HeartBeam, Inc. (BEAT) Earnings Call Transcript & Summary

Greetings, and welcome to the HeartBeam Fourth Quarter and Full Year 2023 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise our -- or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results crossed the wire this afternoon and is available in the Investor Relations section of our company's website, heartbeam.com. Your host today, Branislav Vajdic, Chief Executive Officer and Founder; Rob Eno, President; Deborah Castillo, Vice President, Regulatory Affairs; and Rick Brounstein, Consulting Chief Financial Officer, who will present results of operations for the fourth quarter and full year ended December 31, 2023. At this time, I will turn the call over to HeartBeam's Chief Executive Officer, Branislav Vajdic.

Thank you, operator. I'd like to start by giving a brief overview of HeartBeam and our technology. It is really important to understand how our VECG technology is different and vastly, more powerful than the most common personal ECG technologies that are out there in the marketplace today. A 12-Lead ECG is one of the most commonly performed diagnostic test and it is actually a standard in hospitals and clinics. There are many ECG technologies that can be used by patients and [ all ] consumers at home. You can see a couple of examples on this slide. They are not 12-Lead ECGs, instead, they are 1-lead, 3-lead or 6-lead. This is adequate for detecting many arrhythmias, but it is not sufficient for detecting a heart attack or complex arrhythmias. In contrast, there has been AIMIGo is an easy-to-use credit card-sized size system that simplified as a 12-lead ECG. It is handheld device with no external electrodes or wires and it is easy for the patient to apply. The key aim of the HeartBeam technology is to quickly and actively help clinicians identify the full range of cardiac conditions, including a heart attack and outside our medical facility. Our proprietary 3D VECG technology offers higher resolution, monitoring by capturing heart activity in 3 projections, X, Y, and Z, which can provide for many cardiac conditions, a more complete view of the heart than a standard 12-lead ECG. The AIMIGo device coupled with a smartphone app and cloud-based diagnostic software enables a remote evaluation of cardiac symptoms by physicians, and we believe it could reduce the critical time to intervention for heart attack patients. The average patient waits 3 to 4 hours before seeking care, shortening that time from symptoms to the door of medical institution will reduce complications and save many lives. In addition, more than 80% of patients with chest pain, who go to the emergency room are not having a heart attack. An effective [ triage ] tool in the hands of the patient would reduce the number of unnecessary emergency room visits and reduce costs to the health care system. So why do we think that an easy to use 12-lead ECG with patients is transformational. Well, first, having the ability for patients to take frequent 12-lead readings over time and in a variety of real-life situation potentially has huge agnostic value. Whenever patient is feeling symptoms, they can get a 12-lead reading that will be reviewed by a physician. Secondly, trending a 12-lead ECG, both symptomatic and asymptomatic over time will allow physicians to gain insight to help guide cardiac care. Frequent 12-lead ECGs to create this trending is simply not feasible today. And finally, as we will discuss in more detail, combining deep learning algorithms with a large number of longitudinally created ECGs has the potential to create an unparallel predictive and diagnostic algorithm. We have the opportunity to address not only atrial fibrillation markets, but also coronary artery disease market, which is about 6x larger. In the United States, there are approximately 3 million Afib patients, representing a $2 billion market. There are approximately 20 million total coronary artery disease patients, which is a $12 billion market. So the overall opportunity in the U.S. only is about $14 billion. I'd like to now turn the call over to Rob Eno, our President.

Thanks, Branislav. We wanted to give an update on our progress related to AIMIGo. Our initial clearance for the AIMIGo system will be a major milestone for the company, and it's important for many reasons. To start, we expect this to be the first patient held 3D VECG device to be cleared by the FDA. Also, this clearance will be the basis for further FDA submissions for HeartBeam, so it's the cornerstone of our efforts. The 3D VECG approach is an excellent platform for AI algorithms. We have a major AI effort underway. We're encouraged about the progress and the initial results we presented at scientific meetings in Q2. In the longer run, we believe that applying AI algorithms on top of the rich VECG data, especially with longitudinal data sets for patients taking readings monthly, weekly or even more frequently could result in unsurpassed predictive and diagnostic capabilities. In addition, there is significant clinical research over several decades that demonstrates the diagnostic value of a VECG approach. By capturing the heart vectors in 3 dimensions, there's even more diagnostic information available than in a standard 12-lead. And our landmark study summarized here that was published in JAK advances in August of last year, showed that the AIMIGo VECG technology had similar diagnostic ability as a 12-lead ECG in detecting coronary occlusions and adding a baseline reading for comparison, which is a crucial part of our system resulted in significantly better accuracy than a single 12-lead ECG. And with that, I'd like to introduce Debbie Castillo to give an update on our regulatory efforts. Debbie is HeartBeam's Vice President of Regulatory. She holds a PhD in biomedical engineering from Johns Hopkins University and has extensive experience in regulatory affairs in industry and also at the U.S. Food and Drug Administration, where she held various roles, including senior lead reviewer, lead scientific reviewer and acting Chief of the cardiac devices branch.

Thank you, Rob. As a reminder, we have a 510(k) application under review with FDA for our AIMIGo 3D VECG system. This application includes our 3D VECG credit card-sized device that records cardiac activity from the x, y, z projections and displays the signals for clinician review. The system also includes a patient application, a physician portal and wireless communication among the elements. As Rob mentioned, this is the cornerstone permission for HeartBeam and will be the basis of future regulatory efforts. We submitted this 510(k) application in the second quarter of 2023. The review remains active with FDA as we have successfully passed the acceptance of the filing and have completed the initial substantive review phase with questions and requests received from FDA. As we continue to navigate the progress towards clearance, we have taken advantage of all available regulatory tools and opportunities to work interactively with FDA, gaining valuable official communication and feedback on our proposed response approach, including our testing protocols. We have conducted the agreed-upon testing to address FDA's open questions and are in the process of preparing our official responses. Once these are submitted, the FDA will complete the review of our 510(k). We currently are anticipating clearance by end of quarter 2 of 2024. I also want to touch on our second FDA submission. Following, of course, the clearance of AIMIGo 3D VECG system, we will be working to obtain a second 510(k) clearance. The second 510(k) will be focused on the ability to offer the physician a pair of baseline and symptomatic 12-lead ECGs, both of which are synthesized from the 3D VECG signals, the XYZ recorded by the HeartBeam AIMIGo device. This approach leverages recently issued patents for a personalized system for synthesizing 12-lead ECG wave form. The second 510(k) application is planned to be submitted to FDA by quarter 3 of 2024. A key part of the submission will be a pivotal study named our VALID-ECG study, which will demonstrate the similarities between the synthesized 12-lead output from AIMIGo and a simultaneously recorded standard 12-lead ECG. To date, we have held 2 pre-submission meetings with the FDA on this 12-lead synthesis submission. These meetings have been focused primarily on the performance goals of our proposed pivotal clinical study. Rob will now discuss the details of the pivotal study.

Thanks, Debbie. Based on feedback from FDA and our clinical experts, we've designed our clinical study, the VALID-ECG study. As we announced last week, we've enrolled the first patients in the study, which is designed to validate the AIMIGo 12-lead ECG synthesis software by comparing its results with those of a standard hospital-based FDA-cleared 12-lead ECG using both quantitative and qualitative assessment methodologies. We plan to enroll approximately 198 patients presenting to an outpatient cardiology clinic or arrhythmia center with symptoms suggestive of cardiac arrhythmia or for routine checkup of previously diagnosed arrhythmia. The study is expected to include up to 5 sites in the U.S. The primary objective is to demonstrate the similarities of ECG waveforms between AIMIGo's synthesized 12-lead ECG and a standard 12-lead ECG recorded simultaneously in each subject by assessing intervals and amplitudes. In preparation for this pivotal study, we completed an 80-patient pilot study, which mirrors the pivotal study. Based on these pilot results, we initiated the VALID-ECG study. We anticipate completion of enrollment in the VALID-ECG study in Q2 2024 and submission of the second 510(k) application by Q3 2024. We continue to anticipate that our limited launch of AIMIGo will occur by the end of 2024. Now I'd like to turn it back to Branislav for an update on our AI efforts.

Thanks, Rob. As we discussed last quarter, we have an active artificial intelligence program underway. Our AI team includes 5 PhDs. The leadership has deep AI expertise experience, including positions at Apple, Microsoft and Google. We have acquired approximately 1 million 12-lead ECGs from various sources, a key element in our fast-paced development efforts. We have developed initial deep learning algorithms focused on the ability to detect various cardiac arrhythmias. HeartBeam has had data, this deep learning algorithms accepted for presentation [indiscernible] in May. We believe that when combined with our credit card-sized AIMIGo 3D VECG technology, HeartBeam's AI will provide additional value to patients and physicians in a number of ways, including providing automated classification of cardiac conditions, including common arrhythmias. The potential to further enhance the user experience and simplify the onboarding process. And finally, in the longer run, we believe that applying deep learning algorithms on top of the bridge VECG data that you obtain from our AIMIGo device, especially with the longitudinal data sets from patients taking repeated recordings could result in an unparalleled predictive and diagnostic capability. Turning to IP. We have recently received 2 additional U.S. patents, enhancing our already strong IP portfolio. As you have heard, our current focus is on the credit-sized AIMIGo system. With the ability to create a 3D VECG signal in a small, easy to use, easy to carry form factor. This will be followed by a second clearance on the ability to synthesize a 12-lead ECG for these signals. In addition, there are additional 4 factors covered by our IP. First, in an on-demand 12-lead extended patch, we have an opportunity to take the usual 1-lead signal that's obtained from the patches much further and actually offer a 12-lead. This would operate similarly to current extended [indiscernible] monitors such as extended holders or model [indiscernible] MCAT as well. But using the AIMIGo technology, a patient will place 2 fingers on the top of the device, which will enable a 12-lead readings, something that is really not possible today. I mean any kind of patch that's in the market place. Secondly, our integrated system combines AIMIGo with a continuous monitor. We have multiple patents granted to our LIVMOR watch which is the first FDA clearance prescription wearable for continuous cardiac data monitoring. And finally, our IP allows a 12-lead watch that is actually a combination of functionality of our variable ECG that provides continuous monitoring with an on-demand 12-lead ECG. Our patents cover a 12-lead ECG watch so that when the watch detects abnormalities that patient can remove the watch and simply place it on the chest, activating a 12-lead ECG. We plan to pursue all options in the development of these products, including the possibility of collaborating with leaders in the ECG and variable fields. I'd like now to turn the call over to our consultant's CFO, Rick Brounstein.

Thank you, Branislav. Turning now to our financials. I will give a brief review of our financial results. A full breakdown is available in our regulatory filings and the press release that just crossed the wire after the close of market today. General and administrative expenses for the fourth quarter of 2023 and 2022 were both $2.1 million. For the year ended December 31, 2023, G&A expense increased $1.2 million to $8.5 million compared to $7.3 million in the same period of 2022. The increase is primarily related to noncash stock-based compensation expense amounting to $1.6 million. That was associated with additional awards granted since December 31, 2022, resulting primarily from the issuance of employee stock options following the May 2023 financings. Our cash spending is actually down in fiscal 2023 compared to fiscal 2022. Of note in 2022, we had invested in the commercial team. And due to our change in our near-term focus in early 2023, we are not currently emphasizing commercial activities as we proceed through the FDA clearance process for HeartBeam AIMIGo. Research and development expenses for the fourth quarter of 2023 were $2 million compared to $1.6 million for the fourth quarter of 2022. For the year ended December 31, 2023, research and development expenses, which increased $1.1 million to $6.8 million compared to $5.7 million in the prior year are also due to the increase in noncash stock-based compensation expense as well as the increase in head count and professional services supporting the FDA clearance process, primarily offset by completion of initial development in 2022 of the platform for AIMIGo. Our cash and cash equivalents are conservatively invested in treasuries with a duration of up to 3 months. With 2023 interest rates in the short-term market is around 5%, we earned $675,000 in interest income in fiscal '23 compared to $66,000 in fiscal 2022. As a result of our increased cash balance following the $26.5 million financing in May of 2023, coupled with these higher interest rates. Net loss for the full year of 2023 was $14.6 million compared to a net loss of $13 million for the full year of 2022. We ended 2023 ahead of plan with $16.2 million in cash and cash equivalents as of December 31, 2023, compared to $3.6 million as of December 31, 2022. As mentioned, in May, we closed common stock financing with gross proceeds of $26.5 million. This cash is anticipated to last into early 2025, while we anticipate to begin the limited launch of AIMIGo by the end of 2024. Net cash used in operating activities in the fourth quarter of 2023 was approximately $2.9 million. We remain confident that we have sufficient funds to deliver on our milestones and get prepared to move into commercialization phase of HeartBeam AIMIGo. And finally, I said this before, it's worth emphasizing that the May 2023 financings were common stock only financings. They did not include any warrants on our balance sheet as a result as a very simple and straightforward capital structure with approximately 26 million shares now outstanding. I'm now going to turn the call back over to Branislav for his closing remarks.

Thanks, Rick. So in conclusion, this is an exciting time for HeartBeam and 2024 is a pivotal year in our company's evolution. I want to reiterate that our FDA clearance of the AIMIGo system will be foundational for the company. When cleared, it will be the first patient-held 3D VECG device to be cleared by the FDA. It will also serve as a robust and IP protected foundation for many future developments. As Debbie noted, we have made significant progress on the AIMIGo clearance having successfully passed the acceptance of the filings and have completed the initial review phase. We have taken advantage of all available regulatory tools and opportunities to work interactively and intensely with the FDA, and we are finalizing our testing and our formal responses to questions raised by the FDA. Once these responses are submitted, the FDA will complete their review. We currently anticipate clearance by the end of Q2 of this year. This initial clearance is foundational for a number of reasons. First, it will be the basis of our second submission of the algorithm that will generate 12-lead synthesized ECG. And as we discussed, we will have a completed 80 patient pilot study and once we have completed it, we have actually engaged in the pivotal study that's in progress as we speak. Second, we are developing deep learning artificial intelligence algorithms using our 3D VECG signals for inputs. We are very much encouraged by the progress and early results, and we look forward to presenting the initial clinical data on AI at scientific meetings in Q2 of this year. Finally, we will build upon the initial AIMIGo clearance as a foundation with both the 12-lead synthesis, algorithms and AI efforts, we will continue to advance our robust product pipeline that includes AI-enabled advances to expand indications as well as patient friendly core factors such as the on-demand, 12-lead patch and the 12-lead HeartBeam watch. We ended 2023 ahead of plan with $16.2 million in cash and cash equivalents as of December of last year. We anticipate that our strong cash position provides runway to early 2025. We remain confident that we have sufficient funds to deliver on our limited launch of AIMIGo as it is currently anticipated to occur by the end of this year. I look forward to providing our shareholders with further updates in the near term. I thank you all for attending. And now HeartBeam team would like to answer your questions. Operator?

[Operator Instructions] Our first question comes from the line of Ben Haynor with Alliance Global Partners.

First off for me, Debbie, I was curious on the official responses that you're formulating with your FDA add on, I guess, how would you characterize the questions that you've gotten? Are they fairly straightforward? Any sort of showstoppers? Any surprises on that front?

Yes, Debbie, would you please comment on that?

Yes, certainly. So first, this seems to be -- received a number of questions so much of this from many participants. So what I can share is that the current status and process of our 510(k) submission is within expectations. Definitely from my perspective and experience from being on both sides of the fence, this is a typical process for 510(k) reviews where FDA provides their open questions that must be answered prior to their final assessment and submission. So for me, this is a pretty standard process and sort of questions from the agency. So in doing that, to address this as best as we can, as we've mentioned, we're using the regulatory tools available to industry where we have leveraged all opportunities to engage with the agency in order to align with our responses and approach to these open questions. This will help us ensure that our responses will meet FDA expectations and, of course, then allow FDA to make the final assessment of our submission.

Okay. That's helpful. And then -- on the -- on future FDA submissions for the AI applications, do you have any sort of time line on when we might start to expect those submissions going in? Or is that kind of open-ended at this point?

Yes. As you know, we have engaged in the full speed AI development, technology development for AI, not so long. We have made incredible progress over the last 6 months. And we are, at this point, assessing really what the schedule will be. So we are, at this point, not ready to share anything, but we are intensely in the phase of estimating the effort to get that 510(k) submitted eventually cleared.

Okay. Got it. And then lastly for me on commercialization kind of once you get that second AIMIGo clearance, is that kind of the time to wrap up -- or ramp up, excuse me, the commercialization folks and begin adding to the team again? Or would that be kind of later on after you make potentially some of these AI submissions.

Rob?

Yes, I'll take that. Yes. No, we -- as we said, we're planning on doing a limited launch by the end of 2024. So we're currently pretty deep in work with our current team of defining the go-to-market strategy and our plans. And as we get closer with the first clearance have the opportunity to get some beta testing and experience with the device. We plan to be ramping up the commercial team kind of in conjunction with that limited launch towards the end of the year.

[Operator Instructions] And there are currently no questions for the telephone Q&A session. Therefore, I'll now hand the call over to Brooks Hamilton for any questions on the webcast.

Thank you, operator. First question asks, could you describe the VALID-ECG study in more detail, specifically as it relates to patient follow-up or endpoints?

Rob?

Sure. So first, to reiterate the goal of the study is to demonstrate that our synthesized 12-lead ECG is similar, clinically comparable to a standard hospital-based 12-lead ECG and we're doing that by taking simultaneous recordings of both the 12-lead and the AIMIGo device. So they're literally simultaneous while the patient has the electrodes from a standard 12-lead, we also place the AIMIGo device on. As far as endpoints, we've worked closely with FDA to define the endpoints. The primary endpoint is looking at a series of ECG measures that are called intervals and amplitudes. We've also defined what the performance criteria is. In other words, how similar these measurements need to be between the synthesized 12-lead and the standard 12-lead. There's also a secondary endpoint which physicians will categorize all the arrhythmias that they see in the 12-lead in a blinded manner, and we'll analyze the similarities and differences between the two. As far as follow-up, there's no patient follow-up in the study. So we're only analyzing the simultaneous recorded ECGs during a single visit. And just I think what I'd add on to that is, we mentioned we're enrolling 198 patients and up to 5 sites. They're leading U.S. research centers, but also high volume. And because they're high volume, and these are arrhythmia clinics, where lots of patients coming in every day. We expect to be able to see a range of arrhythmias, which helps us in the study and also expect to enroll patients quickly and that's why we anticipate enrollment being completed in Q2 of this year.

Excellent. Next question. It seems like you're developing AI tools internally, but so many of them are already developed by academia. Why not license?

Yes, we are keenly following everything that's being published, and there is a lot of it in the relationship these days, and that's relevant. However, and luckily for us, our signals are 3D ECG signals. They're very much data resource or input, if you want, to the AI and so for us, it's key that we develop our AI tools and methods based on this data set of X, Y and Z signals, so that's a key differentiation. And of course, the single control device, AIMIGo device, that's always with the patient. So all in all, that's the key why we are following what's happening in the field, but our unique situation is that we have even a more data rich set of signals, and that's why we like to take full advantage of that -- those sets of signals that come out of AIMIGo device. Secondly, based on the fact that this technology will be with the patient 24/7. And many, many ECGs will be taken by the patients and users over time. This longitudinal data that's normally not available in the either hospital ECG environment is an extremely important source of differential signals that AI, we believe, can comprehend and shed additional light on the cardiac condition of that patient. And lastly, we have 30-second recordings, right? And all these tools that you see published results given are for 10-seconds recording. So having 30-second recording will make a positive impact on the accuracy as well. So all in all, in summary, we are following but our unique situation is that we have a set of signals, a set of features that go beyond what everybody else has. So that's the main reason why we are developing internally, which, on the other hand, we plan actually to engage some of these academic institutions in the future for some of the predictive algorithms perhaps and so I wouldn't be not surprised if we actually engage one of them because they have many, many more signals. And secondly, in some of the areas of prediction, they might be well ahead of everybody else.

The next question is, where will the AIMIGo device be manufactured?

So -- we've been working in Silicon Valley with Triple Ring, who's been helping us with the development of the hardware and they link in with a group called Evolve Manufacturing. All of those are discussed in the 10-K. And Evolve will do the initial manufacturing, the quality systems [ interlink ] we are looking forward to an easy transition. Ultimately, when we get into higher volumes, we'll likely be moving off site. But in the initial , we will -- we can probably make 10,000 a month or so. So I think it will get us going for some period of time.

Great. Our next question, are you able to deal with cybersecurity aspects as I hear that the FDA and the SEC are very much focused on that.

Debbie, please.

Sure. I can take that. So certainly, cybersecurity is clearly an important area for FDA, but also for HeartBeam as we start to keep our systems secure. To that end, our internal teams in conjunction with working with cybersecurity experts in the field, we feel confident that we are able to meet all regulatory expectations both from the FDA and the FCC side. I'll also point out that we've included our cybersecurity policy in -- which is disclosed in the 10-K for additional information.

Next question, medical studies are usually very expensive. Did you fully account for the cost of your VALID-ECG study within your financial projections? Can you speak to the cost of the study?

Yes. It actually is not so expensive as people might believe. There is no intervention requirement. There's no follow-up required. So it is much less expensive. We've actually signed contracts with a clinical research organization and the first of our expected 5 sites. In the footnotes in the financials if you go to the very end and the subsequent events, we quantified it. And you can see that the commitment to the CRO is about $0.5 million and the cost of the enrolling the approximately 200 patients, 198, we're predicting is going to be about $200,000. So the full cost of the study is going to be about $700,000.

There are no more questions at this time. So I'd like to now turn the call back over to Dr. Vajdic for his closing remarks.

Yes. Thank you, operator. I would like to thank each of you for joining our earnings conference today and look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who will be more than happy to assist. Again, thank you very much for your participation today.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.