Hi, everyone. John McCutcheon here, President and CEO of EBR. Joining me today is Andrew Shute, our Chief Corporate Development Officer. We've got Gary Doherty, our Chief Financial Officer, and Spencer Lott, our Senior VP of Finance. We're going to go over today our preliminary Q2 results from this year and also address the concerns around the complications that went online from one site. That'll be the second part of the discussion. We've got a lot of pre-questions that came in. Andrew's been collecting those, we'll do our best to address the ones that have come in in advance. I believe you can put in additional questions. You can type those in, we'll be able to see those. If we're not already on our list, we'll try to get to those as well. We've got about 40 minutes.
Gary, let's go ahead and advance to the introductory slide, if you don't mind. Okay. We're happy to announce that the momentum continues. The growth in the business continues to go forward per our Limited Market Release. It was a big year last year, getting approval, early launch, this year, all that momentum has continued. I think the highlights are really the number of sites that have started and physicians that have been trained, the fact that we're getting reimbursement payment for these procedures really bodes well for the future. Andrew's going to go through the KPIs on the next slide, but what I would encourage you to focus on are the ones that are the precursors to long-term success.
Many times in a new technology launch, the most difficult part is getting the device contracted and what I would say euphemistically on the shelf of the hospital, getting the devices into the hospital so that the physicians can then use them. That's just gone exceedingly well. Our sales force has done a great job of that in training physicians to the point that we're now spread a little more thin than we'd like. The message going forward will be to go deeper, more penetration, less focus on new site starts, sort of victims of our own success there. That's all great news. If you turn that around, a lot of new technologies struggle with that part, you can't do cases, you can't treat patients if you're not on the shelf.
That's one of the key things I think we should all focus on. Go ahead, Andrew, if you want to take up the KPI slide, or Gary, if you could advance that.
Yep. Okay, we met a number of key milestones in this second quarter. We completed or initiated the AUD 150 million capital raise. We look to complete that following the special stockholder meeting on August 19 and close that second tranche of AUD 35 million around August 24. This AUD 150 million will be used to support the pathway to cash flow break even and continue our U.S. commercial scale-up, which also includes our manufacturing expansion and cost of goods reduction. CMS initiated their National Coverage Determination process for WiSE. This will ultimately lead to a national Medicare coverage framework. That'll help to expand patient access and accelerate our U.S. commercialization. That final National Coverage Determination is expected in early March 2027. We had three major hospital purchase agreements signed with HCA Healthcare, Advocate Health, and CHRISTUS Health.
These represent some of the largest healthcare networks in the U.S. These will support our broader hospital access for our sales team. In April, we had a fairly significant presence at the Heart Rhythm Society meeting. We had our exhibit booth. There were two invited talks, one abstract presentation, and a lunchtime symposium. Maybe just that abstract presentation was delivered by Dr. Niraj Varma from the Cleveland Clinic, and his headline results showed a reduction in complications from the 19.1% that was observed in the SOLVE study down to 10% in this real-world experience of WiSE in the U.S. Q2 was another quarter of commercial progress and growth, and we include these KPIs that we've been sharing because we believe these are the most important indications to predict durable, sustainable commercial success.
Physicians trained, we had an additional 26 physicians trained during the second quarter. That brings the total number of trained physicians to 90. Looking at purchasing agreements, there were 17 additional purchase agreements signed during the quarter, now bringing the total purchasing contracts to 52. We've now activated or perhaps implanted in 30 hospitals across the U.S. An important metric within this is that 17 or more than half of these hospitals have now implanted three or more WiSE systems. This is just showing that level of same-store sales or hospital scheduling additional patients after that initial experience. It's the headline result was the 46 commercial implants in the quarter, bringing our total to 117 since the beginning of Limited Market Release. I think if you're looking at these in particularly the second quarter, our sales reps have done a phenomenal job.
We've now got contracts in place at over 50 sites. We've completed training with 90 physicians. We just now need to revert back, I guess, to the original intent of our Limited Market Release by focusing on our existing hospitals and having our reps start actively looking to drive deeper utilization within these hospitals. That's because we know from previous experience that sustainable commercial adoption really comes from the focus on going deep within accounts and to really want to generate that sustained utilization rate rather than going broad. Looking forward, we can expect to see a drop-off in the number of new sites contracted and physicians trained. Because when we have too many sites, or I guess now we have too many sites to really adequately service properly.
Once they set up, physicians start to identify patients, start to schedule patients, and this really leaves our reps spread, I guess, too thin and not able to really focus on that deep penetration. Any additional comments there, John?
No, I think you covered it, Andrew, and I assume we'll get some questions. In the meantime, we can go forward to the next section. Andrew, I'm not seeing any questions on the screen.
There's a question tab in the top right, a question box.
Okay.
Question box.
Oh, I see. Okay. Thank you. All right, perfect. Thanks for that. Let's move on to the next part. First, I want to acknowledge how sad this is for the patient and their family. It's always difficult to address these when there's a mortality or death. It's part of our business, unfortunately, but it's still not something that we want to see with any frequency, certainly. It's tragic whenever it happens. Gary, if you can go on to the next slide. This MedSun report was released several weeks ago. We weren't aware. I guess it's routine, but we weren't aware that that was going to be public. We were notified about the events shortly after the first close of the first tranche of the financing. This would've been in. Got my timing off. That would've been early July, late June.
Anyway, we were notified by the site. We didn't realize that they were going to submit that to the FDA and have that published so quickly, because we're obliged to do our own investigation before we understand the full event. In this case, this was written by the site, not by the FDA. The language appeared to be a condemnation of the technology, and one could have interpreted that that was words from the FDA, but it was not. They just published what the site submits, and then we're given an opportunity to do our own investigation, and there's a timeline. I believe that the results are going tomorrow. We've just recently completed our internal investigation.
When we heard about this initially, it seemed like a tragic, but routine event where the site did not follow the labeling, but we needed to go through our investigation in order to reach a fulsome conclusion. We've now done that. That'll go into the FDA. This complication is a known risk. This is in our labeling. It's in our training. It's something that was part of our PMA submission to the FDA. The rates are actually lower. The only two that have occurred in the commercial release are the two that you're all aware of from this one site, happened in the same site on the same day, almost literally at the same time, we're told. They were in two different rooms when this occurred. Clearly, there was a not following the protocol that we recommend and the way to do this safely.
Echograms, or we call them echoes for short, TTEs, transthoracic echocardiograms, they're done routinely in these patients. Most of our patients probably have minimum of two a year. It can vary. They might have them more frequently. They don't typically get them upon release, but it might depend on the site's protocols. They could get them early. They can get them later. In SOLVE, we did them at least every, I think it was every three months, six months, 12 months, 24 months. There's a lot of these echoes that are done quite safely. There's no contraindication against doing them. There's a protocol and a method to doing it safely, which we believe wasn't followed in these cases. There's some concern about this in the investment community. Why didn't we disclose this immediately? First of all, for us, it was a routine happening.
We didn't identify something wrong with the device, something that would trigger an FDA sanction or anything to that effect. When we discussed this with the board and our counsel, our point of view is it was routine. Had we known it was going to be announced the way it was from MedSun, with that sort of verbiage, wish we'd gotten ahead of that. We didn't think it was a disclosable event until that language from the site came out, which seemed to indict the technology, and we think that was not accurate, a not accurate portrayal of the events. Again, just going through my notes here, we concluded the investigation. It definitely happened, but the evidence is that the physician was trained, the sites were trained, it's in our labeling. The FDA knows about this as an occurrence.
In our PMA submission, we actually had dialogue with the FDA on how to put this in our labeling. It was an interactive review of our instructions for use, and they gave us guidance on how to word that and how to caution against it. As a result of this, we'll probably strengthen that because every time something like this happens, hopefully it's very rare, infrequent. When there's something that happens like this, we take this as an opportunity to even reduce the risk further and go deeper, notifying our current customers and future customers, reminding them of this risk, sharing that this happened, and making sure that the mitigations are very clear, upfront, and known to all in the hospital so that people can follow our best practices. A good analogy would be what is called MRI conditional approval.
Almost every, what we call active implantable, or every pacemaker, every battery-operated device in the body has labeling that warns against MRI. It doesn't say you can't do MRIs, but they'll have specific. That's true of the EBR WiSE System. We have MRI conditional approval. It tells the operators, the physicians, the sites, which intensity settings to use, which parts of the body they can image under MRI, which ones they can't, and if you were to do an MRI without following those procedures, it could be catastrophic. This isn't unusual to EBR. It's, again, quite common in industry that you have risks that are mitigated by your labeling, by informing the customers, by providing education. The other thing is we give patients a card, an implant card. It has a QR code on it, and it has a warning. The patient has a ultrasound-sensitive device implanted.
They're to give that to anybody that's going to do an echo or echocardiogram on them, and then that echocardiographer should scan the QR code, and that will take them right to our protocol, our transthoracic echo protocol, and how to do it safely to mitigate any further risk. People have asked, is there any risk of this to our labeling or reimbursement? Zero risk to reimbursement. I wouldn't say risk to labeling. I'd say it's quite possible that we'll strengthen the labeling, and we're actually going to, in part of our risk analysis and internal assessment with FDA, will be us going back to them and saying, "We think we can be more strong in how we state this and clearer." We might upgrade it, but that doesn't add any new restrictions. It's just more information. Again, more emphasis on this.
That is TBD because anything in the labeling is an interactive review with FDA. We're going to suggest some upgrades. They may agree with that. There may be some back and forth. We don't anticipate anything negative. It'll be an opportunity to be even better at communicating with the sites. We always want to learn from things like this that happens and gets better in the future. We don't anticipate any negative consequence, just being better going forward. Commercial impact, this site is on hold, pending the FDA's review of their submission and then FDA's review of our submission. It's had no effect on any other sites.
We've proactively gone to all of our current customers and any new customers, certainly, reminded them of the training, that this is a known occurrence, and have had zero feedback from the field that this has created any slowdown or any worries in other sites. We certainly hope to get back in action with this particular facility, but they need to go through their internal processes before that happens. At the moment, I think we also stated that when we have an investigation like this, we're obliged to reach out to the center and do our best efforts to get additional information. In this case, the site did not provide us with any information, yet they still might. The window on the requirement for us to respond to FDA was closing, so we've closed our investigation for now.
If we got any new information from the site, we would certainly update that. It's not unusual for sites to not cooperate or give information to a vendor. They're not obligated to do anything. There's no obligation for them to share information with us. We're obliged to do our best efforts to get information and then notify the FDA that we weren't able to get any more information, but here's the results of our internal investigation. In that case, this behaved as is known, and what was reported to the FDA. Our historic rate for this on a per-patient basis was on the order of about 3% of all patients have some sort of this pacing induced by ultrasound. In this case, these are the only two in the commercial experience, so that's a 1.7% rate commercially. Well below our historic rate that we got approval with.
The FDA looks at rates and they want to see is the risk changing, going up or down, and if anything, it's gone down, not up. This was the only fatality that we've seen ever. We've done over 500 cases globally in our history. That's about a 0.2% rate. Again, those are tragic, every one of them, but it is a very, very low rate and it is avoidable with the proper mitigations. There's no concern about new rates or increased rates. If anything, it's gone down and is well within the limits and what the FDA was informed about during our review. Let's see. Why didn't they support our investigation? I think I just said that. They're not obliged to. They still might, and they might have to go through their process, and it might take longer.
We may get information from them, as of yet, we do not have any new information. The FDA let us know when they were first notified on site, they just said, "Hey, please do an investigation," they give us a timeline. That investigation involves, we go through our training records, we go through our labeling. We do a very thorough risk analysis. We go through the device history. We look at the serial number of the devices used, was there anything anomalous about the manufacturing of those devices, and found nothing that would indicate anything was malfunctioning. In effect, again, we know that when the devices are functioning properly, this is a known risk of that. It's actually doing what it's supposed to do, but the mitigation is always with the labeling and the training.
We went through all of that in our internal review concluded that it really was induced by the echo, was most likely not done with our mitigations in place. I mentioned echoes routine, again, I just quoted rates of 3% historically if you look at on a per-patient basis. If you multiply that denominator by five or six or more, it would be a fraction of a percent because these patients get echoes routinely. When you have heart failure, that's one way that they diagnose the progress or the reversal of the disease, of the progression is by echo. It's quite normal. They also are looking for other things, not just the heart failure, but mitral regurgitation. There's other parts of the heart that they're looking at. They really want to monitor the patient's progression, this is a routine tool.
It is done quite frequently and safely on these patients. Andrew, are there any questions that I haven't hit on that come to mind?
Yep. I guess we have one on, does the FDA notify us once it's concluded the review? The FDA does not typically issue a file closure letter or notice. Once they stop asking questions, we can essentially consider that case closed. I guess in our experience where the analysis is clear, we would not expect to receive any additional questions. However, they may do.
Yeah, I think we're going to suggest some labeling verbiage. They hopefully will respond to that. We don't know. They're not obliged to. If they think we don't need to change the labeling, they won't respond. Yeah, there's no official closeout. There's nothing that we've seen that would give us any concern that there's going to be any harsh reaction or a negative reaction from them. We expect, if anything, it'll be a collaborative, how do we improve our labeling if that's necessary or helpful, and nothing negative is expected.
A question here. Has EBR decided to slow down the rollout process considering these recent events?
Oh, no. Not at all. No. These events are, again, as sad and tragic as it is, it's just part of the nature of our business. It's unfortunate. These things happen. We do our best, and the sites do their best to mitigate and avoid them. There's nothing that would tell us that we need to go more slowly. If anything, we just need to be more emphatic when we go in. Also remind the sites repeatedly, not just their first training, but again and again, that remember these patients are sensitive or can be sensitive to echo, and you need to be aware of that and follow the mitigation. We'll increase that noise level, if you will, the discussion. We won't slow down the rollout in any way. There's no need to. It wouldn't help. There's no reason to do that.
John, with the number of sites being contracted being greater than expected and physicians trained being greater, rather than slowing down the growth in additional sites and physicians being trained, wouldn't it be more optimal to hire further sales and training team members to keep expanding the footprint?
Yeah, that's an interesting question. It's a trade-off. The ROI on a new sales rep is long. I've got our finance folks here, Gary and Spencer. We're all trying to manage cash burn versus revenue growth. Right now we want to get our current reps up completely trained. Most of them are, but still finishing training on some of those. Then we will add more reps, probably early next year. We're always trying to walk the line between investing in growth ahead of the return and managing cash. There's not a perfect way to balance that, and I think at the beginning, we invested quickly in getting the sales team, the sales footprint in place. Now we want to make sure they're productive before we start bubbling down and adding more reps. It'll happen.
We're just not ready to do that right at this point. We really want to see greater productivity from the current investment we made, using your investments so that we're good stewards of the cash that we're bringing in. The good news is with this recent financing, we're fully financed now, but we still need to manage that cash, and so we've got to be cautious on that balance.
I think you've already addressed this one in your commentary, John, but have any hospitals paused or slowed scheduling since the MedSun report? Is the H2 patient pipeline bigger-
No.
Or smaller than expected?
The answer is no, they haven't. We've been very proactive with all the sites, so we don't wait until they hear about it. We go out and tell them and make sure that they're all aware of it. To a site, to a person, there's been no slowdown. We don't have a great pipeline visibility, so the patients arise and get scheduled, not in real time, but several weeks in advance. That's still tracking as we'd expect, and so there's been no slowdown there. We just think this event, again, it's tragic and it's been certainly a distraction for our investors and that MedSun report really spooked people, and so that's not good. Other than that, from a business fundamental standpoint, it has had no impact on us and we don't think it will.
There's a lot of repeat questions here. I'm trying to-
I think the message again, I'm probably repeating myself, we always look at this. We want to learn from everything. Every time something non-optimal, every time something bad happens, we want to learn from it, and we want our customers and our sales team and the company learn from it. That's how we're taking this event. We don't need to change the technology. The technology works the way it's supposed to, there's an opportunity here to again, increase the noise we make or the visibility and how we position this when we train to make sure it's always top of mind for all of the folks in the clinic.
There was another question on complication rates that EBR highlighted 10% complication rates in the first 20 commercial implants versus the 19% in SOLVE. With the commercial cohort now at 117 implants, is there any updated view on the complication profile or rates?
That 10% rate was from our WiSE-Up trial, that's the post-approval registry. Andrew, you might know better than I, but every site does not participate in WiSE-Up. This is where we can actually gather really good data. Is it about a third of the sites, Andrew? Any idea?
Yeah. I believe that's correct. There have been some-
Roughly. Okay. We haven't done a revision on that, an update on that since HRS. It's when Dr. Niraj Varma is the PI, when he requests, hey, he wants to do a presentation, we'll then do a data freeze and do all the analysis. I would expect it's trending the same. We haven't heard anecdotally that it's any different, but we have not done a formal freeze of the data and review. There's also periodic reports that go to FDA, and I think the next one's due towards the end of the year. We'll do an update then as well. If that changed, we would make that known to the investment community.
We also know that Asia Pacific Heart Rhythm Society is coming up and an abstract on the first 100 patients has been accepted for presentation there.
Is that Dr. Varma?
That's correct.
Okay. There might be something that comes out of that. Andrew, remind me when the APHRS is. That's in October?
It is in I've just got the invite here. On October 22nd , around that week.
Hmm. Okay. One other thing, let me go back on this event, this echo-induced pacing. We actually had a publication that we sanctioned that was released in April, again, because we wanted to get this out to the community. Our whole thing is education and transparency to the sites. We had an echo core lab. During SOLVE study, we had a core lab where they reviewed all the echo films and did the measurements. As you may recall, our primary endpoint was left ventricular end-systolic volume. That's measured by echo. The core lab actually does those measurements so they're done routinely, done the same way. It reduces any site variability. Because they were so intimately involved with echo and SOLVE study, we asked them to publish a reminder to the clinical community that this is a known occurrence. That went out in April.
It's just an ongoing part of us wanting to make sure that these events, the possibility of them, are known. Now that this has occurred, we'll certainly encourage the site itself. We'd cooperate with them if they're going to write it up. We expect they will. We would cooperate with them in terms of getting that published. If Dr. Varma wants to present this or include that in his presentations, we'll certainly encourage that and cooperate with that. The best thing for these things is to be open and get them out there, and then that reduces the risk of it happening again in the future.
I guess related to the first part of that statement, John, another question. There's no question about the clear efficacy of WiSE, but is there anything you can do to improve the safety? Or is it out of your control if sites have their own risk mitigation protocols?
Well, we always have some agency here, right? A lot of it's communication. Any device can be. There's a lot of complications that happen that are just out of one's control. Any device can be misused or accidents can happen. Every technology faces this. Every hospital faces it, and we all work together to try to reduce that. The whole goal of medicine is to keep improving efficacy and improve safety. Again, as I said earlier, you learn by these mistakes. I'm sure this will certainly change the behavior of that site and their understanding and appreciation of how this can happen. It's given us more reason to go out and talk about it.
What we do with our sales team, I always say there's two or three things you really don't ever want to have happen, and make sure that you lead with these when you're talking to your sites, when you're onboarding physicians. Keep it top of mind, because you also can get complacent. Hey, I've done 100 of these and never had a problem. If you get too complacent, then something can often happen. It's a matter of us always education, repetition, and in this case the device is functioning as intended.
John, we've probably got time for one more question, one from Ben. What are the challenges behind moving hospitals from purchasing contract to becoming activated?
That's scheduling the first patient. Once we've signed a contract, then we call them activated. That's just our internal vernacular. Once they've done their first case, then they're activated. It's the physician training, scheduling the patient, and scheduling our team to be there to in-service the first patient. Typically, we train a physician, they've already got patients lined up. In some cases, it's easier to schedule. Some sites are harder, there's some variability there, like how quickly that can happen.
We've got I'm paraphrasing about six or seven questions here. Can we share an update on the status with an application to the TGA in Australia?
That's still pending. Andrew, you're probably closer to that than I am. I know we're still pending doing that. I think the quality system, we have to make sure it's TGA compliant is one of the things. We have that step. Andrew, please correct me if I'm wrong. I think that's the major internal hurdle to getting that in.
We received the TGA's priority review determination. Our intention is to submit an application to the ARTG within that six-month window. That should come in before the end of October.
Just so people know, there's a lot going on. Moving the facility takes a lot of resources, a lot of our quality team to drive that. We're always allocating resources. As much as we want to get on the listing through TGA, we definitely need to get the facility on board Santa Clara, and then our team, our quality team, can move over to focus on that.
We've got about a minute or so left, John. Maybe you can give a wrap-up or summary of the call.
Thanks, everybody, for attending. I'm really sorry for all the drama around the stock price and how that MedSun article came out, we weren't in front of that. I know that caused immense turmoil for everybody, and we're trying to play catch up now. Hopefully, we won't be facing this again, or we'll be out in front of it in the future. Again, we see this not benignly, and we don't want to dismiss it, but we do think it's a routine sort of thing that our job's minimized not to overreact on or over fixate on, because these things do happen. We'll do our best to keep communicating with the sites and making sure that we're teaching people and training and being out front and avoiding these sorts of complications. Thanks, everyone.
We appreciate your support, again, sorry for all the activity in the market and negative activity. Hopefully things will stabilize going forward, and we'll be fully funded with this next tranche coming up. That's hopefully good for all of you and good for the technology. Thanks again