Pulse Biosciences, Inc. (PLSE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Pulse Biosciences Business Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference to your speaker today, Philip Taylor, Investor Relations. Please go ahead, sir.

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, February 18, 2020, only and will include forward-looking statements and opinion statements. These include statements regarding our plans and expectations relating to regulatory clearance, including the process and expected outcomes; our commercial, operational, scientific, clinical and financial projections; products, including the uses and applications of such products; and other future events. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our most recent Form 10-Q and February 13 Form 8-K filed with the SEC. Our SEC file -- filings can be found through our website or at the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. Please note that this conference call will be available for audio replay on our website at pulsebiosciences.com on the News and Events section of our Investor Relations page. The format of today's call will consist of providing updates on the regulatory submission for the CellFX System, followed by a question-and-answer session. With that, I would like to now turn the call over to our President and Chief Executive Officer, Darrin Uecker.

Good afternoon, and thank you all for joining us. Today, we'll be discussing the regulatory status of our CellFX System in dermatology. To remind you, the CellFX System is a multi-application platform that powers our proprietary Nano-Pulse Stimulation technology. NPS technology delivers nanosecond pulses of electrical energy to nonthermally clear cells, while sparing adjacent noncellular tissue. The intended initial application for the platform will be in aesthetic dermatology. As such, a 510(k) application was submitted to the U.S. Food and Drug Administration for the use of the CellFX System to clear common benign skin lesions. After ongoing dialogue throughout the review process, on February 13, 2020, we received a Not Substantially Equivalent letter from the FDA. In summary, the letter indicates that based on the clinical data provided, our submission has not demonstrated that the CellFX System is substantially equivalent to the predicate device, concluding the 510(k) review process without clearance. I'll explain further why we believe that, that was the case and how we intend to remedy this moving forward. We submitted the 510(k) in February 2019 with input from regulatory experts and key opinion leaders in dermatology and included clinical data in support of the benefit-risk profile for the CellFX System for the treatment of 2 common and difficult-to-treat benign skin lesions, seborrheic keratosis, or SK, and sebaceous hyperplasia, or SH. The clinical data provided in the 510(k) was primarily based on 2 single-arm studies, one for each indication. We also provided a review of the literature for the treatment of these lesions with currently available treatment modalities. We believe our clinical data is supportive of the conclusion that the CellFX System in the treatment of these benign lesions compares favorably to other treatment modalities. However, based on the final feedback we received during the 510(k) review, we now understand the data was not sufficient for FDA to conclude with the clearance for these indications and that comparative controlled clinical data would be necessary to make a direct comparison. Though we are disappointed in this outcome, having clarity on the level of evidence required by FDA gives us confidence in moving forward and in obtaining a 510(k) clearance in dermatology. Based on the review process, we do not believe there is a concern with the choice of the predicate device, but instead, that FDA did not see the level of evidence provided as sufficient to establish substantial equivalence without a comparative control. Therefore, as of today, we believe the best course of action is to prepare a new 510(k) submission with comparative clinical data for these lesions to more directly and clearly demonstrate the benefit-risk profile of the CellFX System and NPS technology for these applications. Through our work and previous studies, we have assembled a group of leading aesthetic dermatologists who are now advocates of NPS technology. We will leverage this deep clinical network to power the additional studies required. At this point, we have not yet determined specifics for the upcoming studies, but we'll continue to work collaboratively with the agency to iterate and optimize trial protocols. The additional studies will continue to highlight the unique benefits of NPS, while producing robust clinical data for the CellFX System in the treatment of SK and SH. These studies are our top priority, and we are confident we have the team and resources to execute in rapid fashion as we have done in previous studies. During the review process, we also discussed an additional regulatory approach with the FDA that may result in a slightly different path going forward. This approach would be a stepwise approach to obtaining indications in SH and SK, starting with a more general dermatologic indication before adding specific indications. We intend to continue to explore this approach with the FDA as it may be a more efficient approach. Based on the need to perform additional studies and resubmit a 510(k), we believe commercialization will be pushed out at least 12 months and perhaps longer. We will continue to discuss any designs and any other requirements with the FDA, and we'll provide further details as we make decisions. This result does not diminish any of our exciting previous clinical work in any way. We are proud of the existing data that has been generated on the path to treatment optimization and its validation through publications in well-respected, peer-reviewed journals and presentations at scientific meetings. The data contained in our submission has been published in prominent, peer-reviewed medical publications, including the Journal of Dermatologic Surgery and the Journal of the American Society for Lasers, Medicine and Surgery and has been presented at prestigious conferences, like the American Society for Dermatologic Surgery, among others. In efforts to further engage and educate the scientific and medical communities on NPS technology and the CellFX System, we will continue to support our clinicians as they present data at upcoming scientific meetings, including the American Society for Lasers, Medicine and Surgery Annual Conference in Phoenix at the end of April. Pulse Biosciences has made tremendous progress over the last year with the development of the novel and proprietary CellFX System, the only tunable Nano-Pulse Stimulation system for use in clinical applications, and we have generated significant clinical data across a number of dermatologic applications. The interest and excitement around the CellFX System continues to grow in the dermatology community. We will use this time prior to commercialization to continue to enhance the CellFX Systems capabilities and to further build the clinical body of evidence. Now I'll provide a quick update on our financial status. As of December 31, 2019, cash, cash equivalents and investments were $25.4 million. In efforts to strengthen the balance sheet, last week, we announced approval to commence a rights offering to raise an additional $30 million in net proceeds. The proceeds will be used to fund operations, including the required subsequent studies, build-out of the commercial infrastructure and to continue clinical and development work on additional applications for the CellFX System. I'm proud of this organization for their resilience and focus throughout the submission process. Next steps are to design and execute studies to generate all additional data required for our submission in collaboration with the FDA, who we plan to remain engaged with throughout the process. I'm 100% confident we will work tirelessly to accomplish the tasks required to earn a clearance for initial applications for our CellFX System. We look forward to providing additional updates when available in the future. Joining me now for Q&A are Ed Ebbers, Executive Vice President and General Manager, Dermatology; Sandy Gardiner, Executive Vice President and Chief Financial Officer; and Robert Duggan, Chairman of the Board. Operator, let's open the call for questions.

[Operator Instructions] And our first question comes from Josh Jennings with Cowen.

I was hoping to just get a sense of the pathway, just a little bit more detail. I think I caught that there may be a general use pathway to initially get the system approved and then have stepwise from there to obtain indication as in SH and SK. Can you give a little more detail on that and the potential there?

Yes. Josh, thanks for calling in. We appreciate it. And thanks for the question. So yes, I don't want to probably go into too much detail in that, but I do think, through some conversations that we've had with FDA kind of towards the end of the process, we do think there could be an opportunity to do. What I was mentioning was exactly what you just said, which is, there could be an opportunity for a general indication in dermatology and then have that followed in a kind of a stepwise approach with SH and SK. And the advantage of that, should that be an opportunity, is that it could be more efficient from a timing perspective. So we would anticipate being able to get a 510(k) submission for a general indication in a bit sooner and then follow that with SK and SH. Those studies that we intend to do, which would be comparative trials for SK and SH, would be going on in parallel, as you could probably imagine. So that's definitely something that we're interested in, and we're already continuing that conversation with the FDA.

Excellent. And just curious on just the potential cost for each trial for SH and SK. Any sense there in terms of the capital required to fund those 2 initiatives?

Yes. So I would just be going kind of on historical because we don't have the details of those studies outlined. But historically, trials of kind of the size that we've done in SK and SH and other trials that we've been doing in dermatology typically run between $250,000 to $500,000. So from the perspective of clinical trials relative to other devices and certainly, drugs, it's a relatively small investment.

Absolutely. And just lastly from me. If we think about the submission -- the 510(k) submission and what the FDA deems is essential from here, is it safe to assume that the only incremental work that needs to be done on this submission are these comparator -- comparative trials in SH and SK for those specific indications and then future indications on the line, clearly, but all the preclinical work in the rest of the submission? Is there any other work outside of those comparative trials that you need to do, I guess, is the gist?

Yes, yes, you bet. Thanks. And so I think for those indications, that is what we believe today is that it's really generating some direct comparative data is what's required. And certainly, for indications going forward, we would expect that as well. But we'll continue to dialogue with FDA. I think, obviously, we're going to do everything we can to ensure that all the data that is going to be required, we will submit. And so -- but as we sit here today, that's certainly our impression from all the discussion with the FDA.

Our next question comes from [Thomas Attingham ] with -- a private investor.

I'd like, if possible, a clarification as to why the De Novo approach is not a good idea. More specifically, if this is indeed a novel and proprietary system, a 510(k) procedure, as I understand it, tries to compare it to something else, so that it's basically saying it's more or less the same as this other thing that's already out there. I don't know what the predicate devices that you're comparing it to. But I get that is already okayed. But if this is new and different and a whole new ball game, it seemed to me, from the limited knowledge I have, that the De Novo approach would be appropriate. So obviously, you don't -- you're not finding that to be the case. And I'd like to know a little bit more as to why a 510(k) seems like a better idea than De Novo.

Yes. Thanks, [ Thomas ]. That's a good -- that's a very good question. So yes, basically, the 510(k) process is set up for 2 purposes or you can think about the comparison to another device in 2 ways. One is, is it the same technology as the other device? But the other way to think about it is, is it -- have the same intended use, sort of the same indications for use? And if it does, then the 510(k) is a path that you can take advantage of. And so in our case, the predicate device isn't obviously a device that has the same exact technology, but it does have the same indication for use. And so that gives us the ability to use the 510(k) process, which, just in terms of the process within FDA, the 510(k) process is a much more well-defined process that, from a timing perspective in terms of FDA's timing, it is much more straightforward. The De Novo process is one that is much less defined from the FDA perspective. And the FDA, I believe, is working. And you can see in the FDA documents, they're working towards making the De Novo process a little bit more well defined just in terms of the steps that are required and everything else. But I think, as we sit here today, the 510(k) process is a much more well-defined process. And we fit squarely within it, even though the core technology is a bit different from the predicate.

Okay. Very good. I think that's a considerable clarification. If it's not a matter of equivalent technologies, but is merely -- there's some device out there intended to do the same thing, presumably, we will show that the CellFX device is doing a better job and does the same kind of work, but better, and that will be actually acceptable. Okay.

Our next question comes from [ Mike Kravitz ], a shareholder.