeam second-quarter 2023 financial results conference call. (Operator Instructions) As a reminder, this conference is being recorded. At this time, I will turn the call over to HeartBeam's Chief Executive Officer, Branislav Vajdic. Please go ahead, sir.
Branislav Vajdic
Thank you, operator, and good afternoon, everyone. I am pleased to welcome you to today's second-quarter 2023 financial results conference call. On today's call, we will be releasing some very important updates about our business and our products.
Recently, we completed $26.5 million in funding, which will enable us to execute on upcoming product development, clinical, and regulatory milestones and extends our cash runway into late 2024. With this funding, we took the opportunity to adjust our strategic focus to enable timely delivery of our ambulatory vector electrocardiogram or VECG products, our key future value drivers.
Our first step is to obtain and 510(k) FDA clearance for the HeartBeam AIMIGo VECG device. This application was submitted to the FDA in May, and we will be following this with a second FDA application on the system's ability to synthesize a 12-lead ECG. Given this strategic focus on our AIMIGo system, we withdrew the 510(k) application for our AIMI product, which is a software applied to 12-lead ECG in the emergency department. This will allow us to devote all of our resources and energy to products that are being powered for our 12-lead ECG into the hands of patients and outside of a medical facility.
We just announced the publication of our first peer-reviewed paper, a foundational study, demonstrating the ability of our VECG platform to detect the presence of coronary artery blockages. The study comparing our 3D VECG approach to conventional standard 12-lead ECG appeared in JACC: Advances, a journal of the American College of Cardiology.
We also strengthened our Board with the appointment of three respected industry executives, Dr. Michael Jaff, Ken Nelson, and Mark Strome, bringing the number of HeartBeam Board members to eight. We also are excited to report that we recently welcomed to our team Debbie Castillo, PhD, as Vice President of Regulatory Affairs. Debbie is an experienced biomedical engineer and brings more than 12 years' experience in regulatory affairs and quality assurance for medical devices and diagnostics, both with the FDA and the private sector.
Finally, we continued to solidify our intellectual property portfolio in the second quarter with a new patent issued by US Patent Office on automated cardiac detection, with HeartBeam AIMIGo. We believe this patent underscores our leadership effort in the ambulatory VECG space.
As previously reported, on May 3 of this year, we closed a secondary offering of $25 million, followed by a registered direct offering of $1.5 million for a total of $26.5 million. We worked with Public Ventures as our placement agent. They are a wholly owned subsidiary of MDB Capital Holdings. MDB and Public Ventures have proven to be tremendous strategic partners for HeartBeam.
Public Ventures is a member-driven investor community with the mission of backing visionary public companies that have potential to become market leaders in their technology category. We continue to work with them as we execute on our strategic plan. And in fact, our involvement with PatentVest, also an MDB entity, is ongoing example how we plan to continue to use their services.
We believe that we are the leader in the mobile VECG space. And as we build on our global intellectual property portfolio, our work with PatentVest is a tangible example of our commitment. PatentVest is a unified technology, development, and patent law firm focused on creating IP leadership for development-stage technology companies like HeartBeam. And we expect they will support our goal of creating clear leadership in the area of ambulatory VECG cardiac detection.
I would like now to turn the call over to our President, Dr. Rob Eno, to further discuss our strategic focus and provide product updates. Rob?
Rob Eno
Thank you, Branislav, and thanks to everyone joining us today. We mentioned this last quarter, but I wanted to reiterate the key points. We've refined our strategic focus and are concentrating on our AIMIGo platform, bringing the performance of a 12-lead ECG into patients' hands. We see this platform, which will enable physicians to remotely monitor patients and immediately interpret any concerning cardiac events, as an important value creation path. In addition, we'll be undertaking clinical studies in 2023 and beyond to demonstrate the performance of the HeartBeam AIMIGo platform, which we believe is the most advanced ambulatory cardiac detection platform available.
As Branislav mentioned, the first peer-reviewed study related to our technology was recently published in JACC: Advances. This publication highlighted the capabilities of the technology to detect the presence of a coronary occlusion, the cause of heart attacks, with the same accuracy as a standard 12-lead ECG. It also demonstrated the advantages of putting a baseline recording for comparison in the analysis. This is something that is integral to the HeartBeam technology. But today, when 12-lead ECGs are analyzed, it's not common that a baseline ECG is used for comparison.
The significance to this study is in demonstrating the potential to provide patients with an easy-to-use system to record a diagnostic quality ECG signal outside of a medical institution, which could improve heart attack detection, speed up access to care, and save lives. We'll be conducting additional studies focused on our 12-lead synthesis and on the performance of the system as a whole. And we believe these studies will be key to driving clinical and patient adoption.
Our commercial launch activities will be for the second version of HeartBeam AIMIGo after we obtain FDA clearance for the algorithms that synthesize the 12-lead ECG. I'll describe this in more detail in just a minute. In this year, we're undertaking aggressive pre-commercial efforts to finding the initial market segments for HeartBeam AIMIGo and identifying potential business partners for HeartBeam AIMIGo and other technologies in our portfolio.
And finally, as Branislav mentioned, we'll continue to aggress -- the aggressive development of our intellectual property through our partnership with PatentVest.
Turning to our product timelines and updates, we have two planned FDA 510(k) submissions. The first, which we call Version 1, is for the hardware. In other words, obtaining clearance as a 3-lead ECG collection device. Next Version 2, built upon version one and includes the algorithms that take the 3-lead VECG signals and synthesize a 12-lead ECG for physician review.
In May, we submitted our 510(k) application for Version 1. We've also started the process for Version 2. In June, we submitted a request for a pre-submission meeting to FDA. The pre-sub process is an excellent means to get feedback on key elements of the submission. That pre-sub meeting has been scheduled. It has been scheduled, and we look forward to working closely with FDA on both of these applications.
The result of these two submissions, once cleared by FDA, will be a device carried by patients that can synthesize a 12-lead ECG for physician review. We'll focus then on a limited market release, which we estimate in the second half of 2024.
With the appointment of Debbie Castillo as Vice President of Regulatory Affairs, we've strengthened our team. Debbie is an experienced biomedical engineer with extensive knowledge of the FDA. In addition to her private sector experience, Debbie held various roles at FDA, including Acting Branch Chief, Senior Lead Reviewer, and Lead Scientific Reviewer.
And finally, in an effort to focus on the HeartBeam AIMIGo product, we withdrew our 510(k) application for HeartBeam AIMI. HeartBeam AIMI is focused on emergency room use, which is significantly smaller opportunity than the HeartBeam AIMIGo ambulatory ECG market. This decision will allow the company to focus on the product development, clinical, regulatory, and market preparation efforts for HeartBeam AIMIGo.
I'll now turn the call over to Rick Brounstein, Chief Financial Officer, to discuss operational updates and financials.
Rick Brounstein
Thank you, Rob. Turning to our financials, I'll now give a brief review of our financial results. So a full breakdown is available in our regulatory filings -- we just filed the 10-Q -- and in the press release that crossed the wire after the close of business today.
General, administrative expenses for the second quarter of 2023 were $1.8 million compared to $1.8 million for the second quarter last year. Our overall G&A expense is flat. Spending is actually down in 2023 compared to 2022. In 2022, we were invested in the commercial team and due to our change in near-term focus in early 2023, we are not currently emphasizing commercial activities. Reduced sales and marketing expense was offset by increased non-cash stock-based compensation of about $0.4 million, resulting primarily from the issuance of employee stock options following the May 2023 financings.
Research and development expenses for the second quarter of 2023 were $1.5 million compared to $1.7 million for the second quarter of 2022. Our focus on R&D differed in 2022 compared to this quarter. While both consisted largely of product development and regulatory costs, in 2022, our focus was on the development of our platform for our products, working with an outside development organization, LIVMOR and preparing for our first FDA submission.
This quarter, our US development team are employees hired from LIVMOR and the focus is fully on HeartBeam AIMIGo. We submitted Version 1 for FDA clearance in May. And at the same time, we continue to use our professional services agreement with Triple Ring.
Triple Ring represents over 20% of our investment in R&D this quarter ended June 30, 2023, which we are investing in a device cost reduction program. As of June 30, 2023, we have a remaining commitment with them for this project of $0.8 million. In both periods, we also invested in research costs in support of future product pipeline coming from our patented VECG platform technology, which is the basis for our patent portfolio of 10 issued patents.
With the current interest rates in short-term markets around 5%, we earned $158,000 in interest income in the second quarter of 2023. And this only for two months as we close the financing in early May. This compared to $10,000 in the second quarter of 2022.
The net loss for the second quarter of 2023 was $3.2 million compared to a net loss of $3.5 million for the second quarter of 2022. We ended the second quarter of 2023 with $21.3 million in cash, cash equivalents and short-term investments compared to $3.6 million as of December 31.
As mentioned in May, we closed common stock financings with net proceeds of approximately $24.3 million. The use of proceeds is planned to last into late 2024, timed to when we expect to have received clearance for our commercial product. We are confident we remain on track.
With regard to our short-term investments, we take a risk-averse approach only investing in short term government-backed money market funds that we are holding to maturity. The approximate $4 million in short-term investments at June 30, 2023, represent such securities with a four- to six-month term. Also of importance in the recent financing is the fact that the 17.7 million shares offered did not include any warrants and our balance sheet, as a result, has a very simple and straightforward capital structure, approximately 26 million shares now outstanding.
Finally, I'd like to share the results of our recent annual meeting of shareholders. At the event, all proposals passed, which included adding 4 million authorized shares to the 2022 equity incentive plan, reflecting the overall dilute effect of the S-1 financing.
I will now turn the call back over to Branislav for his closing thoughts.
Branislav Vajdic
Thank you, Rick. We remain incredibly optimistic for the future of HeartBeam. I would like to summarize the recent efforts in the following categories: financial, strategic focus, and progress and validation. Following our $26.5 million capital raise, we have a strong cash position, providing a run rate to late 2024. We have adjusted our strategic focus to enable timely delivery of HeartBeam's breakthrough ambulatory VECG products, the company's key future value driver. And we are highly focused on executing on our product development, clinical and regulatory milestones.
The key element of this focus is the HeartBeam AIMIGo, a credit-card-size VECG device. In May, we submitted a 510(k) FDA application on Version 1 of our system. And in June, we have submitted a pre-sub request for Version 2 of the system. We are excited about the addition of Debbie Castillo, our new Vice President of Regulatory, as we work with the FDA on these submissions.
Finally, we have several recent milestones that adds to the validation of the technology and the company. Our foundational clinical study was recently published in JACC: Advances. We added three strong members to the Board of Directors in addition to Debbie Castillo joining our management team. We had an additional patent granted on our automated cardio detection with HeartBeam AIMIGo system.
I look forward to providing our shareholders with further updates in the near term. I thank you all for attending today. And now the HeartBeam team would like to answer your questions. Operator?
Question and Answer Session
Operator
Thank you. We will now be conducting a question-and-answer session. (Operator Instructions)
Ben Haynor, Alliance Global Partners.
Ben Haynor
Hey, gentlemen. Thanks for taking the questions and congrats on the progress. First off, for me, just -- I know it's early days, but wondering if you've gotten any reaction to the JACC publication. And then maybe you could talk about -- obviously, the performance was solid. Any surprises, positive or negative, with regard to the device to open and/or kind of the human reading that came out in the study?
Branislav Vajdic
Yes, Ben, thank you for your question. Yes, we were actually very fortunate that our publication caused an; editorial as well. This is a sign of a well-received publication, a publication that's very impactful. And indeed, all our associated medical team members as well as some of our potential business partners have noted this as a very significant event for our future acceptance.
The study shows that we have a technology that puts the power of a 12-lead ECG, the standard of care, in patients' pockets, is always with the patient, and that is a huge value for those high-risk patients. So all in all, this is our first publication, extremely well received, and it's only the first one. We have a few of the follow-on publications in the works, and we will continue on that treadmill of publications showing the efficacy of our technology.
Ben Haynor
And can you discuss -- well, first off, I guess, maybe any surprises there? And then any -- on the publications that you have in the works, can you share anything about how they might be similar or different to the current study -- the just published study?
Branislav Vajdic
Yes, the future studies will take a bit different angle at our technology. And I cannot really discuss it in many details, but I can tell you that every one of these studies will be like a brick in the wall, so to speak. And at this point, we have a number of patents and a number of applications that we are working on. And again, that cadence coming out of HeartBeam will continue both on the publication front and the IP front.
Rob Eno
Branislav, maybe I'll just add briefly, if you don't mind. Completely agree with all that. I don't think -- and the question of surprises, I don't think there's any surprises. But I think one thing which comes out in the paper, which maybe is less obvious, is the importance of a baseline. So in both the VECG and the 12-lead, the results were a lot better when the baseline was used to compare with the reading.
What's interesting about that is that's an integral part of our process. We have a baseline when the patient enrolls and we compare that by definition. And when you think about how 12-leads are analyzed today, they're often analyzed in isolation without a baseline. So the top line of the paper is that the VECG performed equal to a 12-lead in both comparison or one at a time, we're always going to have that baseline and sometimes the 12-leads are analyzed in a vacuum. So I think that's a kind of subtle but important point in the study.
Branislav Vajdic
Good point. Thank you, Rob.
Ben Haynor
And then I guess maybe a couple maybe for Rick. On the G&A, it sounded like there's maybe $400,000 that was kind of non-recurring in the quarter. Is that a fair assessment? Or -- what should we kind of think about going forward on the G&A line?
Rick Brounstein
Okay. I would say re-occurring but non-cash, right? And indeed, as we've now up to 26, 27 million shares, you'll see, I think, a growing non-cash stock expense. But if you have -- if you go back to 2022, yes, there was $400,000, I would say, of non-recurring SG&A expense that we won't see again for probably until we start getting commercialization -- late 2024 and or so.
Ben Haynor
Okay. So there wasn't any -- I may have misheard it. I thought you said $400,000 related to stock-based comp related to the financing.
Rick Brounstein
No. As a result of the financing, we granted more stock options to people who now had a much lower share in the company.
Ben Haynor
Okay. So there wasn't any kind of one-time-ish G&.A expenses associated with the deal?
Rick Brounstein
No, not in the quarter, no. Anything that was associated with the financing is all just -- ran through stockholders' equity. It didn't go to the P&L.
Ben Haynor
Okay, got it. And then on the cost reduction program with Triple Ring, how's that progressing? Any more color there that you can provide? And that's it for me. Thanks for taking the questions, gentlemen.
Rick Brounstein
Branislav, do you want to handle that one or -- ?
Branislav Vajdic
Go ahead, Rick.
Rick Brounstein
Yeah. Okay. So then it's probably going to be most of the year -- we're doing things to take a basically a prototype-level device that costs over $1,000 and reducing something that -- when we start to get in volumes -- will be in a couple of hundred dollars, right? So there's various pieces that are going on. It's ongoing. We're looking at the [PCV board]. We're looking at some moles that we'll buy and some other things. But it's a dedicated approach now that we look forward to commercialization to be able to produce a -- if you would, the credit card at a reasonable price.
Ben Haynor
Okay, great. Thanks for the color and thanks for taking the questions.
Branislav Vajdic
Thank you, Ben.
Operator
(Operator Instructions)
At this time, we will now take questions from our webcast.
Rick Brounstein
The first question asks, you mentioned that you have withdrawn AIMI. Can you tell me more about that decision?
Branislav Vajdic
Let me handle that question. Our strategic focus is on ambulatory devices. AIMI application, while valuable, had a very different market and distribution strategy. As we have seen the opportunity with our AIMIGo ambulatory VECG device and as we make progress and get closer to its market availability, it is important for us to totally focus and take advantage of that huge opportunity.
This market is much larger market, probably 20x or more, than that of the emergency room market. The great need and the key opportunity is to bring the 12-lead VECG to the patients outside of the healthcare institution. Actually, the algorithm that we developed for AIMI, which basically takes the 12-lead ECG and convert it to the VECG and runs analysis on the VECG, is a plan to be included in future generations of AIMIGo as well. So in that sense, we expect to see this technology appear in AIMIGo down the line.
Rick Brounstein
Our second and final webcast question is you are providing only high-level details on the timings of the future FDA submissions and clearances rather than a detailed timeline. You say you're expecting a limited market release in the second half of 2024. Can you provide more context?
Branislav Vajdic
Yeah, Rob, would you please go ahead?
Rob Eno
Yes, the one thing that's clear about regulatory filings and the whole regulatory process is the timing's uncertain. And to a large extent, it's outside of our control when dealing with regulatory agencies. So we're going to continue to update on our progress toward our milestones, things that we've achieved as we did today, talking both about the Version 1 and Version 2 products.
But rather than give estimates on the timing of some of these upcoming intermediate steps, we decided to focus on the key milestone, which is this limited market release of AIMIGo, which happens after the clearance of Version 2 in the second half of 2024. And we'll continue to do that going forward is focus on that ultimate date of market release, but also keep providing updates on the progress and the milestones that we've achieved.
Operator
I would now like to turn the floor back over to Dr. Vajdic for his closing comments.
Branislav Vajdic
Thank you, operator. I would like to thank each of you for joining our earnings conference call today and look forward to continuing to update you on our ongoing progress and growth. If you were unable to answer any of your questions, please reach out to IR firm, MZ Group, who will be more than happy to assist. Thank you again.
Operator
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
