Q2 2023 Pulse Biosciences Inc Earnings Call
Participants
Darrin R. Uecker; CTO & Director; Pulse Biosciences, Inc.
Kevin Danahy; CEO; Pulse Biosciences, Inc.
Michael Koffler
Mitchell E. Levinson; Chief Strategy Officer; Pulse Biosciences, Inc.
Robert W. Duggan; Executive Chairman; Pulse Biosciences, Inc.
Steven Hammer; President; Hammer Capital Management, Inc.
Philip Taylor; Associate; Gilmartin Group LLC
Presentation
Operator
Greetings, and welcome to Pulse Biosciences Second Quarter 2023 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Philip Taylor. Thank you. You may begin.
Philip 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, August 10, 2023, only and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations and other similar 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 U.S. Securities and Exchange Commission. Our SEC filings can be found on our website or 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 and 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 expected to be joined by Darrin Uecker, Chief Technology Officer; Mitch Levinson, Chief Strategy Officer; and Mike Koffler, the Vice President of Finance. The full breadth of our expert and experienced leadership team will be on display today to highlight the robust progress we are making.
In the second quarter, we were appropriately focused on the continued validation of Nanosecond Pulsed Field Ablation, and we continue to build on the science behind CellFX technology to clearly differentiate nsPFA, Nanosecond Pulsed Field Ablation, from all current PFA technologies, emphasizing the potential for meaningful improved safety and efficacy with nsPFA.
First, I would like to discuss our core opportunity and top priorities. Then I will hand the call over to Darrin Uecker to discuss specific cardiac device development and noteworthy performance achievements. Then Mitch Levinson will describe our business development progress and provide exciting news on our first-in-human experience with benign thyroid nodules, our company's first surgical application for nsPFA. Then Mike Koffler will review our second quarter financial results before I conclude and open the call for a question-and-answer session.
As a reminder, our primary focus is on developing a cardiac ablation catheter and surgical ablation clamp, utilizing nsPFA for the treatment of atrial fibrillation or AF. Clamps will be used during open or minimally invasive heart surgery by cardiac surgeons, and the catheter will be navigated into the heart using standard minimally invasive catheter techniques through large blood vessels by electrophysiologists in the EP lab.
There is a clear emerging consensus from treating physicians that PFA is safer and faster than RF and cryo. And we intend to take this a step further with nsPFA by creating a more advanced treatment that has the potential for benefits for patients, surgeons and clinicians. This is an amazing period in Pulse Biosciences history. nsPFA is establishing a new standard in efficacy and safety, now being demonstrated in preclinical studies in our first-in-human surgical procedures. These exciting results follow years of visionary engineering and development.
As a reminder, Pulse Biosciences engineers have been designing and understanding nsPFA since 2015 and investing in nsPFA for cardiac applications since 2016. We are unique in the pulse field ablation space, partially because of our development process. We have built the CellFX System from the ground up.
Pulse Biosciences engineers first understood the science of nsPFA at a basic electrophysiology level, then created the CellFX console to generate and harness the energy of nsPFA, then took that knowledge and designed electrode endo factors purposely built to deliver nsPFA energy to create the appropriate tissue response across multiple therapeutic areas.
Our command of nsPFA is rooted in 15 years of research at academic and science tenets, followed by a half dozen years of advanced engineering, allowing Pulse Biosciences to move at an accelerated pace in preclinical cardiology studies in first-in-human thyroid surgical cases, and the results to date are what we wanted to see. I will let Darrin and Mitch fill in the details.
As we accelerate our strategic vision in the cardiology device development, the company focus has been on preclinical validation of that technology for the cardiac surgical clamp and the catheter programs. We remain on track to file an FDA submission for the cardiac surgical clamp in the first half of 2024 and to begin a feasibility study for the cardiac ablation catheter during the same time period.
As a supplemental point of validation of our engineering capabilities and to demonstrate our unique mechanism of action on internal organs, we have performed feasibility work in the treatment of benign thyroid nodules and initiated first-in-human studies using novel proprietary nsPFA end-effectors. This study was conducted to further validate the mechanism of action and tissue response of nsPFA and internal organs as we advance towards human cardiac tissue.
We view the safety and efficacy and demonstrated tissue response data from the thyroid's nodule study as an important incremental validation of our product engineering thesis and is the first demonstration of our potential of nsPFA to deliver otherwise not available safety and efficacy in human tissue ablation.
Based on these results, we see external interest and opportunities to further develop our technology platform beyond cardiology. We are entertaining and evaluating inbound inquiries through partnerships or licensing agreements that align with our corporate goals.
I will now hand the call off to Darrin to discuss the progress we have made on our cardiology device development and their initial preclinical performance.
Darrin R. Uecker
Thank you, Kevin. We have been very active in the lab over the last several months as we build the foundation of preclinical study data on the path towards potential human clinical use for both our cardiac surgical clamp and catheter devices. I am pleased to report that our confidence in the performance capabilities of these devices has evolved with each step in the process.
The results of the preclinical studies we are conducting have our expectations as well as those of the physicians we are honored to work with. By pairing our novel and proprietary nsPFA energy with our custom end-effector device designs that exploit the tissue ablation capabilities of nsPFA uniquely for each application, we are achieving results that indicate potential market-leading safety and efficacy and prospective durability in the treatment of atrial fibrillation.
Specifically, in our recent preclinical studies using our nsPFA cardiac ablation clamp, we are generating exceptional results relative to the energy modalities currently in use, including radiofrequency, or RF, and cryosurgery ablation. The goal of cardiac ablation is to consistently produce continuous full thickness, also referred to as transmural, ablations in cardiac muscle as quickly as possible.
With our nsPFA cardiac clamp, we are consistently achieving transmural ablations in 1.25 seconds, independent of tissue thickness, even when treating tissue thicknesses up to approximately 25 millimeters. This is compared to RF ablation, which requires approximately 10 to 40 seconds per ablation, depending on the tissue thickness, which is generally limited to 10 millimeters; endocryoablation, which can require several minutes per ablation.
The ability of our nsPFA cardiac clamp to produce consistently transmural ablations through tissue of varying thickness in 1.25 seconds is enabled by the nsPFA mechanism of action, our novel surgical clamp design, and proprietary energy delivery algorithms that automatically adjusts the nsPFA pulse parameters based on tissue thickness. Thermal modalities rely on thermal conduction through the tissue, which will inherently vary depending on the tissue thickness and collateral effects such as vessels.
Lack of predictability presents a multitude of challenges for treating physicians. Optimum predictability supports ideal outcomes. Dr. Gan Dunnington, our Chief Medical Officer of Cardiac Surgery, is very busy bringing together a group of innovative, thought-leading cardiac surgeons from around the world to work with us as we bring nsPFA to cardiac surgery.
These cardiac surgeons have significant experience in cardiac ablation for the treatment of AF using currently available RF and cryoablation technologies. This group of surgeons have been extremely impressed at the treatment speed and consistency of outcome enabled by our nsPFA cardiac surgery clamp system.
In any type of surgery, but especially cardiac surgery, every second counts, while the patient is under general anesthesia and potentially on cardiopulmonary bypass. So reducing the time to perform the multiple ablations required in a procedure can translate to significantly reduced risk for the patient.
In addition, because the pulse electric field is controlled between the clamp jaws and is nonthermal, there is minimal risk of collateral tissue damage. Thermal modalities, which generally require repeated longer treatments, can cause thermal spread, which, in turn, can cause unintended collateral damage to surrounding structures. For these reasons and more, we continue to believe our nsPFA cardiac clamp has the potential to provide a faster, more effective and safer cardiac ablation than what is currently available with thermal modalities.
And we continue to be encouraged with our preclinical development progress. On the regulatory front, we continue to be in communication with FDA regarding the requirements for a 510(k) clearance for the nsPFA clamp. We believe we are on track to file the submission in the first half of 2024. Shifting the focus to our cardiac catheter ablation device, our preclinical studies to date indicate that our novel catheter design is able to deliver nsPFA to circumferentially ablate targeted pulmonary veins in a single shot in approximately 5 seconds.
In our preclinical studies, the device is consistently achieving fast and effective ablations without collateral tissue damage and without the need to perform multiple ablations at different orientations or positions of the catheter, which electrophysiologists often need to do when using RF or other traditional PFA systems, with pivotal studies underway. Similar to our cardiac clamp, we believe these benefits are enabled by the combination of nsPFA and our novel catheter that was designed specifically for use with our nsPFA platform.
In May, at the Annual Heart Rhythm Society Meeting, three abstracts were presented by our physician collaborators from Mount Sinai Hospital in New York, which highlight the performance of our novel circumventional catheter. Across the 3 studies, favorable safety and performance data were generated.
One study concluded our device can create clinically relevant circumferential-wide lesions with minimal phrenic muscular stimulation. The next study observed nsPFA delivered by our catheter can create clinically relevant deep and wide lesions in ventricle tissue, which did not demonstrate any evidence of thermal injury. Delivery was associated with only mild muscle and nerve stimulation. Finally, the third abstract demonstrated the effects of nsPFA on cardiomyocytes, muscle cells of the heart, at acute time points using electron microscopy.
All 3 of these abstracts support our belief that nsPFA can potentially eliminate the substantial trade-off between safety and efficacy observed in traditional thermal ablation, modalities and newer PFA technologies. The data also have confirmed our belief that our catheter design will be suitable for first-in-human trials. Each of these manuscripts are available at our website.
We have started the regulatory clinical process for our first-in-human feasibility study for the nsPFA catheter ablation system. As reported previously, we expect the feasibility study to begin in the first half of 2024. We are also making progress in determining the U.S. regulatory pathway for our cardiac catheter. We anticipate the catheter product line will require an FDA premarket approval, or PMA. We look forward to sharing updates on our progress along the way.
In summary, we are thrilled with the preclinical performance of our 2 cardiac ablation devices, and we look forward to providing surgeons and patients with improved treatment options. I'll now turn the call over to Mitch to describe some exciting recent first-in-human feasibility clinical work that demonstrates the broad potential of nsPFA and how we are reaping the benefits of our platform strategy and our team's expertise to validate nsPFA in surgery. Mitch?
Mitchell E. Levinson
Thank you, Darrin. I echo your excitement about the recent preclinical work in cardiac ablation, and I'm excited to share the early results from our first clinical study in a surgical application.
The progress we're making with our cardiac programs is a testament to the platform nature of nsPFA and our CellFX System. The CellFX system was developed with the vision of pursuing multiple applications across various medical specialties, with cardiac ablation being our top priority today.
Since the company was founded, we've continued to research nsPFA's impact on different tissue types and how best to deliver the nsPFA energy to tissue. Today, we have an R&D team with expertise gained through experience in the use of nsPFA and how to develop end effectors that leverage the novel therapeutic benefits of nsPFA throughout the entire body.
Part of my role as Chief Strategy Officer for Pulse Biosciences has been to lead the exploration and evaluation of applications across a wide range of clinical areas to determine where our platform technology can have the largest impact on patient care. One result of this effort was our decision to prioritize significant resources on cardiac ablation, and those efforts are now achieving great effects, as Darrin just explained.
Over the past couple of years, we have shared high-level results from our feasibility work with stakeholders, physicians and potential strategic partners in applications, including gastroenterology, gynecology, urology, cardiovascular, pulmonology, oncology and otolaryngology, the medical specialty focused on the ears, nos and throat.
Our feasibility demonstrations and the clinical value propositions of nsPFA in multiple applications have attracted external organizations who've expressed interest in exploring opportunities of mutual interest. While we are evaluating stakeholder value-enhancing opportunities, we'll continue to remain acutely focused on our cardiac applications.
As a means to further understand the effects and broad potential of nsPFA inside the human body, we recently initiated an nsPFA surgical procedure study. The goal of this clinical feasibility study was to measure the patient tolerance, safety and tissue response in the ablation of benign thyroid nodules using a custom proprietary end-effector to deliver nsPFA energy.
These fibroid nodules are common benign tumors located in the neck, near the trachea and voice box and can cause difficulties in swallowing, breathing, hoarseness and neck pain. They're most commonly treated by open surgical resection to remove half or the entire thyroid, resulting in scarring and requiring lifelong hormone replacement.
Percutaneous ablation with RF and microwave modalities carries the risk of collateral thermal damage to critical nerves, vessels, trachea and other structures, and they can create a significant scar inside the thyroid after the thermal injury has resolved. nsPFA's unique mechanism of action offers the potential of a more effective and safer alternative to surgery or other ablation modalities.
These benign tumors can be accessed with our novel nsPFA electrode under ultrasound guidance while the patients are conscious under local anesthesia. We treated 10 subjects and evaluated them immediately following the procedure and then at 30 days, with plans for additional follow-up at 90, 180, 360 days post treatment. All patients tolerated the procedure very well with no reported pain or serious side effects.
Ultrasound imaging 30 days post procedure showed that the treated portions of the nodules had already been mostly or completely resorbed, which is very fast compared with other ablation modalities. There was also no sign of scarring or fibrosis, which is another side effect of other ablation modalities.
This demonstrates the unusual benefits of our technology's unique mechanism of action, inducing regulated cell death while avoiding unwanted scarring and preserving the vasculature and lymphatic infrastructure to facilitate the body's own rapid natural clearing of the treated tissue. Based on these positive initial results, we're preparing an amendment to the thyroid study protocol to expand enrollment and the next phase focused on optimizing treatment parameters and is anticipated to occur in the fourth quarter.
Our experience in this first human study in a surgical application suggests that nsPFA is well tolerated inside the human body and also demonstrates our skill in delivering energy to an internal human organ without pain or serious side effects. While we remain focused on developing devices for the treatment of AF, it is clear that nsPFA may well be safe and effective in treating many other conditions as well.
Now I'll turn the call over to Mike Koffler for an update on our financial results.
Michael Koffler
Thank you, Mitch. Moving down the income statement, I'll focus my comments on our non-GAAP results. I encourage you to review today's earnings release for a detailed reconciliation of non-GAAP measures to the most comparable GAAP measures.
In the second quarter of 2023, we reduced non-GAAP total cost and expenses by $3.4 million to $8.8 million compared to $12.2 million in the prior year period. The decrease in operating expenses is driven by the prior headcount reduction and restructuring. Non-GAAP net loss quarter ended June 30, 2023, was $8.5 million compared to $11.9 million for the quarter ended June 30, 2022.
Cash, cash equivalents and investments totaled $58.7 million as of June 30, 2023, compared to $54.1 million as of March 31, 2023. Cash used in the second quarter of 2023 totaled $10 million and was reduced compared to $12.8 million used in the same period in the prior year and increased compared to $7.2 million used in the first quarter of 2023. We recognize the increase in our cash usage, largely resulting from the timing of certain nonrecurring payments, but maintain our expectation for quarterly cash burn to average approximately $9 million throughout 2023.
In April, we entered into a stock purchase agreement with Robert Duggan, our majority shareholder and Executive Chairman, for the purchase of 10,022,937 shares of the company's common stock at a price of $6.51 per share, a greater than 1% premium over the last reported sale price of the company's common stock on April 28, 2023, the immediately preceding trading day.
In May, we successfully closed this private placement and sale of these securities, effectively canceling all prior indebtedness owed by the company to Mr. Duggan, including the principal balance of $65 million and accrued and unpaid interest of approximately $250,000. At the time of Mr. Duggan's original loan to the company in September 2022, the company's stock is trading under $1.50 per share. Total transaction cost for this financing were less than $6,000.
Also in May, we delivered a notice of redemption to redeem all outstanding warrants to purchase shares of our common stock issued in connection with our June 9, 2022 rights offering. Prior to the redemption date, approximately 99% of the warrants still outstanding were exercised to purchase approximately 7.14 million shares of the company's common stock at $2.05 per share, generating approximately $14.6 million in gross proceeds in the second quarter. This brings total proceeds from the rights offering, including $15 million received in 2022, to approximately $29.9 million, with $14.9 million coming from the exercise of warrants in total.
In addition, in July 2023, Robert Duggan exercised options to purchase an additional 133,800 shares of the company's common stock at prices ranging from $2.14 to $5.95, adding an additional $299,000 of cash to the company's balance sheet. We are pleased to see the continued support from our existing shareholders.
I will now turn the call back over to Kevin.
Kevin Danahy
Thank you, Mike. Now I will provide some closing remarks. We are encouraged by our preclinical results we have achieved in our cardiology devices. Our novel devices, combined with our unique mechanism of action, are demonstrating the expected potential our engineers anticipated. We are confident in the breadth and depth of our leadership team can propel nsPFA technology to achieve a leadership position in this multibillion-dollar atrial fibrillation market. We look forward to providing a progress update on the next call.
Joining me for a question-and-answer session today is Executive Chairman of the Board, Robert Duggan; Chief Technology Officer, Darrin Uecker; Chief Strategy Officer, Mitch Levinson; and Vice President of Finance, Mike Koffler. Operator, please open the call for questions.
Question and Answer Session
Operator
(Operator Instructions)
Kevin Danahy
Rob, this is Kevin. We have a couple of questions that came in online. So I will read these questions first, and you can put together the questions online. So the first question says congrats on your cardiac progress in both the clamp and catheter and great news on your first-in-human cases and the results. Considering the new focus and success in cardiac and their time lines, why would you continue the thyroid study expansion if you have the validation you needed?
Mitchell E. Levinson
Yes, I'll take that one. Yes, this is Mitch. Thanks for that question. And yes, the color is right. The first human study has helped us to validate the safety, the patient tolerance, the tissue response of our nsPFA energy inside the body. Because these preliminary results look so promising and because there's outside interest in this application and others, we decided it was worthwhile expanding the number of subjects, and that will allow us to demonstrate our ability to optimize the treatment parameters.
Kevin Danahy
Perfect. Okay. The next question that came in is with regards to the clamp and catheter, do you feel like you can compete in these spaces?
I will take this one and kick it off. Thank you for the question. And absolutely, we think we can compete in these spaces. As we stated, our command of nsPFA is rooted in 15 years of research, academic and science centers. And our engineers have designed and understood nsPFA since 2015 and have been investigating nsPFA and cardiac application since 2016.
We first understood the basic electrophysiology level, like we said. And then we created the console to really generate and harness that energy of nsPFA and then took that knowledge and designed electro end-effectors that we purposely built to have the appropriate tissue response these results that we've talked in Darrin's section today shows our command of this energy and how we believe we can lead in the nsPFA space.
Anything to add to that, Darrin?
Darrin R. Uecker
Yes. I would just say, I mean, certainly, what Kevin said is accurate. And I think I talked about a lot of different numbers in terms of the speed and the other attributes of Nanosecond PFA and our devices. But I think the real proof of how competitive and how differentiated our devices are -- will come from physicians and their patients.
And we spend a lot of time in the development process talking to physicians and getting physician feedback. We did that with Dr. Dunnington, who then decided he liked it so much, he wanted to become our CMO for cardiac devices. So I think the proof is really in the end customers and the end stakeholders like physicians and patients. And so far, I think the feedback that we've gotten from them is that we're highly differentiated, and we're going to be very competitive in both of these spaces.
Kevin Danahy
Thank you, Darrin. Operator, questions online?
Operator
Yes, we do have an audio question. Our first question comes from Steven Hammer with HCMI.
Steven Hammer
Yes. And we've been great supporters of Pulse from the start. My question relates to the dermatological projects that the firm abandoned. I'm curious, obviously, I would think the technology was working. Was the decision to leave that market on the basis of the physicians and other people in the industry to the long education cycle it took to teach them how to use the equipment?
Kevin Danahy
Bob, do you want to jump in and then I'll come in and support?
Robert W. Duggan
Sure, Kevin. Steve, I appreciate your question. The device is not really difficult to use. Any digital electronic device, modern in nature, can take half a dozen hours and first can use a dozen or 2 times. And in this case, it's a fraction of the challenge that was experienced with the robotics.
We affected excellent outcomes, and we were very pleased they exceeded all expectations in terms of ultimate patient benefit. The challenge was that the competing product was really pennies on the dollar. And while typically, it requires multiple and frequent revisits to the clinic, which are, in effect, profitable for the clinic and that we didn't compete well with that. So as we demonstrated safety on the tissue side, it became very, very obvious. We only had an FDA clearance for soft tissue -- that a more challenging and opportunistic ability to go inside the body was staring us in the face. We had looked at that years ago.
And -- but we felt we first needed to get the FDA approval, that electricity use, as we do in the human body, would be considered safe by them. We think we've done a spectacular job. We have an excellent relationship now going forward. We're very proactive with the FDA. So we look forward to this journey.
Then we went into preclinical studies and looked at similar tissues in the analog side with the who's who in the profession in cardiac and in thyroid repair. And frankly, the results have been outstanding. The surgeon response has been somewhat one-off. I'm acclimated that when surgeons get excited about something, as they did with prostate surgery and robotics, we think this is the match, if not better than that. So we personally -- I personally could not be more excited with the opportunity.
I think everything that the company has done, as we've applied patients' prior experience in end effectors and robotics, prior communications with physicians and surgeons. It's all -- all these businesses very real to us. Kevin spent years in training and I also worked in the robotics field, as have half a dozen of our people. So I personally don't think this opportunity could be in better hands.
And I consider it to be probably the most significant opportunity that I've been fortunate to work with, and we look forward to the next half dozen years as something that we're going to make a substantial difference for the betterment in the field of cardiac and I think in other areas of the human body.
Because it's got such a broad opportunity, you have the potential then to fund this business through different relationships. And we certainly don't lack for large companies talking to us and who were showing a real interest, and we'll diligently work our way through that over the next period of time. And we'll report back to our stakeholders as progress is made and results occur. So it's going to be an exciting 3, 6, 9, 12 months and then the following years. I hope that addresses your question, Steve.
Steven Hammer
It sure does, Bob. And I have followed your career for quite a number of years, and the first time I met you in Santa Barbara back in the Computer Motion Day. So thank you for the support for this company, and we're all very excited.
Kevin Danahy
Thank you, Steve.
Robert W. Duggan
It's been a journey, and it's all well that ends well. I'm very, very positive on where we're going with this, but thanks for your patience.
Kevin Danahy
And Steve, I'll just add. One of the things that I'm really impressed with is I know that we talked about dermatology, but this is the learnings that we had from that space and how we've developed the console going forward. And what's really unique for us is when we wheel this console in, and we're doing clamp cases or cardiac pre-work, it's astonishing how people look at our console and see how polished it is and how well designed it is. And that goes back to the history of evolution as we went through the dermatology space. And we're proud of those milestones and those have gotten us to where we are today.
Operator
There are no further audio questions at this time.
Kevin Danahy
Okay. Operator, thank you so much. Thank you, everyone, for joining this call. We are excited about the future. We have much more to report in the up and coming months, and we will keep you all informed. And thank you for your continued support and interest in Pulse Bioscience in the direction we're going.
Operator
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
