ENDRA Life Sciences (NASDAQ:NDRA), a medical technology company, held its Fourth Quarter 2023 Financial Results Conference Call, revealing key updates on its regulatory progress, financial status, and strategic initiatives. The company has successfully installed its TAEUS system for a clinical study at King's College Hospital in the UK and is actively engaging with new clinical partners.
Despite a net loss of $10.1 million for the year, ENDRA has decreased its operating expenses and ended the year with $2.8 million in cash and cash equivalents. The company is making strides with the FDA, having aligned on significant points and scheduled a pre-submission meeting for Q2 2024.
Key Takeaways
- TAEUS system installed at King's College Hospital for a clinical study.
- Operating expenses decreased in 2023, net loss recorded at $10.1 million.
- $2.8 million in cash and cash equivalents as of year-end.
- FDA De Novo application process advancing with a pre-sub meeting set for Q2 2024.
- CE mark obtained for European market; focus on local clinical evidence.
Company Outlook
- ENDRA aims to activate new partner sites and strengthen its commercial position.
- Leveraging advancements in liver disease management and exploring the bariatric and obesity market.
- Plans to expand TAEUS applications through partnerships.
Bearish Highlights
- The company reported a net loss of $10.1 million in 2023.
Bullish Highlights
- Decrease in operating expenses year-over-year.
- Installation of TAEUS system at a prestigious UK hospital for a clinical study.
- CE mark approval for the European market.
Misses
- Despite decreased operating expenses, the company still operates at a loss.
Q&A Highlights
- The company discussed the importance of local clinical evidence for market penetration.
- Emphasized the stringency of FDA approval, focusing on efficacy and clinical data.
- Plans for commercialization in Europe and the US were outlined.
In conclusion, ENDRA Life Sciences is navigating through a critical phase of regulatory approval and commercial strategy development. With a focus on expanding clinical evidence and leveraging its technology platform, the company is poised to address the needs of the liver disease management market. The financial results indicate a challenging path ahead, but with strategic initiatives in place, ENDRA is committed to advancing its position in the medical technology landscape.
InvestingPro Insights
ENDRA Life Sciences (NDRA) has had its challenges, reflected in the significant net loss and a substantial decrease in share price over various periods. According to real-time data from InvestingPro, the company's market capitalization stands at a modest $6.4 million, highlighting the small size of the company within the medical technology sector. The price-to-earnings (P/E) ratio, an indicator of market expectations of future earnings growth, is negative at -0.64 for the last twelve months as of Q4 2023, suggesting that investors are not anticipating profitability in the near term.
InvestingPro Tips reveal that NDRA holds more cash than debt on its balance sheet, which could provide some financial flexibility in the short term. However, the company is quickly burning through its cash reserves, which raises concerns about its long-term financial sustainability. The stock is also trading near its 52-week low, currently at around 20.79% of its 52-week high, which may indicate a potential entry point for investors if they believe in the company's future prospects.
For readers looking to delve deeper into ENDRA Life Sciences' financial health and future outlook, more InvestingPro Tips are available, with the full list including insights such as the company's weak gross profit margins and analysts' anticipation that the company will not be profitable this year. To access these additional tips and metrics, visit https://www.investing.com/pro/NDRA. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription for more in-depth analysis and data.
Full transcript - ENDRA Life Sciences (NDRA) Q4 2023:
Operator: Good day, and welcome to the ENDRA Life Sciences Fourth Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Yvonne Briggs. Please go ahead.
Yvonne Briggs: Thank you, operator. This is Yvonne Briggs with LHA. Good afternoon, and welcome to ENDRA Life Sciences fourth quarter 2023 business update and financial results conference call. Earlier today, ENDRA issued a press release on this topic, which is available in the Investors section of ENDRA's website. Before we begin, please note that today's discussion will include forward-looking statements. All statements by management other than statements of historical facts are forward-looking statements. These include statements regarding the company's strategies, financial condition, operations, costs, plans and objectives as well as anticipated results of development and commercialization efforts. The timing of clinical studies, potential partnership opportunities and expectations regarding regulatory processes, receipt of required regulatory clearances and product launches. Except as required by federal securities laws, the company disclaims any obligation to update or revise any forward-looking statements. Please refer to the company's Form 10-K for the 2023 fiscal year and subsequent SEC filings for more information about risks and uncertainties related to forward-looking statements. In terms of the structure of today's call, Francois Michelon, Chairman and Chief Executive Officer; will begin the prepared remarks followed by Michael Thornton, ENDRA's Chief Technology Officer. Mr. Thornton will be followed by Irina Pestrikova, Senior Director of Finance, to review the fourth quarter financial results and then we'll take your questions. I'll now turn the call over to Francois Michelon. Francois?
Francois Michelon: Thank you, Yvonne, and thank you for joining us today to review ENDRA's fourth quarter 2023 financial results and key business developments. We're advancing our mission to revolutionize metabolic health through the practical detection and monitoring of liver disease. We've made significant progress in the following five areas. Number one, activating new clinical partner sites in our target markets to build our body of clinical evidence at the local level, which is the foundational element to achieving regulatory and commercial success. Number two, advancing our FDA De Novo application for TAEUS through close collaboration with the agency. Number three, strengthening our commercial position by developing new and nurturing existing relationships with clinicians as well as maintaining a steady cadence of awareness-building activities. Number four, leveraging the rapid and positive evolution of key industry building blocks for diagnosing and treating liver disease, which strengthen ENDRA's position and commercial opportunity. And number five, looking beyond our current markets and technology to new opportunities to license our intellectual property. Now I'll elaborate on each of these elements. Recently, we achieved a key milestone in one of our target markets by installing the TAEUS system in the United Kingdom. King's College Hospital in London, a prestigious national health service institution is leading the introduction of ENDRA's liver system in the UK market. This partnership entails a clinical study comparing TAEUS's liver fat assessment accuracy to MRI, the recognized research standard. The study is expected to include approximately 75 subjects and aims to provide crucial data for evaluating the TAEUS technology's performance. Moreover, the findings will be submitted for publication in a peer-reviewed medical journal. We're excited about this collaboration as it will strengthen our base of clinical evidence and potentially opens doors to strategic opportunities within the UK's extensive National Health Service network. Mike will provide an update on ENDRA's active and pending clinical sites. And these sites are crucial for generating the body of clinical evidence needed to support our business strategy in three fundamental ways. First, clinical evidence from these sites supports our current and future regulatory filings and reimbursement claims. Second, the clinical sites enable commercial traction, serving as reference sites in key markets. They bolster our commercial endeavors by demonstrating ENDRA's technology in real-world settings and help us develop compelling clinical and economic value propositions in our target segments endocrinology, hepatology and other segments in each target market. And third, the clinical sites enable the ongoing enhancement of ENDRA's technology through customer feedback leading to future product improvements. Gaining commercial traction and additional regulatory approvals for ENDRA's innovative technology hinges on continuing to build the base of clinical evidence. The clinical abstracts we presented at the European Association of Study of the Liver last year mark encouraging progress. These presentations highlight impressive clinical performance of our technology compared to the MRI gold standard. Yet, to convince potential users in our target market of our technology's value, we must further expand our pool of real-world evidence and do so at the local level. As you're hearing, we're accelerating these efforts by activating new sites such as King's College in the UK and others will announce in the second quarter. Clinical evidence is essential for the successful global adoption of new innovative technologies like ENDRA's. Looking ahead into 2024, in addition to the foundational work of building clinical evidence, we're also advancing in other key areas. First and importantly, we're advancing our FDA regulatory submission in the U.S. market. Since our De Novo submission in the third quarter of 2023, we've received an additional information request from the FDA, and we're closely engaged with the agency. We've confirmed the meeting with the FDA to be held in the second quarter of this year to address open items and ensure a predictable regulatory pathway for our technology. And Mike Thornton will elaborate on this in a minute. The second area as we expect to achieve commercial sales with early adopters in Europe this year in our initial target markets of Germany, the UK and France, leveraging our CE mark and our growing base of clinical data from King's College and other sites to showcase our technology's clinical and economic value propositions. In parallel to these activities, the ENDRA's team has been proactive in generating awareness for our TAEUS technology and engaging with key stakeholders by attending major clinical conferences. Notably, at the Liver Meeting hosted by the American Association for the Study of Liver Disease, ENDRA hosted a panel discussion with multidisciplinary key opinion leaders in hepatology, endocrinology and radiology. And this platform enabled the sharing of unique perspectives on managing Metabolic Dysfunction-Associated Steatohepatitis, also known as MASH. ENDRA's participation in eight industry conferences in 2023, such as the European International Liver Congress and the Diabetes Professional Care Meeting in the UK contribute to raising awareness of our TAEUS technology. Plans are in place to attend the most critical European and American conferences this year and the cadence of visibility underscores ENDRA's commitment to fostering relationships with potential customers and partners highlighting our technology's potential. The third area in alignment with our FDA initiatives is we're exploring an intriguing new opportunity in the U.S. bariatric and obesity management market. Because of the popularity of the GLP-1 drugs, this market is rapidly evolving from a surgery-centric approach to a broader mandate as metabolic disease management centers. Our research so far indicates that the obesity management market is characterized by high patient self-pay and relative price in elasticity with highly motivated patients who demand clinically relevant services to support their weight loss journey with three to four monitoring visits per year. This aligns really well with ENDRA's technology since liver fat is a key biomarker for metabolic syndrome. And this potentially expands ENDRA's addressable market beyond hepatology and endocrinology and holds promise for revenue streams based on patient self-pay per scan. On a broader market basis, three crucial building blocks for diagnosing, treating and managing liver disease are rapidly advancing, providing hope for the millions affected and opportunities for companies like ENDRA. The first building block is that leading clinical societies that already updated their screening guidelines for fatty liver. As an example, the American Diabetes Association and the American Association for Clinical Endocrinology now recommends screening of fatty liver disease for prediabetic, diabetic and obese patients. Those guidelines alone encompass 50% of the adult U.S. populations with either diabetes or prediabetes and 41% of the U.S. population who are obese. That's approximately 150 million people in the U.S. alone. The second building block is that the World Health Organization has issued a new ICD-10-CM code specifically for fatty liver disease. The ICD-10-CM is a global coding system that indicates a diagnosis for reimbursement purposes, and it facilitates standardized billing and documentation for insurance processes in the U.S., Europe and other markets. ENDRA believes the ICD-10 K76 code issued specifically for the diagnosis of fatty liver represents a significant opportunity for innovation. As health care providers now have a more straightforward path to integrate advanced diagnostic technologies like ENDRA's. And the third building block involves the FDA's recent approval of Rezdiffra, Madrigal Pharmaceuticals (NASDAQ:MDGL) pioneering drug therapy for NAFLD/NASH, marking the beginning of a whole new chapter in liver disease management. This therapy, along with other emerging targeted treatments for liver disease will significantly impact both healthcare providers, insurers and patients. Major insurers like Blue Cross are requiring adherence to nine specific authorization criteria for Rezdiffra, including an MRI-PDFF liver fat exam which can only be performed by the most advanced subset of the world's estimated 58,000 MRIs. This underscores the complexity of managing NAFLD/NASH and highlights the need for precision in diagnosing and treatment. Rezdiffra and similar drugs will consequently drive demand for more accessible point-of-care diagnostic tools like ENDRA's TAEUS that are capable of facilitating the screening and monitoring of liver disease, which affects over 2 billion people. Finally, we're actively exploring collaborations and strategic pathways to expand the applications of our TAEUS platform beyond the liver. By leveraging our intellectual property and engaging in strategic partnerships and out-licensing opportunities. We aim to capitalize on the potential of TAEUS in new therapeutic areas. We've engaged PatentVest, a leading intellectual property advisory firm to spearhead the valuations of ENDRA's IP, competitive landscape analysis and M&A outreach efforts. This collaboration will strengthen our position in the rapidly evolving medical technology landscape and enable us to explore a new set of opportunities for the TAEUS platform. To that end, we've been aggressively expanding our global intellectual property portfolio with the issuance of 16 new patents in the U.S., China and Europe in 2023 and two patents issued so far this year. With these additions, ENDRA's patent estate has reached an impressive 75 issued patents worldwide. These patents safeguard key innovations that are integral to the TAEUS system and reinforce our competitive edge in the market. I'll now turn the call over to Mike Thornton, our Chief Technology Officer. Mike?
Michael Thornton: Thanks, Francois. In the fourth quarter of 2023, ENDRA received an additional information request known as an AI from the FDA related to our 2023 De Novo submission. The AI request included questions related to the final configuration of our system. The clinical data submitted non-clinical testing such as electrical safety and compatibility testing and cybersecurity. Over the past 12 weeks, we've had a number of interactions with the FDA, including providing additional information. And we've submitted a request for an in-person pre-sub meeting. The FDA has granted ENDRA an in-person meeting in the second quarter of 2024. In anticipation of that meeting and potential request for additional clinical testing, ENDRA has prepared a protocol for a proposed statistically powered multi-site clinical study using the latest version of our technology. The statistical analysis plan and hypothesis were based on data collected on 45 subjects, supplementing the data presented in 2023 at European Liver conferences. This additional clinical data further confirmed our product's historical performance and was provided to the FDA for the first time as part of the pre-submission. At the pre-sub meeting, we plan to demonstrate the product and obtain alignment with the FDA on the final device configuration and clinical study design. We believe that our recent interactions with FDA reviewers has produced significant alignment and understanding related to the principles of operation of our TAEUS platform and a specific understanding of the task required for the regulatory grant of our technology. In summary, ENDRA believes that with close communication and alignment with the FDA regarding the device configuration and clinical study protocol design ENDRA can achieve a successful outcome. As Francois mentioned, we're excited to have added KCH London as a clinical collaborator site earlier this year. In addition, we recently received IRB approval for a new study comparing our TAEUS derived fat fraction measurements to MRI-PDFF in collaboration with the University of Michigan. That brings ENDRA's global currently active clinical study partnerships to four, including Rocky Vista University, The Medical College of Wisconsin, the Michigan site and King's College in the UK I'm happy to report that both the KCH and Michigan studies have initiated and recruited several subjects. These study sites are critical to supporting ENDRA's clinical validation efforts and ultimately, clinical adoption of our technology. The team at ENDRA is excited about our clinical activities in 2024, and I look forward to sharing more about our progress in this area in subsequent conference calls. Now with that, I'll turn it over to Irina Pestrikova for a financial update. Irina?
Irina Pestrikova: Thank you, Mike. Turning now to review of our recent financial performance. For the year ended December 31, 2023, our operating expenses decreased to $10.5 million from $13.2 million for the same period in 2022. The decrease was mainly due to lower research and development and sales and marketing expenses. Our research and development expenses decreased year-over-year by approximately $1.6 million as we completed the development of our initial TAEUS product. Our sales and marketing expenses decreased by approximately $609,000 mainly due to the departure of our Chief Commercial Officer. General and administrative expenses decreased by approximately $478,000 mainly due to a two-year management bonus write-off and lower professional fees. Our net loss in 2023 was $10.1 million or $1.58 per share. This compares with a net loss of $13.2 million or $4.50 per share in 2022. Cash and cash equivalents were $2.8 million as of December 31, 2023. In the fourth quarter, the company raised $677,000 in gross proceeds from the sale of common stock through at-the-market equity facility and $1.1 million from the exercise of warrants. We're currently evaluating alternatives to raise capital to provide for our future funding needs. Now I will turn the call back to Francois.
Francois Michelon: Thanks, Irina and Mike. In summary, for our listeners, we remain committed to driving innovation and our market presence through the following five levers: number one, activating new partner sites in Europe and the U.S. to build our body of clinical evidence and achieve our regulatory and commercial goals. Number two, continuing to engage closely with the FDA to advance our regulatory submission in the U.S. Number three, strengthening our commercial position through clinical relationships and local awareness building activities. Fourth, leveraging the accelerating market developments in the detection and treatment of liver disease to strengthen ENDRA's position. And fifth, leveraging our intellectual property to grow beyond our current markets and clinical focus. On behalf of the entire ENDRA team, I want to extend our thanks to the shareholders for their continued support. And now, operator, we're ready to open the call for questions.
Operator: We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Edward Woo with Ascendiant Capital. Please go ahead.
Francois Michelon: Hi, Ed.
Edward Woo: Yes. Thank you for taking my question. Yes. Hey guys. Congratulations on the progress you guys have. It looks like the FDA deadline or decision timeframe has been pushed well past to expect 150 days. Is there any new guidance of when you think a decision may be made?
Francois Michelon: Yes. Thanks for that. So to be clear, the 150 days we referenced is a target from the FDA on their website in terms of review days. And I hope we clearly emphasized that this was part of a range and a goal by the FDA. First, I would say the good news is we're clearly in close communication and engaged with the FDA. The fact that they granted us a meeting to advance the discussion to demonstrate the product and review some of the clinical data is a good thing. I think these things take time. And before turning it over to Mike, we're doing everything we can, although we don't control the entire process, we remain confident based on the clinical data we've collected and the performance as well as the tone and the type of questions that we've received from the FDA that we will reach a positive outcome together. I cannot, however, and this is the bad news. I can't give guidance because not all of that is within my control Ed. So I understand we want things to happen as quickly as possible. And ENDRA is certainly working in that way. But I think the fact that we're engaged and closely aligned with the FDA is a very good sign. Mike, do you have other thoughts you might want to add?
Michael Thornton: Yes. And just to follow-up on some of the comments that Francois made. In the past 12 weeks, as I mentioned, we've had several interactions with the reviewers individually and at subgroups. And the clinical study design is something specifically we will look to discuss with them and align on – in our in-person pre-sub meeting coming up in the second quarter. Once we have that, we'll be much better able to forecast timing of those studies, if required and subsequently other key events in the regulatory process.
Francois Michelon: I hope that's a fair and transparent answer, Ed.
Edward Woo: That sounds good. You mentioned that there's a date in the second quarter. Would you be announcing when that meeting will happen? Or will you just disclose after you have the meeting and any...
Francois Michelon: Yes. These things can shift. And so it's in the second quarter, it's confirmed, assuming the FDA sticks to that, we'll have it. And then we will as we always have done, even if it's out of sequence with quarterly reporting update investors on that meeting. So it's set. It's been accepted, number of people attending in the second quarter, and we'll update investors after that.
Edward Woo: Great. And my last question is, it didn't seem like you had as many issues getting approval in the EU. Is there just something different in terms of getting the approval in the EU, that's very different from what the FDA is requiring?
Francois Michelon: Yes, it's a great question, and thank you for highlighting the fact that we have a major regulatory approval, the CE mark in Europe, but they are quite different. And I'll let Mike speak to that distinction, but FDA is definitely a higher bar. And so it's not surprising that the requirements and the timelines tend to be a little bit longer. But Mike, if you'd help our listeners better understand that distinction and why it takes normally a little bit more work to get the FDA approval.
Michael Thornton: Sure. So CE clearance of medical devices, including new technologies such as ours and novel technologies such as ours, is largely focused on safety and processes. The FDA is absolutely focused on those same items and then has a much greater scrutiny on efficacy, including clinical efficacy. And that's even more true with new technology. So since they've introduced the De Novo pathway, I would describe the pathway for most other companies now going through the process as being directed more and more through the De Novo pathway just like ENDRA is. I think Francois said we're really being treated very similarly to other similar new technologies, including ones for liver health. And the De Novo pathway definitely requires clinical data. That's one of the key pieces that differentiates it from the 510(k) process, which we pursued earlier.
Francois Michelon: Thanks Mike. And Ed, just to tag on an extra bit of reaffirming some of what we've said, the CE mark enables us to sell the product in Europe. But as I mentioned, having a body of clinical evidence from local users in each target market is the missing link. And so that's clearly what we and other companies do and King's College being a good example of that, will be a source of data. We'll be able to bring our potential customers in the UK to visit that site. They'll be able to see the system on the ground in the UK. They'll be able to eventually review the data from that study. And we'll do the same in Germany, in France and other markets. So the CE mark is a great starting point. I think it reflects the product quality. And combined with the clinical data that we're building, that will lead to commercialization. And in parallel, certainly, same thing will happen here in the U.S. with the FDA. I hope that's helpful.
Edward Woo: Yes. That was very helpful. Thank you very much for answering those questions, and again, I wish you guys, good luck. Thank you.
Francois Michelon: Thank you so much.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Francois for any closing remarks.
Francois Michelon: Yes. Thank you, operator. And thank you to my team and to the listeners today for listening to our progress. I'll close the call and wish everyone a good long Easter weekend, if you're celebrating Easter. And looking forward to updating everyone with news as we progress. Thank you. Bye-bye.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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