Solana Co (HSDT) 2020 Q1 法說會逐字稿

Good evening, ladies and gentlemen, and welcome to the First Quarter of Fiscal Year 2020 Earnings Conference Call for Helius Medical Technologies. (Operator Instructions) Please note that this conference call is being recorded and that the recording will be made available on the company's website for replay shortly.

Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management, including statements regarding the impact of the COVID-19 pandemic on the company's operations, the success of the company's planned study, the future commercialization of the PoNS treatment, expected future clinical and regulatory time lines, the potential receipt of regulatory clearance of the PoNS device in the United States and projected financial results.

These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the risk factors section of our most recent annual report on Form 10-K. Such factors may be updated from time to time in our filings with the SEC, which are available on our website.

All statements made during this call are as of May 7, 2020. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

I would now like to turn the call over to Mr. Phil Deschamps, Helius Medical's Chief Executive Officer. Please go ahead, sir.

Thank you, Diego. I appreciate it. Welcome, everyone, to Helius Medical's First Quarter of 2020 Earnings Conference Call. I hope everyone is home and safe in this really crazy time. And certainly, from our perspective, we hope that everyone is -- and your families and your communities is doing well.

I'm joined on the call this evening by Joyce LaViscount, our Chief Financial Officer and Chief Operating Officer.

Let me provide you with a quick agenda for today's call. I'll begin by discussing our regulatory process in the U.S. and Canada, followed by a review of our first quarter revenue results and the operational progress that we made during the quarter and in recent months. I'll then provide you with detailed updates on our business in light of the disruption caused by the COVID-19 pandemic. Joyce will discuss our first quarter financial results in detail and the recent progress we've made to secure additional capital and enhance our balance sheet conditions. I'll then provide a few closing thoughts before Joyce and I open it up for questions.

Before I begin into the formal program, I'd like to share that the feedback we continue to receive from the authorized clinics treating patients in Canada continues to support our view that the real-world performance of our PoNS device and treatment is consistent with the performance that we observed in our clinical trials. This encourages and motivates the clinicians and patients using PoNS, their loved ones and certainly our employees.

While not everyone responds upon treatment, it is extremely heartwarming and gratifying to be able to make a significant difference in the lives of the majority of patients that we treat.

With that as a background, let's start with the review of our regulatory progress in the U.S. and Canada. In the U.S., we made an important strategic decision during the first quarter to prioritize an indication in multiple sclerosis, or MS, as our pathway to pursue our first de novo classification of the PoNS device. This decision was based on the quality of the data included in our MS submission to Health Canada. And to describe that a little bit more, we have 2 peer-reviewed clinical trials. One of the clinical trials demonstrated the active group showed statistically greater improvements versus control group in Dynamic Gait Index, or DGI, that's a measure to assess an individual's gait, balance and risk of falls. The other study suggested that PoNS stimulation can enhance motor performance and working memory while also driving neuroplasticity.

In addition, we've generated evidence based on the real-world data gathered in our validated database in Canada, which showed statistically significant improvement from baseline in the functional gait assessment. We believe our results are sufficient to demonstrate a favorable risk profile -- I'm sorry, risk-benefit profile as required by the de novo pathway in the U.S.

Importantly, from a business standpoint, MS represents a significant patient population in the U.S. with nearly 1 million individuals estimated to be living with this condition. MS is also deemed to be a high unmet medical need by the FDA. And thus, we believe that the medical necessity is another significant driver for us to pursue this therapeutic area.

With this as a backdrop, we believe this regulatory pathway represents our most effective and importantly, efficient pathway to obtain our first U.S. clearance for the PoNS device. We believe we will create the highest value for shareholders in this path.

Importantly, to date, our pursuit of our indication in MS has not significantly been affected by the COVID-19 pandemic, and we have remained focused on aggressively pursuing this initiative. While future impacts of the pandemic on our regulatory submission remains unknown, we've been very pleased with our pace of progress and continue to anticipate submitting for de novo classification for MS in the second half of 2020.

In Canada, our regular strategy continues to be driven by 3 primary objectives: First, our goal of bringing our innovative therapy to patients with high unmet medical needs, check on that one; second, to expand our Canadian label, specifically for MS, to drive our addressable market and performance in Canada; and third, to generate sound evidence to build the scientific credibility of our novel treatment, which will also support our near-term U.S. regulatory strategy, specifically in our focus in MS.

On February 27, we submitted a Canadian Class II license amendment application for this label expansion based on the data that I discussed earlier in my remarks. We were very excited to receive marketing authorization from Health Canada on March 18. This label expansion significantly increases our addressable market opportunity in Canada, enabling us to market our PoNS device to the approximately 93,500 individuals living with MS in Canada. In fact, it's one of the highest incidents in the world.

Given the chronic progressive and potential debilitating nature of this neurodegenerative disease, we have seen that MS patients are highly motivated to pursue treatments that can lessen the severity of their symptoms. We're incredibly proud to provide these patients with a novel therapy that has the potential to improve and potentially even restore their ability to walk, and we're focusing on making them aware of this new treatment option. Patients and clinicians are excited to have a nondrug, nonimplantable option to relieve their symptoms of MS.

Lastly, I want to briefly discuss the pursuit of our U.S. indication for the treatment of chronic balance deficit due to mild-to-moderate traumatic brain injury, or mmTBI. We are continuing to seek potential sources of funding in order to execute our TBI-002 trial and other TBI-related research. The trial has been temporarily halted as a result of the COVID-19 related impacts on all clinical trial activity across the U.S. and Canada. Accordingly, this regulatory initiative is on hold for the foreseeable future.

Now let's turn to our revenue performance in the first quarter. We reported total revenue of $207,000 during the first quarter of 2020 compared to $677,000 in the prior year quarter. Our review in both periods was driven by sales of neuroplastic -- in neuroplastic -- I'm sorry, neuroplasticity clinics in Canada that have been authorized to provide our PoNS treatment. In the first quarter of 2020, our revenue was largely comprised of sales to clinic locations that were authorized prior to the beginning of 2020. As a reminder, we began 2020 with a total of 7 clinic locations authorized to provide our PoNS treatment in Canada.

In the first quarter of 2019, when we originally launched, our revenue benefited from strong initial sales to 2 clinic locations as we began commercializing our PoNS device during this period. Both these clinics were clinical trials -- participated in our clinical trial, and had significant database of patients who are eagerly waiting for the PoNS treatment to be cleared in Canada.

Looking at our revenue performance in more detail. Our revenue performance during the first 2 months of 2020 was consistent with our expectations. However, in the last 2 weeks of March, our business was significantly impacted by the disruption caused by the COVID-2019 pandemic, which led to the temporary closure of clinic locations that have been authorized to provide our PoNS treatment. I will discuss this disruption and its impact in more detail later in my prepared remarks.

Moving to an overview of our operational progress in Canada. By way of background, we began 2020 well positioned to build on our commercial progress in Canada. During the quarter, we established a new direction for the Canadian business based on our strategy to drive patient treatment starts by building access, credibility and awareness for the PoNS. The approach has significantly streamlined our operations in Canada with the goal of improving our process for identifying, authorizing and training new clinics, increasing the pace of adoption of our PoNS treatment over time and doing so as efficiently as possible.

In connection with this approach, we improved our targeting criteria for the clinics that we engage with an authorized to provide PoNS treatment. Specifically, we're targeting clinics now that have a large existing commercial focus on neurorehabilitation to enhance credibility. We are also focusing on clinics that have established referral networks with the public hospital systems for the treatment of patients with neurological conditions to drive awareness. And finally, clinics with a significant reimbursement experience with payer relationships with respect to the neurorehabilitation treatment to drive access.

We've also implemented a new pricing model designed to facilitate patient adoption by reducing the upfront cost of PoNS treatment, and we're encouraged -- we are encouraging studies of our device by reputable clinicians through activities like our clinical experience programs.

Armed with this new commercial targeting and pricing strategy, our team made impressive progress during the first quarter, authorizing 7 new clinic locations to provide PoNS treatment, doubling our Canadian capacity in the first quarter alone. Our new focus of driving patient starts has made a big impact on our operational efficiency in the first quarter, leaving us better positioned to drive adoption of our innovative PoNS technology as soon as the post-COVID business recovery begins.

Like many companies in our industry, our operational and financial performance has been adversely impacted by the emergence of the COVID-19 pandemic and the restrictions that have been implemented to slow its spread in Canada. In March, provincial and territorial governments in Canada began to implement policies to limit the performance of non-life-saving medical treatments, authorized PoNS clinics to suspend new patient treatments other than to provide emergency services required for select patients. At the end of March, all the 14 clinic locations that are authorized to provide PoNS treatment were temporarily closed. As a result, our performance during the last couple of weeks of March was significantly impacted.

All of the patients who have completed their 2-week in-clinic initiation prior to the COVID-19 shutdown, were able to continue with their 12 weeks of at-home portion of the treatment. Throughout the shutdown and the support of the clinics via -- with the support of the clinics via virtual means.

With respect to our own business, Helius reacted quickly and proactively to the COVID-19 pandemic to protect the health of our employees and enable them to safely continue their work. Most notably, we closed our physical offices and instructed our employees to respect the federal and local COVID-related policies that have been enacted in their regions. I'm pleased to say that we also prepared -- we were also prepared with an IT infrastructure that was -- that enabled all of our employees to productively work remotely.

With respect to our commercial activities, we've made important changes to help mitigate the impact of COVID-19 and ensure that we are well positioned when the impacts created by this pandemic subside. First, we're engaged in closely monitoring the activities of our authorized PoNS clinics to provide them with any supportive need in this challenging period. And second, while our internal team -- I'm sorry, while our internal team in Canada has been unable to visit prospective new clinics in person to engage in business discussions, they are continuing to target and cultivate relationships with clinics targeted specifically with our new criteria via virtual means. We've been very pleased to find that many clinics have been receptive to engaging with our team in this way.

Stepping back. During the first quarter, we made considerable progress toward our primary goal of getting our PoNS technology cleared in the U.S. and continue to scrutinize every expenditure to efficiently achieve that goal. During the quarter, we raised approximately $3 million in gross proceeds to support our operations -- our operational goals and activities. We'll continue to vigorously manage our expenses to focus on the activities that yield the highest value for our shareholders, namely our U.S. MS submission and clearance and the development of the market for our technology by treating patients and building access, credibility and awareness through our Canadian operations.

As the COVID-19 pandemic remains ongoing and the pace, timing and magnitude of recovery in Canada and the U.S. are highly uncertain, we're currently unable to provide expectations for future financial performance until the world recovers from these unprecedented times. However, we're encouraged by our continued pace of activity as we pursue U.S. regulatory clearance in MS and the commercial initiatives in Canada that we're focused on to position Helius to drive expanded access and patient adoption of our PoNS treatment as soon as the COVID-19 pandemic subsides.

With that, let me turn it over to Joyce to walk you through the first quarter financials.

Thanks, Phil.

We reported total revenue of $207,000 for the first quarter of 2020 compared to $677,000 in the prior year period. Product sales represented approximately 92% of revenue in the first quarter of 2020 compared to 100% of total revenue in the first quarter of 2019. Product sales in both periods were generated through the sales of the PoNS device and mouthpieces to neuroplasticity clinics in Canada. As Phil discussed, product sales in the first quarter of 2020 were largely compromised -- comprised of revenue from sales of clinical locations that were engaged and authorized to provide PoNS treatment prior to 2020. First quarter 2020 product sales were impacted by the COVID-19 pandemic, specifically, the temporary closure of clinic locations.

As a reminder, product sales in the first quarter of 2019 benefited from strong initial demand from our first 2 clinic locations, as Helius initiated the first commercial shipments of its PoNS device in Canada during that period. Our gross profit for the first quarter of 2020 was $106,000 compared to $441,000 in the prior year period. Operating expenses for the first quarter of 2020 decreased $3.2 million or 43% year-over-year to $4.1 million. It's important to note that the 43% year-over-year decrease in operating expenses reflects the continued benefit of cost-reduction initiatives that we implemented during the past year.

By line item, the change in operating expenses was driven by a decrease in selling, general and administrative expenses of $1.7 million or 38% year-over-year as well as a decrease in research and development expenses of $1.6 million or 58% year-over-year. The decrease in SG&A expenses was primarily due to reduced wages and salaries due to lower headcount, as well as reduced commercial operations expense associated with U.S. launch planning activities, which were terminated with the FDA denial in Q2 of 2019. The decrease in research and development expenses was primarily due to reduced development costs due to the completion of the PoNS device development in 2019 and reduced wages and salaries due to lower headcount.

Operating loss for the first quarter of 2020 was $4 million compared to an operating loss of $6.8 million for the prior year period. Total other expense for the first quarter of 2020 was $755,000 compared to total other income of $8.1 million in the first quarter of 2019. The year-over-year change in total other income and expense was primarily driven by the change in fair value of derivative financial instruments, which was a gain of $4 million in the first quarter of 2020 compared to a gain of $8.3 million in the first quarter of 2019.

The change in fair value of the company's derivative financial instruments was primarily attributable to the change in the company's stock price, volatility and the number of derivative financial instruments being measured during the period.

For the first quarter of 2020, we reported a net loss of $4.8 million or $0.15 per basic and diluted common share, compared to net income of $1.3 million or $0.05 per basic common share and $0.06 per diluted common share for the first quarter of 2019.

Turning our discussion of our balance -- turning to a discussion of our balance sheet and recent financing activities. As of March 31, 2020, we had $4.4 million of cash compared to $5.5 million at December 31, 2019. We had no outstanding debt obligations in either period. The decrease in cash during the first quarter of 2020 was primarily driven by net cash used in operating activities of $3.8 million and net cash used in investing activities of $10,000, partially offset by $2.7 million of cash provided by financing activities. Net cash provided by financing activities during the 3 months ended March 31, 2020, consisted of proceeds from the following activities. On January 27, we entered into an ATM agreement with H.C. Wainwright. During the first quarter, we sold and issued 1.1 million shares common stock under the ATM at an average price of $0.75 per share. The aggregated market value of these activities was $800,000. On March 20, we issued an aggregate of 6.3 million shares of our common stock in a registered direct offering at a price at $0.35 per share. Additionally, we issued unregistered warrants in a concurrent private placement to purchase up to 6.3 million shares of our common stock at a price of $0.46 per share. Net proceeds from the offering were approximately $1.9 million.

Subsequent to quarter end, on April 13, the company was granted a $323,000 loan under the Paycheck Protection Program established under the Coronavirus Aid, Relief and Economic Security, or CARES Act of 2020. The company planned to use the proceeds from the PPP loan for covered payroll expenses, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. As disclosed in our 8-K filing this afternoon, based on subsequent guidance issued by the federal government, including a presumption that no publicly traded companies are eligible for a PPP loan, the company has decided to return the PPP loan proceeds within the time period imposed under the new guidelines out of an abundance of caution, subject to any additional items that may be issued by the federal government on eligibility criteria for public companies who have already been granted PPP loans.

We continue to evaluate multiple options to secure additional capital to strengthen our balance sheet and support our operations.

Let me now discuss our 2020 guidance. As we mentioned in our earnings release this afternoon, we have withdrawn our financial outlook for the full year 2020 due to the uncertainties associated with the COVID-19 pandemic. Like many of the companies in the medical device industry, we are currently unable to estimate the duration and impact of COVID-19 on our operations and financial results at this time.

With that, I'll turn the call back over to Phil.

Thank you, Joyce.

Look, we're extremely proud of our achievements in the past quarter, and we remain confident in the long-term opportunity in store for Helius Medical Technologies. Despite the ongoing challenges created by COVID-19, the process we have made, the progress -- sorry, we have made has better positioned us to successfully submit for U.S. regulatory clearance and continue to drive the potential of our PoNS technology.

Before we open it up for questions, I'd like to close by thanking our employees for their exceptional efforts and dedication in the first quarter of 2020 despite the challenging circumstances as we navigate the global COVID-19 pandemic. And I'd also like to thank our customers, certainly our shareholders for their support, and those on the call this evening for your interest in Helius Medical Technologies. I'm very thankful that together, we continue to provide this innovative treatment to people who need it.

Joyce and I are now really happy to take questions from the audience.

(Operator Instructions) Our first question comes from Jeff Porter with Porter Capital.

I had been reading that a lot of the approved drugs for MS that are being taken by patients have immunosuppressive characteristics. Therefore, a lot of doctors are discouraging their patients from taking those drugs because they would be extremely vulnerable to COVID-19. Does that create any opportunity for us in our dealings with the FDA to move along our application in light of the fact that we offer a safe alternative?

So here's how I'd answer that, Jeff. As I said in my remarks, FDA has identified MS as a high priority or high unmet medical need area. And certainly, the fact that we're noninvasive, non-implantable, nondrug is certainly really consistent with what people are looking for. And FDA have been particularly -- you're absolutely correct. They've issued some guidances around the emergency use. We actually discussed the emergency use for PoNS with FDA. It really wasn't an area because they're really focused on the CNS area there. So it wasn't an area in which we could pursue. But under the envelope of the fact that this is a high unmet medical need, and we're going through our submission precisely at a time where, as you pointed out, some people with MS might find it difficult to start on an immunosuppressant drug, we think that, that plays very nicely in the environment for us to be applying to FDA today.

Okay. Great.

Second question is for Joyce. With regard to the Paycheck Protection Program, why was the decision made to return the funds to the government rather than keep the funds and then possibly have it just be a debt that needs to be repaid to the government?

Yes. So when we went through the process, Jeff, with the Paycheck Protection Program, we followed all the rules in terms of the eligibility. Initially, there were some questions around the certifications that were required. And based on all the rules in the initial round of that program, we were more than qualified. We thought that we were basically the poster child for the program. As you know, we're a small company, limited number of employees. We've kept our employees on staff to continue to work forward on these important initiatives. But as we evaluated the guidance that was coming out and on the advice of our legal counsel, as the Small Business Association (sic) [Small Business Administration] did not feel that publicly traded companies, regardless of their status, should be eligible for those loans, we felt it was in our best interest to avoid the potential disruption as well as the penalties, both civil penalties and having to pay back 3x the amount if it was determined that you were -- you should not have been eligible for that money. So it was a risk analysis done. And we just felt like that was the best way to move forward, even though we had followed all the rules and made sure that our application was appropriate.

(Operator Instructions) Our next question comes from [Randy Hag].

I think before I get to my question, I think it's important to kind of just give everybody an idea of some factual, historical, financial information. I'm a financial person and I'd like to know kind of what I'm talking about in dealing with before I ask a question. Just a few facts. First of all, you guys have publicly reported that both you, Phil, and you, Joyce, had received quite a large salary increase, effective March 31, 2019. And as we all know, days after, the company was denied its FDA application, which resulted in a significant drop in the value of the shares. The other thing that I noticed is that, as a group of officers and directors, you guys all own a very, very small percentage of the company. It's less than 10%. And myself and other investors that I've introduced Helius to, we've invested millions and millions of dollars into this company at around $10 a share price range. So since the time we got in at $10, the stock was on April 1, 2019, $6.46. Days later, it dropped 70% to $2.03. And then since April 8 to May 7, it's dropped another 78%. So the total drop is about 95%.

So what I'm getting to is a couple of things. Number one, we had 25.8 million shares. We have over 38 million shares. And every time you are raising capital, you're almost diluting us by 10% per month because your current burn is $1 million a month. I mean I just don't know with all these delays how you can -- how you're going to continue to finance this company when you're burning $1 million a month, which shockingly, $600,000 of that is just for being a commercial company in Canada. You've got $120,000 a month in D&O insurance. Management has taken $75,000 a month. But yet in 14 clinics, you're proud of the fact that you did $200,000 in revenue in the first quarter? Guys, you need to last probably at least a year. So if you keep selling stock at the rate you are, you're going to have to sell 30 million shares. Number one, I don't see that happening. Number two, what I think is going to happen is someone's going to come along and say, "Hey, you know what, we're taking you private. We'll give the management team 15% clawback, and we're eliminating the common shares." So I hear nothing on this call that gives me any sense of security about how you are going to get from point A to point B.

There's 30 million unemployed people in the last few weeks, yet you guys are taking these very large salaries down. And I just don't get it. I mean if the device really works, the only thing that should matter is survival from today to point B, which is the end point of some kind of approval. I know there's all kinds of problems in Canada with reimbursements. And if you average the revenue per clinic in Canada for the first quarter, it's less than $15,000. So unless I'm missing something, and I apologize for -- I'm just laying the facts out. I'm laying the facts about what you guys are spending a month, about what the future -- now there's no revenue guidance because you don't know what's going to happen up ahead. And I'm sorry to disagree with you, but I don't think COVID-19 has really that much to do with your business. The last 2 weeks of March would not have made a significant difference in your quarterly number. So I don't want to hear any hiding behind COVID-19. I want to know what you and the Board plan to do to keep this company afloat so that the shareholders, the common holders, aren't going to get completely burned out so that we have no chance to ever make a return back on what we invested in.

Look, I appreciate your comment. Do you have a -- well, you asked your question. So let me begin by saying that we think -- and you illustrated through your commentary that the #1 value for the company is a U.S. clearance. And that's where I think that we've made the most progress over the last 3 to 6 months when we started to recognize that our revenue in Canada was one thing, but more importantly was preparing for us to take the patients that were treated up in Canada and record their data as if it was a clinical trial to be able to build the database so that we could have an option to go back to the U.S. FDA. So the real -- the really big opportunity for us now is we did do that. We did have some real-world evidence gathered through our clinics. And that's the extraordinarily valuable commodity that comes out of Canada because ultimately, it's the means by which we were able to quickly respond to the fact that we got denied on the TBI side and prepare a submission based on our -- having the 2 clinical trials already done. And with the Canadian data, we're able to prepare a submission that, at least based on the guidelines that FDA have put out in terms of a reasonable assurance of clinical efficacy and safety, we are -- we're going to be submitting.

And we're working -- with COVID-19, you're absolutely correct. And what's gratifying is it has nothing to do with that pathway. And we do believe that, that is the #1 value-creating engine for our shareholders. So what we've done is we've tried to take the minimal amount of money that we need to be able to sustain our operations with that in mind. And we continue to progress down the path with FDA, and we'll be making our submission as soon as we possibly can.

So that's, I think, the path. And then should we be successful in that path, there should be a return to some value for our shareholders. And that's the path that we chose to use.

And know, [Randy], I -- from an expense standpoint, being a medical device commercial company requires a certain amount of infrastructure for us to maintain our clearance and our clearance in Canada and our business. So we scrub, believe me, every month, the expenses to make sure that we -- well, first of all, we streamlined what we work on and the U.S. MS submission is #1. And the 3 executives have taken anywhere from 25% to 50% cuts in pay in order to help this along. So we're doing what we can. What happened with FDA last year, there were 19 submissions for de novo clearances at FDA, 14 were denied and 5 were accepted. So unfortunately, we didn't make it in the minority. We made it in the majority. And we're doing what we can to use the circumstances to get back to FDA, get a clearance in the U.S. and restore some of the value for our shareholders. So that's basically our plan.

Can you make a comment, though, on -- is the -- you're really not talking about, though -- if you need another year's worth of capital, is it the intent really right now that the ATM is going to continue to be the primary source of keeping the company afloat? Because I know that you're going to be voting on a possible reverse split, which I know is going to be necessary to keep your listing active on the NASDAQ. And typically, historically, reverse splits don't bode well for share price. So -- and me trying to figure out what I do next or what I advise other people, if your ATM is your only source of keeping the company-funded and you're going to have a reverse split coming up, which will be voted on at your Annual Shareholder Meeting -- yourself or Joyce hasn't mentioned any other possible financing mechanism to give us any comfort in keeping this company-funded for the next 12 months because -- listen, so I believe in the device. I think that -- I think it works. I think it can be amazing. And if we do get MS clearance, then perhaps there's a return here for all of us. But to get to that point, some more color on how you're going to do that when you're burning $1 million a month, which is at $0.35. It doesn't matter what the share price is now, it always migrates down to that point when you're raising capital. What is your plan? Is the ATM the only plan you have right now when you're looking at other options? I guess that's my follow-up question.

Sure. Look, [Randy], we're always looking at every possible option to raise money to benefit the shareholders in the most efficient, possible way. The ATM is an efficient way to raise money. But fundamentally, it's around trying to reach a milestone as fast as we possibly can to change the value proposition so that when we raise money, we can make it in a much more dilutive way.

And so it's impossible for me to outline precisely what options are in front of us. But know that Joyce and I are looking at every possible option. But mostly, it's about reaching an important milestone with FDA and to get some indication from FDA that they're considering our application. And that, we hope, will bring some enthusiasm with people on this really robust path back to FDA.

(Operator Instructions) Our next question comes from Anthony Lamport with Lambda Fund Management.

I know that you felt that you would pass the milestone when you got approval in Canada for MS, and that is wonderful. But I noticed that it had absolutely no effect on our market value. And I feel that we tend to believe in ourselves too much. I think it's a terrific device and whatever, but the market doesn't seem to think that. And if we hear from the FDA that they're considering our application, that's not a milestone. When they finally clear it, it could be another year from now. And in any case, as we saw in Canada, the clinics weren't blowing away because our previous indication was one that wasn't so urgent. They couldn't get insurance, so they weren't moving ahead. When it comes to the U.S., we have to make sure we can get insurance clearances. We have to make sure that people are willing to come to the clinics and so on. It's going to be a long, hard road, and I hope you can comment on other things you looked at, just to say the problem with the market -- setting the market financing is that our market's so low that it just digs a bigger hole as was previously comp.

I understand. Yes. I understand your question, Tony. And so here, circumstance -- here are the circumstances. We were, quite frankly, expecting a little bit of a bigger bump because of our Canadian -- but here is the time line of what happened. We -- the Canadian or the COVID announcements came back -- came out in the U.S. on March 16th. And in Canada, roughly the same time, but I think, perhaps, about a week before. And that was the domination of the news cycle. Our clearance for MS in Canada was on March 18, so 2 days later. All of the clinics that we authorized with this new focus on neurorehabilitation and who had existing MS patients and stroke patients and so on and so forth in their clinics were essentially 1.5 week later shut down. So quite frankly, right now, we don't know the effect of this new indication on the performance of our clinics. All we know is there's 100,000 patients that certainly have a larger sense of urgency because they know that next year, they're going to be worse than this year, quite likely, with MS. The traumatic brain injury patients, as you pointed out, they're saying, okay, I'm not feeling great or I have this balance deficit. But next year, I'm going to be the same. So I'm going to wait for reimbursement to come in. That seems to be the dynamics that we were seeing. It's not the same dynamic for MS.

So we're confident that when COVID goes away and our clinics get back together and perhaps, right now is the time for the clinics to actually be scheduling these patients while they're closed that we'll see this come back.

I want to set the proper expectations, though. This is a scheduling issue and they have to do the PT. So I don't think that the day the clinics open, that all of a sudden, there's 1,000 patients that come through, right? But the dynamics feel better. So unfortunately, on the stock response, the news cycle that was going on at the time was just miserable and very impossible for micro-cap companies at the time. So I'd like to believe that, that had the largest effect. And then the dynamics that I spoke about with respect to none of the expansion of our clinics has benefited from that new indication one iota yet.

Well, what sort of treatment were -- are the people with MS -- which is a very serious disease. They're not being treated by -- anywhere at the moment in Canada? You would say the clinics, they were going to shut down? Or is it only our clinics that are using physical therapy that were shut down?

So our understanding, and we were in very close contact with the clinics, all 14 of the clinics that we have, have shut down to the -- what they call, shutdown to the public. They are an essential service. So they do emergency -- see emergency patients that think people who perhaps need rehab from a car accident or a spinal cord injury or things like that. That's what they described that they're doing today, but they're not open to the general public.

Out of all of the neuro conditions like Parkinson's, MS, traumatic brain injury, MS is the one that uses PT services the most. And so right now, they are staying at home and they're not going to their clinic. And many of them do their exercises at home, just the same as our treatment. So when the economy opens back up, they'll be able to go into the clinics, get their 2-week initial training over and then resume their normal life by doing their exercises at home. So we think that it's going to be interesting to see whether MS patients who need to be careful, how quickly they go back into the clinics. So that's why we're -- it's really difficult for us to estimate how the business rebounds in the uncertainty. And that's why neither Joyce nor I have a clear enough crystal ball to be able to give you a better answer to that.

Yes. That's very understandable. To my knowledge, people who've had operations in the U.S. recovering go to rehab hospitals and receive physical therapy. So this has not been shut down in the United States. I think -- is there some way in Canada you could work with them? After all, these clinics want to treat these people. Is there some way they can go -- and so 2 weeks to somebody's home to give instruction or something, is there some method of setting that up as an emergency procedure? A lot of things are being done in the U.S. now that are -- technically, were never possible before. But is there some twist -- way that you can get this going, at least with some people? I think just your ability to demonstrate that you're helping people would be very nice. You could start building up further material for insurance companies or whatever, if you were actually offering the service.

Yes. So -- good, great. So you're exactly correct. We are engaged with these clinics to look at virtual training programs and things like that. It's just right now that there -- in Canada, the stay-at-home orders are -- I guess I have no idea whether this is a Canadian cultural thing, but they're -- they've honored it quite significantly. So employees are not coming into the clinics. So like I said, it's usually the clinic director. Physical therapy in Canada is not a national health service issue, so all of these clinics are private. And so what you're referring to, perhaps in the U.S. is that the hospital-based rehab clinics are providing services for inpatients and things like that, our understanding in the U.S. -- yes, and in Canada, that's the same thing. Those are not the people, though, that treat the outpatients that we're talking about, that are in the community. Those people have to work with the private clinics. And it's really the private clinics that we partner with. And thus far, they're not open.

So -- but we are -- in fact, today, we had a 2-hour webinar on -- with Canadian MS experts with all of our clinics. And not only our existing clinics, but 9 additional clinics that are thinking about joining when everything comes back up, and giving them a tutorial on what's important and how to set up your clinic and how to set up your training system. So we're doing what we can, given the circumstances, to try and get back going as fast as we can when the economy reopens up there.

You had a Chinese investor at one point, and I know they have right and so on. Is there any way, since China seems to be reopening very aggressively, that you can get some work done in China?

So our Chinese partner is still very much a partner. He's a Board member. The way -- the path into China is through FDA because China FDA for medical devices recognize the FDA. And so that opportunity is going to parallel our success with the FDA.

Then they wouldn't honor Canada's approval, is what you're saying?

They -- it's complicated. And I'm sorry to get technical, but it's -- essentially, it needs to be -- the approval needs to be in the country of residence of the company. And so if we wanted to do that, we would have to completely change the domicile. And it's -- and we looked into it. Believe me, we turn over every rock and stone with the partnership of China Medical Systems, which is a very, very large, $3 billion, very credible company in China. And we looked at every opportunity. And unfortunately, the path is still much, much more secure through FDA.

Our next question comes from [Sonny Greenwell with Kobe Partners].

(Operator Instructions)

Our question comes from Sonny Greenwell with Kobe Partners .

A couple of questions. When is the Canadian Prime Minister going to open up Canada? Has he talked about it?

Yes. They've -- so obviously, Canada's up -- I'm a card-carrying Canadian, by the way. So I know a little bit about it. I still have a home up in Canada and looking forward, at some point, to be able to go up there again. So yes, Prime Minister Trudeau said that, pretty much, the next -- on the 15th, there's going to be an announcement with respect to the federal recommendations. And they have set up the country in a red, yellow and green kind of circumstance with guidelines on each of those -- guidelines for reopening on each of those. And it does seem that a couple of provinces will likely make that criteria just based on the dynamic. But the 15th is when we're really going to know.

And then whether -- how these clinics then -- obviously, PT clinics are very, very personal, right? You're manipulating people and things like that. So it will be interesting to see. And it's part of the unknown how many patients, regardless of whether they open, whether this is something that they will go down. But yes, about another week or so, Canada will make some announcements.

All right. And then about the MS indication for the de novo, what data are you going to use? And are you happy to get in front of the same FDA panel that was rather brutal for the company the last time through?

Yes. So interestingly, [Sonny], when we originally founded the company, we thought we were going to be an MS company. Necessity is the mother of invention. We had the relationship with Montel that introduced us to the U.S. Army. The U.S. Army had a TBI issue. They originally funded our clinical trial. So we became a TBI company and developed the TBI clinical trials. And yes, I agree with you. We had every -- we felt very confident that the TBI data that we generated was certainly above the criteria.

So the reason I'm telling you this is that we -- the inventors of the PoNS had originally done back in 2010, it was published in a peer-reviewed journal in 2014, a study of PoNS versus placebo -- so a placebo PoNS, which remember is one of the big issues that FDA had, that the control group didn't show a difference, right? So in this case, the control arm and the active arm were showing a highly statistical difference between the two.

And then when we founded the company, so this was before the company was formed, one of my first ideas was, hey, a great tenant of science has reproduced something that's already been done. So we asked the Montreal Neurological Institute, we could do the study with -- for $0.30, almost $0.30 on the dollar-based on -- I'm sorry, 30% discount and so on and so forth. And we reproduced the MS study. And the results were -- it was a different endpoint, but the results were similar. So these were studies that were a 20-patient study and a 14-patient study. So not a lot -- not enough to submit a Canadian -- I'm sorry, an FDA submission.

Then we got our clearance in Canada. And immediately, we said we're going to be treating patients. And then we'll -- if we put them in a database that's validated like a clinical trial, then we'll be able to gather real-world evidence. And certainly, anybody who follows the FDA knows that real-world evidence is now something that's legitimately considered as part of this.

So we generated data in 39 -- between 39 and 50 patients. And I'm saying this because, obviously, they continue to come off treatment, so it changes every day. And it's really on the basis of those patients and the consistency with which they improved over baseline that makes our submission with those 2 studies robust enough to be able to go down, combined with the fact that we've had now 45,000 treatment sessions in Canada and no significant side effects. So the safety profile has been validated by what we've done in Canada. So I understand that the Canadian performance hasn't been what anybody has expected. But for us, Canada was always a means to be able to get data as we plan from day 1 to get our U.S. submission for whatever indication we would be able to gather data for.

Of course, we thought that was going to be TBI, but that was the plan. So based on our outside counsel and inside experts with respect to the process, the high unmet medical need that I mentioned, we just feel that the MS pathway here is a stronger one.

It's a stronger one? Okay.

Well, in the sense that we don't control FDA. We feel we're going to be able to put a strong application together based on the guidance that they gave us -- that they gave everybody.

In front of the same panel that you did before?

So the panel changes all the time. And it's the same division, though, [Sonny]. So it's likely that some of the same people. Remember that when we were denied our application, it was removed. So essentially, this will be a new application to the CDRH division, neuromodulation division. And so we suspect -- it's not a large division, we suspect that some of the players will be the same, but we don't know that yet.

Okay. So can you give me some time frames on TBI and MS? So you're only about 1.5 month behind on trials in TBI. So when can you, maybe, get something into the FDA on that? Will it be now next year? Or could it still be by the end of this year?

Yes. So the reason for our decision, [Sonny], to go with MS is, all of the environment, as I've described it, the fact that we don't have to get new data, the fact that MS is a higher unmet medical need in the eyes of FDA that we can essentially start preparing the submission today and not have to gather new data in a new clinical trial is what makes the MS pathway much more efficient than having to go and do a clinical trial that would then be submitted to FDA. So the clinical trial would take us roughly a little less than a year to complete. And then we would have to submit to the same process. So I don't want people on the phone to think that this is a sort of a rebound because, ultimately, with the data we generated in Canada, and the fact that we have placebo-controlled, highly statistically significant data to submit to FDA, some of the issues that they raised in our TBI applications sort of go away.

And so that means that if you can submit this, what? Did you say by the end of the year? How long does it take the FDA to review it again?

I said the second quarter -- I'm sorry, second half of the year. And the only reason we're saying second half is because with COVID, we just don't know what the environment is going to be. We're working as diligently as we can to get it done as fast as we can.

Our next question comes from [Carmelo Cardella with AGP].

(Operator Instructions)

Sir, we are currently showing no additional participants in the queue. So that does conclude our conference call for today. Thank you all for your participation.