ENDRA Life Sciences Inc. (NDRA) is a revolutionary medical technology company that has developed a groundbreaking platform called Thermo Acoustic Enhanced UltraSound (TAEUS®). TAEUS® is a novel imaging technology designed to characterize tissue, similar to an MRI, but at a fraction of the cost and at the point of patient care.

Business Overview and History

ENDRA Life Sciences Inc. was incorporated on July 18, 2007 as a Delaware corporation with the mission of developing cost-effective and accessible diagnostic tools to address significant unmet medical needs. The company's flagship technology, TAEUS®, leverages the principles of thermoacoustics to provide clinicians with a non-invasive means of assessing tissue composition, with an initial focus on quantifying fat in the liver.

The company has developed technology for characterizing tissue non-invasively, at the point of patient care, to broaden patient access to the safe diagnosis and treatment of a number of significant medical conditions where expensive X-ray computed tomography (CT), magnetic resonance imaging (MRI) or other technologies are unavailable or impractical.

In March 2020, ENDRA received CE Mark approval for its TAEUS® Fatty Liver Imaging Probe (FLIP) System, enabling its marketing and sales in the European Union and other CE Mark geographies. This was a crucial milestone for ENDRA, as it provided a pathway to commercialize its technology in international markets.

Following the CE Mark approval, ENDRA's primary focus shifted to securing regulatory clearance from the U.S. Food and Drug Administration (FDA) for the TAEUS® system. In June 2020, the company submitted a 510(k) application to the FDA for its TAEUS® FLIP System. However, in February 2022, ENDRA announced that it would pursue FDA reclassification and clearance of the TAEUS® System through the more rigorous de novo process. The company subsequently voluntarily withdrew its 510(k) Application and submitted a de novo request for the TAEUS system to the FDA in the third quarter of 2023.

The de novo process requires the company to provide the FDA with more comprehensive clinical data to demonstrate the safety and effectiveness of the TAEUS® technology. To this end, ENDRA has been actively engaged with the FDA, submitting additional information and requesting a pre-submission meeting to align on the clinical study design and statistical analysis plan.

In the fourth quarter of 2023, the FDA issued an Additional Information (AI) request to ENDRA, seeking further details on the final configuration of the TAEUS® system, the clinical data submitted, and non-clinical testing such as electrical safety, compatibility, and cybersecurity. ENDRA has had several interactions with the FDA since then, providing the requested information and scheduling an in-person pre-submission meeting for the second quarter of 2024. In order to fully respond to the FDA's questions, ENDRA needed to compile additional clinical data, provide additional device test data, and respond to cybersecurity related questions in a new de novo submission.

ENDRA's commitment to regulatory compliance and collaboration with the FDA underscores its dedication to bringing the TAEUS® technology to market in a thorough and responsible manner. The company believes that the close communication and alignment with the FDA regarding the device configuration and clinical study protocol design will ultimately lead to a successful regulatory outcome.

Throughout its history, ENDRA has faced financial and operating challenges. As of June 30, 2024, the company had an accumulated deficit of $96.94 million and had $6.40 million in cash. To date, ENDRA has funded its operations through private and public sales of its securities and will need to raise additional funds in order to execute on its business plan, fully commercialize its TAEUS technology, and generate revenues.

Financial Performance and Liquidity

ENDRA's financial performance has been consistent with its focus on regulatory approvals and technology development. For the year ended December 31, 2023, the company reported total operating expenses of $10.5 million, down from $13.2 million in 2022. This decrease was primarily due to lower research and development (R&D) and sales and marketing (S&M) expenses.

R&D expenses decreased by approximately $1.6 million year-over-year as the company completed the development of its initial TAEUS® product. S&M expenses also declined by $609,000, mainly due to the departure of the company's Chief Commercial Officer.

However, ENDRA's net loss for 2023 was $10.1 million, or $1.58 per share, compared to a net loss of $13.2 million, or $4.56 per share, in 2022. As of December 31, 2023, the company had $2.8 million in cash and cash equivalents.

To bolster its financial position, ENDRA raised $677,000 in gross proceeds from the sale of common stock through an at-the-market equity facility and $1.1 million from the exercise of warrants in the fourth quarter of 2023. The company is currently evaluating alternatives to raise additional capital to fund its future operations and regulatory efforts.

For the most recent fiscal year (2023), ENDRA reported the following financial metrics:

• Revenue: $0.00
• Net Income: -$10,060,250
• Operating Cash Flow: -$9,548,775
• Free Cash Flow: -$9,582,659

For the most recent quarter (Q2 2024), the company reported:

• Revenue: $0.00
• Net Income: -$2,229,153
• Operating Cash Flow: -$2,083,301
• Free Cash Flow: -$2,072,301

It's important to note that ENDRA has not generated any revenue from its TAEUS technology, which has not been commercially sold as of June 30, 2024. The net loss, negative operating cash flow, and negative free cash flow reflect the company's ongoing research and development activities and lack of commercial sales.

In terms of liquidity, as of June 30, 2024, ENDRA reported:

• Debt/Equity ratio: 0.02031734475465205
• Cash: $6.40 million
• Current ratio: 4.972328608238833
• Quick ratio: 4.972328608238833

The company's strong liquidity position is evidenced by its high current and quick ratios, as well as its low debt-to-equity ratio. However, ENDRA will likely require additional capital to fund its operations and commercialization efforts going forward.

In Q2 2024, ENDRA raised $7.3 million in net proceeds from a public offering. Based on current projections, this provides a cash runway into the first half of 2025. The company has also implemented several strategic changes to improve its financial position, including reducing operating expenses by over $3 million annually.

Operational Highlights and Strategic Initiatives

ENDRA has made significant strides in its operational and strategic initiatives, both in terms of advancing its regulatory efforts and strengthening its commercial position.

Regulatory Advancement

• Installed the first TAEUS® system in the UK at King's College Hospital (KCH) in London, a prestigious National Health Service (NHS) institution. KCH will use the TAEUS® liver system in a clinical study to compare its liver fat assessment accuracy with MRI, the recognized research standard.
• Continued engagement with the FDA, including providing additional information in response to the agency's AI request and scheduling an in-person pre-submission meeting for the second quarter of 2024. This meeting aims to align on the final device configuration and clinical study design.
• ENDRA is focused on completing a statistically-powered, multi-center prospective clinical trial to obtain the necessary data to support their regulatory submission to the FDA. The company is aiming to have all clinical work completed and the data incorporated into their de novo submission targeted for mid-2025.

Commercial and Awareness-Building

• Showcased the TAEUS® system at key hepatology, endocrinology, and radiology medical conferences in the U.S. and Europe, including The Liver Meeting by the American Association for the Study of Liver Diseases (AASLD).
• Hosted an offsite panel discussion at The Liver Meeting with multidisciplinary key opinion leaders to share unique perspectives on managing Metabolic Dysfunction-Associated Steatohepatitis (MASH).
• Participated in eight industry conferences in 2023, including the European International Liver Congress and the Diabetes Professional Care Meeting in the UK, to raise awareness of the TAEUS® technology.

Intellectual Property Expansion

• Expanded its global intellectual property portfolio to 75 issued patents, including 16 new patents granted in the U.S., China, and Europe during 2023 and two patents issued so far in 2024.
• Engaged PatentVest, a leading intellectual property advisory firm, to spearhead the valuation of ENDRA's IP, competitive landscape analysis, and M&A outreach efforts.

Market Tailwinds

• The World Health Organization issued a new ICD-10-CM code specifically for the diagnosis of fatty liver disease, facilitating standardized billing and documentation for insurance processes in the U.S., Europe, and other markets.
• The FDA approved Rezdiffra, Madrigal Pharmaceuticals' pioneering drug therapy for NAFLD/NASH, marking a significant milestone in the management of liver disease. This approval, along with other emerging targeted treatments, is expected to drive demand for accessible point-of-care diagnostic tools like TAEUS®.

Strategic Changes

• Strengthened the management team with new hires in key roles.
• Prioritized the clinical trial and regulatory submission as the key near-term deliverables.
• Revised the regulatory strategy to a prospective clinical trial approach.
• Reassessed the go-to-market strategy for the TAEUS liver device.
• Preparing to formalize a longer-term business strategy and vision.
• Focused on improved financial stewardship and reducing operating expenses by over $3 million annually.

ENDRA's strategic initiatives, combined with the favorable market developments, position the company well to capitalize on the growing need for practical and accessible solutions to address the global burden of metabolic liver disease.

Risks and Outlook

While ENDRA has made substantial progress, the company faces several risks and challenges that investors should consider:

1. Regulatory Approval Uncertainty: The company's ability to obtain FDA clearance for the TAEUS® system remains a key risk, as the regulatory process can be unpredictable and time-consuming.

2. Commercialization Challenges: Even with regulatory approvals, ENDRA may face difficulties in effectively commercializing and driving the adoption of the TAEUS® technology, particularly in a highly competitive medical imaging market.

3. Limited Operating History and Financial Resources: As a development-stage company, ENDRA has a limited operating history and has incurred significant losses to date. The company's ability to continue as a going concern is dependent on its ability to raise additional capital.

4. Intellectual Property Risks: The company's success is partly dependent on its ability to protect its intellectual property and defend against potential infringement claims.

Despite these risks, ENDRA remains optimistic about the future prospects of its TAEUS® technology. The company is committed to advancing its regulatory efforts, strengthening its commercial position, and exploring strategic partnerships and licensing opportunities to drive long-term growth.

As ENDRA continues to navigate the regulatory landscape and execute on its operational and strategic initiatives, investors should closely monitor the company's progress and watch for updates on the TAEUS® system's development and eventual commercialization.