Business Overview and History

Helius Medical Technologies was founded in 2015 with the mission of harnessing the power of neurotechnology to improve the lives of individuals suffering from neurological conditions. The company’s flagship product, the Portable Neuromodulation Stimulator (PoNS), is a groundbreaking device designed to treat gait and balance deficits associated with multiple sclerosis (MS), traumatic brain injury (TBI), and stroke.

The PoNS device utilizes mild electrical stimulation applied to the surface of the tongue to activate the cranial nerves, triggering neuroplasticity and facilitating functional improvements in motor skills. This innovative approach sets Helius apart in the neurorehabilitation space, offering patients a non-invasive and portable solution to address their neurological challenges.

In 2022, Helius achieved a significant milestone when the PoNS device received marketing clearance in the United States for use as a short-term treatment of gait deficit due to mild-to-moderate symptoms of multiple sclerosis. Commercial sales of PoNS in the U.S. began in April 2022, marking an important step in the company’s growth trajectory.

The PoNS device has also gained authorization for sale in Canada, where it has been commercially available since March 2019. In Canada, the device is approved for the treatment of chronic balance deficit due to mild-to-moderate traumatic brain injury, gait deficit due to mild and moderate symptoms from MS, and gait deficit due to mild and moderate symptoms from stroke.

In 2023, Helius faced challenges in securing reimbursement coverage for PoNS from government and private payers in the U.S., which impacted the company’s ability to drive adoption and sales of the device. During this period, the company also underwent a transition in its manufacturing process, moving from its previous contract manufacturer to a new partner, Minnetronix, Inc.

Despite these hurdles, Helius has continued to make strides in expanding access to the PoNS device. In 2024, the company formed a partnership with Lovell Government Services to make PoNS available to federal healthcare systems, including the Department of Veterans Affairs. This collaboration resulted in PoNS becoming available on the VA Federal Supply Schedule, General Services Administration Advantage Contracts, and Department of Defense Distribution and Pricing Agreement, potentially opening up new avenues for patient access and revenue growth.

Financials

Helius Medical Technologies has faced significant financial challenges in recent years, reflecting the complexities of commercializing a novel medical device in a highly regulated industry. For the fiscal year 2023, the company reported total revenue of $644,000, with a net loss of $8,850,000. The operating cash flow for 2023 was negative $10,416,000, while free cash flow stood at negative $10,445,000.

As of the latest reported quarter (Q3 2024), the company reported total revenue of $368,000, a decrease from the $510,000 reported in the same period of the prior year. This decline was primarily attributable to the termination of the company’s Patient Therapy Access Program (PTAP) and the discontinuation of temporary cash pay pricing for the PoNS device.

The company’s gross profit margin for the nine-month period ended September 30, 2024, stood at 16.3%, compared to 3.3% in the same period of the prior year. This improvement was driven by lower inventory adjustments and a decrease in cost of revenue. However, the company’s overall financial performance remains challenging, with a net loss of $7.81 million for the nine-month period, compared to a net loss of $7.80 million in the same period of the prior year.

For the most recent quarter (Q2 2024), Helius reported revenue of $182,000, down 28.1% year-over-year. The net loss for the quarter was $1,600,000, flat compared to the same period last year. Operating cash flow and free cash flow for Q2 2024 were both negative $5,900,000, also flat year-over-year.

The decrease in revenue was primarily due to the termination of the Patient Therapy Access Program on June 30, 2023, and the temporary cash pay pricing in May 2024. However, the Q2 2024 revenue represented a 35% increase from Q1 2024, indicating some sequential improvement.

In terms of geographic markets, the majority of Helius’ revenue comes from the United States and Canada. For the nine months ended September 30, 2024, net product sales were split between the U.S. ($153,000) and Canada ($182,000).

Liquidity

Helius’ cash and cash equivalents position as of September 30, 2024, was $3.47 million, down from $5.18 million at the end of 2023. As of June 30, 2024, the company reported $6.4 million in cash and no debt. The company’s working capital stood at $3.91 million, reflecting a current ratio of 3.61 and a quick ratio of 3.10, indicating a relatively strong liquidity position.

The company’s debt-to-equity ratio is very low at 0.006, suggesting minimal leverage. However, the company’s ability to continue as a going concern remains uncertain, as it continues to incur significant operating losses and net cash outflows.

Helius completed a $6.4 million public offering in May 2024, which is expected to extend its cash runway into 2025. This additional funding is crucial as the company continues to work towards broader commercialization and reimbursement for the PoNS device.

Reimbursement and Regulatory Developments

A crucial aspect of Helius’ strategy has been securing reimbursement coverage for the PoNS device, which is vital for improving patient access and driving commercial success. In 2024, the company achieved a significant milestone by securing the first third-party reimbursement from a major insurance carrier, with the PoNS device being reimbursed at $23,900, slightly below the list price.

Additionally, Helius has made progress in navigating the regulatory landscape, with the Centers for Medicare & Medicaid Services (CMS) assigning Healthcare Common Procedure Coding System (HCPCS) codes for the PoNS controller and mouthpiece in 2024. While the preliminary reimbursement rates set by CMS have been a point of contention, the company is actively engaged in discussions to secure more favorable pricing that aligns with the market value of the PoNS device.

The company expects Medicare reimbursement for PoNS therapy to be effective October 1, 2024, which is anticipated to significantly boost revenues beginning later this year. Helius believes it is positioned to achieve positive cash flow with this expected Medicare reimbursement and its recent inroads into the VA healthcare system.

Pursuit of Stroke Indication and Clinical Trials

Helius has also been diligently pursuing a stroke indication for the PoNS device in the United States, building upon the device’s existing authorizations in Canada for the treatment of gait deficit due to mild-to-moderate stroke. The company has established a comprehensive registrational program, including a randomized controlled study and an open-label study, to evaluate the therapeutic benefits of PoNS therapy on gait and balance deficits in chronic stroke survivors.

The enrollment for this registrational program is on track, with the company anticipating completion by the end of 2024 and a submission to the FDA for stroke authorization targeted for the first half of 2025. This milestone would significantly expand the addressable market for the PoNS device and potentially drive increased adoption and revenue growth.

In addition to the U.S. stroke registration program, Helius is conducting an additional Canadian study on the use of PoNS therapy to treat stroke, with the goal of enrolling 40-60 subjects by the end of 2024.

Challenges and Risks

Helius Medical Technologies faces several challenges and risks that have impacted its financial performance and overall business operations. The company’s reliance on a single product, the PoNS device, makes it particularly vulnerable to any setbacks or delays in the commercialization and reimbursement efforts. The deferral of a reimbursement determination for the PoNS controller and the inadequate pricing set by CMS for the PoNS mouthpiece have been significant hurdles, limiting the company’s ability to advance its operations and access traditional financing avenues.

Additionally, Helius has been grappling with the impacts of the COVID-19 pandemic, which disrupted its supply chain and logistics, leading to delays in manufacturing and the transition to a new contract manufacturer. The competitive landscape in the neurorehabilitation space also poses a risk, as the company faces competition from both established players and emerging technologies.

Outlook and Conclusion

Despite the challenges Helius Medical Technologies has faced, the company remains committed to its mission of improving the lives of individuals with neurological disorders. The successful completion of the stroke registrational program and the eventual expansion of the PoNS device’s indications could significantly strengthen the company’s position and drive long-term growth.

The company expects to significantly boost its revenues beginning later this year, after the expected Medicare reimbursement for PoNS therapy becomes effective on October 1, 2024. This, coupled with the recent inroads into the VA healthcare system, positions Helius to potentially achieve positive cash flow in the near future.

However, the company’s ability to achieve sustainable profitability and secure adequate reimbursement rates for the PoNS device will be crucial in determining its future trajectory. Helius’ ongoing efforts to navigate the complex regulatory and reimbursement landscape, as well as its ability to effectively scale its commercial operations, will be closely watched by investors and industry stakeholders.

As Helius Medical Technologies continues to innovate and advocate for patient-centric neuromodulation solutions, its success will be an important barometer for the broader neurorehabilitation industry. Investors and analysts will closely monitor the company’s ability to overcome the current challenges and capitalize on the significant opportunities presented by the unmet needs in the neurological wellness market.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.