Greetings. Welcome to the Brainsway Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.
I will now turn the conference over to your host, Brian Ritchie with Life Sciences Advisors. You may begin.
Thank you all and welcome to Brainsway's Q2 2021 earnings conference call. With us today are Brainsway's President and Chief Executive Officer, Christopher von Jako and Chief Financial Officer, Scott Areglado. The format for today's call will be discussion of 2nd quarter trends and business updates from Chris, followed by a detailed discussion of the financials from Scott. Then We will open up the call for your questions. Earlier this morning, Brainwave released financial results for the 3 6 months ended June 30, A copy of the press release is available on the company's Investor Relations website.
Before I turn the call over to Chris and Scott, I would like to remind you that this conference call, including both management's prepared remarks and the question and answer session, may contain projections or other forward looking statements regarding among other topics, Brainsway's anticipated future Operating and financial performance, business plans and prospects, and expectations for its products and pipeline, which are all subject to risks and uncertainties, including shifting market conditions resulting from the COVID-nineteen pandemic, as well as the use of non GAAP financial information. Additional information regarding these risks are available in the company's earnings release and in its other filings with the SEC, including the Risk Factors section contained in Brainsway's Form 20 F. I would now like to turn the call over to Chris.
Thank you, Brian, and welcome, everyone, and thank you for joining us today. We are extremely pleased with our strong performance in the Q2. We expect that the current operating trends in our business And our most recent achievements, especially on the reimbursement front, will continue to drive further growth and momentum for Brainsway. I will discuss all of this further shortly, But first, I will provide a brief overview of our key second quarter financial results. We achieved $7,000,000 in revenue for the Q2 of 2021, which represents a significant 45% increase over our Q2 2020 and demonstrates the continued resiliency of our business through the pandemic.
We have now demonstrated strong year over year growth in multiple consecutive quarters and believe the progress we have achieved During this period, it's sustainable throughout 2021. Importantly, the operating environment continues to improve as we learn to cope with the pandemic. That said, in light with the recent spread of the Delta variant, we will, of course, continue to closely monitor The situation and work to adapt appropriately. I noted on our last call that patient treatments with deep TMS were continuing to increase since the end of 2020. I'm pleased to report that this is once again the case in the Q2.
As I've mentioned in prior quarters, mental health issues continue to rise dramatically as we all live through the impacts of the pandemic. As a result, we have all seen an increase in the prominence of mental health in the media. Moreover, these issues are affecting those at younger ages during a year of remote schooling and increased isolation. The article focuses on how a lack of human connection and in person support Has led to an increased stress, anxiety and feelings of hopelessness for students across the U. S.
As more younger individuals are seeking treatment for mental health, raising awareness around newer treatment methods like DTMS Has become critical as they reach adulthood. As such, we continue to ramp up our patient awareness initiatives. During the Q2, we hosted 6 well attended webinars. We have a number of additional webinars throughout the Q3, including one we are particularly excited about, which will be led by a deep TMS patient who has benefited tremendously from our technology. We also continue to leverage our website to educate prospective patients on the benefits of DTMS.
In continuation of recent trends, we are pleased to report That our organic website traffic has again increased significantly, up over 2 10% in the first half of twenty twenty one as compared to the first half of last year. We continue to add fresh content, enhance the user experience on our website. Moreover, on My Brain's Way, our customer portal, we have streamlined navigation and improved the content, including robust insurance, Reimbursement and policy information, thus enabling our customers to have the information they need at the click of a mouse. I will now briefly review the patient awareness campaign we initiated in May around Mental Health Awareness Month. The goal of this initiative was to reach any patient seeking an alternative to traditional medical management of their mental health.
We conducted a social media follower campaign, utilizing micro to mid tier influences to create content in line with Brainsway's broader message on mental health awareness and the utility of DTMS. The campaign resulted in Brainsway securing Hundreds of new followers, including increases of 91% on Facebook and 25% on Instagram. The mental health awareness initiative in May was part of our ongoing large scale digital patient awareness campaign. While still in the initial phases of this campaign, our patient inquiries have grown by nearly 300% in June July. As pleased as we are with the success of our collective digital efforts, we all know that there is no substitute for in person interactions.
In this regard, I am pleased to report that our sales professionals in person access to customers has increased statically from the Q1 to the Q2. Likewise, we return to live in person conferences with our participation At the June 2021 Annual Clinical TMS Society Meeting, an important medical meeting in our space, We had a significant presence at this meeting, including presentations by Professor Abraham Zangan, a co developer of our DTMS And by Doctor. Aaron Kindler, our Chief Medical Officer. The event also featured 11 poster presentations highlighting important research done on DPMS, which represented 25% of all posters displayed at the meeting. The meeting also included 2 showcase presentations.
The first focused on the impressive body of evidence behind deep TMS Treatment for OCD, an important driver behind our recent favorable OCD coverage decisions. The second presentation was delivered by Sean Siddiqui of the Brigham Women's Hospital in Boston, whose lab is dedicated to research on brain circuitry. His presentation focused on how Brain's Way's 3 commercially available helmets are specifically designed to broadly engage various anatomical and functional brand circuits. Looking ahead, we are scheduled to participate in 4 additional in person industry conferences over the balance of the year, and we are hopeful that the COVID environment will allow these events to proceed as planned. I now turn to DeepTMS for the treatment of OCD.
During the Q2, we shipped 22 add on helmets, increasing the total number to 247. This represents over 1 third of our total installed base that have opted to offer OCD treatment, which we view as a testament to the strong belief in the benefits of deep TMS treatment for OCD. I'm very excited to discuss with you today the critical progress we've achieved around OCD reimbursement in the Q2, which represents an important step in our plan to further expand our market penetration in this key indication. First, Centene, one of the largest healthcare plans in the U. S, Published a positive coverage policy for deep TMS in this indication.
Importantly, the establishment of this policy was the first of its kind In the treatment of OCD, Centene provides coverage to about 25,000,000 members in all 50 states, including Medicaid and Medicare members as well as to individuals and families served by Health Insurance Marketplace, The TRICARE program and commercial concerns. Centene's new policy specifies that coverage will be exclusive the treatment of OCD utilizing DTMS. This decision follows the team's review of an extensive body of published Clinical evidence demonstrating the safety and efficacy of DTMS treatment for OCD. Following this, we announced the 1st draft Medicare Local Coverage Determination or LCD was published proposing coverage applicable to the DTMS system for the treatment of OCD. The draft LCD was issued by Palmetto, a Medicare Administrative Contractor or MAC, whose jurisdiction covers Medicare members in Alabama, Georgia, North Carolina, South Carolina, Tennessee, Virginia and West Virginia, representing over 9,000,000 covered lives.
A final policy is expected later this year. Most recently, Healthcare Services Corporation or HCSC, an independent licensee of Blue Cross Blue Shield Association Issued a positive coverage policy applicable to DPMS for the treatment of OCD. HCSC is the largest customer owned Health Insurance Company and the 4th largest in the U. S. Covering approximately 17,000,000 lives.
HCFC offers a wide variety of health care plans and related services through its operating divisions and subsidiaries, including Blue Cross Blue Shield Illinois, Montana, New Mexico, Oklahoma and Texas. Each of these positive reimbursement decisions enhance and streamline access to deep TMS for OCD. We will, of course, continue to work to drive further coverage to further positive coverage developments from other major health plans. We continue to reach out to payers with our growing body of clinical evidence to support deep TMS treatments for patients with OCD. Our requests are based on the strength of evidence from our pilot and pivotal studies published in 2018 2019 And 9 additional studies published in 2020 2021, including our real world evidence study, which analyzed 2 19 patients from 22 medical centers.
We also continue to achieve incremental reimbursement progress in depression. As a reminder, 4 of the top 10 commercial payers in the U. S, representing approximately 83,000,000 lives, Now I'll provide coverage for DTMS for depression following 2 failed medication trials. Importantly, the trend of decreasing the number of required Prior medication failures before qualifying for DTMS is continuing among other payers as well. Again, this trend is important as it but further lowers the barriers to access our life changing approach to patient care.
Recently, several smaller private payers have come down from 4 to 2 or 3 medication failures. Likewise, the recent draft Palmetto LCD Reduce the number of required medication treatment failures from 4 to 2. Once the Palmetto LCD is final, 4 of the 7 MAX across the country will provide coverage for our depression therapy after just 1 or 2 failed medication trials. These formats cover 42,000,000 lives and represent nearly 70% of all Medicare beneficiaries in the U. S.
With that, I would like now to provide a brief update on our controlled market release of deep TMS for smoking addiction. You will recall that this new commercial offering, the first It's being launched a phased rollout. We have now completed the first phase, which was a controlled market release designed to gauge the customer experience An initial receptionist among a limited and select group of customers. We are pleased to report excellent early feedback from our customers, including very encouraging anecdotal click rates from the patients being tracked as part of this phase. We are now conducting additional consumer market research to Further cultivate our messaging around this market offering in preparation for our broader launch, which we intend to execute in 2 additional phases, A limited market release that will make the offering available to a somewhat wider group and then a subsequent full commercial launch.
Turning to Investor Relations, we will be presenting at a number of healthcare investment conferences during the remainder of 2021, And we will host a KOL event for investors and analysts on August 31st that will highlight the OCD indication. This upcoming virtual event will feature a presentation by Doctor. Kimberly Kress, Past President of the Clinical TMS Society, who will discuss the current treatment landscape and unmet medical need in treating patients with OCD. In addition, Doctor. Finally, as always, I would like to express my gratitude to our hardworking customers on the frontline of this mental health crisis.
And of course, to the entire BrainSuite team for their continued support and dedication to our mission of boldly advancing neuroscience to improve health and transform lives. With that, I will now pass the call to Scott for his review of our Q2 2021 financial results. Scott?
Thank you, Chris. I will jump right in with a discussion of our financial results. Revenue for the Q2 of 2021 was $7,000,000 a 45% increase compared to the Q2 2020 revenue of $4,800,000 which was impacted by the pandemic. This year over year revenue growth was driven by the increase in our direct sales. On a sequential basis, 2nd quarter revenue of 2021 grew $900,000 or 14% over the Q1 of 2021.
Our recurring revenues, primarily derived from leases, were $3,600,000 Lease revenue in the Q2 of 2021 represented 51% of our total revenue, highlighting the recurring nature and predictability of Brainsway's overall revenue. For the first half of twenty twenty one, revenues were $13,100,000 representing a 46% or $4,100,000 compared to revenue of $9,000,000 for the first half of twenty twenty, which as I mentioned previously was pandemic impacted. As of June 30, 2021, Brainsway's installed base totaled 682 deep TMS systems, which reflects an increase of 30 systems on a sequential basis. Gross profit for the second Quarter of 2021 was $5,700,000 compared to $3,800,000 during the prior year period. Gross margin for the quarter was 81% as compared to 79% in the Q2 of 2020.
Gross profit for the first half of twenty twenty one was approximately $10,400,000 or 79% margin compared to a $7,000,000 gross profit or 78% margin during the prior year period. Margins can fluctuate slightly. However, We expect margins to be in this range in the back half of twenty twenty one. Moving on to operating expenses. For the Q2 of 2021, research and development expenses were $1,700,000 as compared to $1,000,000 in the Q2 of 2020 Research and development expenses for the first half of twenty twenty one were $2,600,000 as compared to $2,800,000 in the prior year period.
Sales and marketing expenses for the Q2 of 2021 were $4,200,000 compared to $2,200,000 for the Q2 of 2020. For the first half of twenty twenty one, sales and marketing expenses were $7,300,000 as compared to $5,900,000 in the prior year period. As Chris mentioned, we have invested in digital marketing campaigns to create awareness as well as increased sales professionals to drive further growth. Moving on to G and A. Expenses for the Q2 of 2021 were $1,400,000 compared to $800,000 for the Q2 of $20.20 $2,800,000 for the first half of twenty twenty one as compared to $2,100,000 in the prior year period.
Total operating expenses were $7,200,000 for the Q2 of 2021 compared to $4,000,000 for the same period in 2020. The significant change in operating expenses on a year over year basis are reflective of cash preservation efforts to mitigate the effects of the pandemic in Total operating expenses for the first half of twenty twenty one totaled $12,700,000 as compared to $10,800,000 in the prior year period. We expect to continue to invest in initiatives to drive commercial adoption of our primary indications in depression, OCD and smoking and additional clinical studies with the Q2 run rate reflective of expenses in the Operating loss for the Q2 was $1,500,000 compared to an operating loss of $215,000 for the same period in Reflecting the cash preservation efforts in the Q2 of 2020. Operating loss for the first half of For the Q2 ended June 30, 2021, we incurred a net loss of $1,900,000 compared to a net loss of $571,000 in the Q2 of 2020. For the first half of twenty net loss was $3,300,000 as compared to a net loss of $4,000,000 in the prior year period.
Moving on to the balance sheet. We ended the quarter with cash, cash equivalents and short term deposits of $55,900,000 compared to $17,200,000 as of the end of December 31, 2020. We believe that our strong balance allows us to continue our sales and marketing efforts to drive additional adoption of our multi indication deep TMS system, as well as invest in R and D in order to commercialize additional potential indications of our differentiated innovative technology. We believe these initiatives and investments will help drive long term shareholder value. This concludes our prepared remarks.
I will now ask the operator to please open up the call for questions. Operator?
And at this time, we will be conducting a question and answer And our first question is from Jayson Bedford with Raymond James. Please proceed with your question.
Good morning and congrats on the progress. Just a few questions. First, Chris, you alluded to the Delta variant. Have you seen an impact on your business over the last few weeks?
We haven't. And obviously, going into Q2 and just looking at procedure volumes, Procedure volume has actually continued to increase in all of Q2 and actually going into Q3 as well. And Nothing no changes also on the side of the sales front either.
Okay. And then just in terms of the 2Q strength, Do you feel confident that this wasn't just a fulfillment of kind of backlogged orders? And I guess it's just You talked about seeing continued momentum and maybe that answers the question. But I guess just commentary on backlog and was 2Q Helped by fulfillment of backup orders?
You mean coming from Q1?
Correct.
Yes. No, I don't think we had any hangover from Q1 at all. I think we continue to build up momentum going into Q2. As you know, we've been increasing salespeople this year as well. And I think we've been continuously working on Improving our sales force and our talent, and I think that kind of showed through into Q2.
Okay. And then just a couple OCD questions. Is there a direct correlation between the new OCD reimbursement and OCD Helmet placement, meaning, are the new coils being placed in settings where there is comparatively heavier coverage from Centene or HCFC?
Yes, that's a great question. I think that probably the news of the first three Positive coverage policies was definitely more helpful in the Q2 as they started to see the trend continue. So we saw obviously with the number of Systems that we shipped with a higher number of component of OCD add on helmets to it. So we are extremely encouraged by this. So it is the highest Probably number of OCD helmets with number of systems that we shipped.
So we're really excited about that. I mean, Obviously, the announcement of the coverage termination actually came right after our last earnings call. And I think it ramped up the sales team, as well as a number of our customers.
Okay. Just I guess on that and looking on the other side, It looks like only a couple of your existing users added OCD In the quarter, which I'm a bit surprised by, but what's the source of resistance right now for those users who Have not yet adopted OCD, which appears to be 2 thirds of the base.
Well, I think in general, there are certain Practices that are not focused on OCD in particular, right, there are some practices that just don't focus on OCD. And I think others are probably encouraged by the news, but continuing to wait for further expansion of the OCD coverage. Right now, we have probably about 40,000,000 covered lives and we still have some continued work to do. But I think overall, Both from our customer base as well as from our sales force, there's a great deal of excitement and we continue to have great results With our post marketing efforts as well on understanding how these SMB patients are doing.
Okay. That's helpful. Maybe just last one for Scott. Gross margin strength in 2Q, your comments suggest that it will In the second half, what's the driving force around the step up in gross margin?
Is it just Yes,
maybe my comment might
have been yes, I think Q2 in particular was a little blip there. I think what I was trying to say is that the year to date Margin is probably more reflective of where we're going to be in the back half. Maybe that didn't come out right.
Okay.
I think we're still going to see 78%, seventy 9% in the back half there. I think Q1 was a bit of a blip.
Okay. Thank you.
Yes. Thanks, Jason.
And our next question is from Steven Lichtman with Oppenheimer, please proceed with your question.
Thanks. Hi, guys. And congratulations. Chris, how are you thinking about the potential for incremental OCD revenue here in the near term By treatments in the geographic areas where there are new policies, is that something we could see here in the second half of the year or should we be thinking about that as a more noticeable
In 2022? I think it's probably further down, Steve. Again, we're still in the early phases, Right. With Centene and HCSC, right. And obviously, we are really excited about Palmetto.
It's only covering a certain number of states and a certain number of covered lives. So I would say probably go into 2022, We'll see probably further momentum around it.
Got it. You talked about sales force investments. Where are you now in terms of number of reps? And what's your latest thinking on where you'd like to end at the end of the year?
Yes. If memory serves me correct, I think at the beginning of the year, we were at 12 and we're up to 16 now. And as I probably mentioned before, our short term goals right now are get to 18, and I think Probably by the end of Q3, we'll be at 18.
Okay, great. And then just on the smoking Station, when are you thinking timing wise about the limited launch and then the potential full launch?
Yes. Thanks for the question. So as I mentioned in the prepared remarks, early data It's been really extremely good for us in the controlled market release. We've actually hit our criteria For all of that to head into the limited market launch now, we just over the last several weeks, We just finalized our education for the sales force and we are already starting to quote out to A more limited group of customers there. So we are already into the limited market phase and we are looking for Probably the full commercial phase probably starts sometime later this year.
Great. And Lastly, obviously, OCD reimbursement has been sort of the headline here in the last few months, but the reduction in number of failed meds On the depression side, as you mentioned, has continued. What have you seen in terms of that driving increased demand for systems For potential new customers, as we look back over the last few quarters?
I think it's really impactful when it comes to the small private psychiatrist offices who have these patients already In their waiting room and to be able to go to a patient that has already 2 failed medications As opposed to waiting for an additional 2 additional medications, which could push it out another year, a year and a half to 2 years In timeframe before they are applicable to have reimbursement, I think it's a big difference. And I think that when it happened with a number of our Customers anecdotally, I spoke to a number of them in different places in the U. S. And they were very excited and they said it's impacting them quite a bit Just looking and understanding of how they're going to be treating these patients moving forward. Great.
Thanks, Chris. Thanks, Steve.
And our next question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
Hi, Chris and Scott. How are you?
Good morning, Jeff. Good. Thanks, Jeff.
Just a couple from our end. I guess, Firstly, going back to Jason's original question or 2, if you could give us a little color perhaps on just your geographic overlay versus some Hotspots on the COVID side, but just trying to get a better quantification of kind of cadence for Q3 and general back half commentary.
Yes. Thanks, Jeff. Like I said earlier, we haven't seen any real effects As of recent, I looked at the numbers. We are tracking from a sales perspective, the number of meetings and things like that. It's steadily progressed from Q1 1 to Q2 and has increased also into Q3.
So we are not seeing any regional effects at this time.
Okay, great. And then secondly on Erin, could you talk a little more about the payer environment and how that reflects Pharma fails, you had some commentary that it looks like you're moving a little earlier in the treatment paradigm from 1 or 2 pharma fails as opposed to Could you provide any commentary there? What kind of discussion the company is having on the payer side?
Yes. One of the great things, Jeff, since we are having all these conversations directly with the payers related to OCD, we also take the opportunity to actually chat And update information about depression as well. And as I mentioned in my prepared comments, more and more even the Smaller payers are now moving from 4 medications down to either 3 or 2, which is I think really exciting. And then as I also mentioned that there are 7 Medicare administrators throughout the United States that cover the whole global area. And now in fact with Palmetto moving from 4 down to 2, that makes 4 out of the 70 to 2 or 1.
In fact, the other 3 Medicare Providers are actually at one failure. So I think it's overall, it's a really good trend. It's going to open up access. It's going to be good for patients, and it's going to be good for the providers as well. No, in doubt, I think we'll see that continue.
I hope to be a trend of moving closer, even getting Maybe one like some of these Medicare providers are allowing.
Okay, got it. And then one more quick one. Cadence and rollout as you're kind of planning and expecting on the nicotine addiction side, is that going to look similar to The OCD coils, as we saw in 2018, the original 58 and then getting toward the 200s couple of years later?
Yes. I think it's probably too early to kind of give some numbers around that this time. I mean, As I mentioned probably on the last call, we rolled out to 10 of our customers with our new smoking addiction helmet or as we call it internally an H4 system. And then over the Q2, we rolled it out to additional 5. So we are up at customers right now that have the technology and once we get into the limited market, we will continue to Provide insight in later quarters.
Perfect. Okay. Thanks for taking our questions.
Thanks, Steve. Oh,
sorry. Our next question is from Jason Werde with Northland.
So for OCD, you guys, it seems have done a pretty good job of making sure that, If I'm correct, that the reimbursement is specific to Deep Brain, Is that the strategy or has that been the strategy and the case in terms of most of your discussions With the insurers and secondly, does that help in terms of copycats trying to sneak in even though I know they don't initially have direct OCD approval?
Jason, thanks for the question. Yes, you're right. That has been the strategy for us. I think as I mentioned on prior calls, When we're meeting with these payers, it's really a primary focus for us to make sure they understand the difference between DTMS In traditional PMS and the benefits of DTMS, us going deeper and broader makes a huge difference, especially in the outcomes of the patients. And as you No, we're very, very particular about the way we do our research and conduct our clinical trials.
And in that way, we have shown really the benefits of what DPMS is doing, particularly for these OCD patients. And we have been very particular, as you mentioned, in getting dTMS as to be the provider of this OCD technology or treatment as you mentioned.
So it has been important part
of the strategy. Thanks, Jason.
Yes, no, helpful. And also related to that, The MAC decision to go from 4 to 2 failed therapy attempts, that's specific to all Stimulation or is that specific to deep brain stimulation?
Just an application on that.
No. That's for all TMS, Whether for us with deep TMS or traditional TMS.
Okay. And then I know it's still early in smoking cessation. So you may have limited comments, but the big question I have and I think a lot of investors have is, it seems like there's a big Out of pocket opportunity here. Has that been tested yet? Can you comment on how big or how realistic or that opportunity might be?
Yes. No, that's been a big part of our focus with the controlled market release to try to understand how we're marketing to patients, Are there opportunities for other reimbursements associated around the treatment as well? We in fact just a couple of weeks ago, we Brought all of our controlled market release customers together and had a call with them. It was really helpful Insurance Billing and Treatment Protocol. So we're learning a lot and we look forward to kind of share further information as But I think as I mentioned in the prepared remarks, early and total evidence was very good about Treatments, we probably treated around a couple dozen patients to date and it's been very well receptive so far.
Okay, helpful. And then on OCD, I know that you talked about different pricing strategies. Is there a separate Is it still basically a leasing type agreement or is there actual additional payments related to OCD from the 3rd of your installed base that has opted to get the helmet?
Yes. Thanks for that question. So, traditionally in the past, We are more on a fee per use, but we've kind of opened it up with all of our three strategies. So doing what we call like a risk share model, which is the fee per use. We also sell the helmet directly and we also lease the helmet as an uptick on increased If they're getting the impressions system, and then they can opt it to also lease the helmet as well.
Okay. Is there an incremental piece of OCD in those revenue numbers that you supply today or?
And it also obviously drives additional sales overall as system sales, right, because of the differentiation of the technology between us and Other traditional TMS systems.
Okay. And then maybe last question. I think you mentioned Your goal is to get to 18 sales reps in the U. S. It seems like you could go bigger, special or is that something that maybe you reevaluate after you look you kind of Complete your evaluation of the smoking cessation trials or commercial trials?
No, we definitely
go bigger. We just want to do it in a kind of a phased So our goals for this year was 2018. Those were going to probably most definitely increase going into 2022. But right now, our short term efforts are to get to 2018.
Okay, great. Thanks. I'll jump back in queue.
Yes. Thank you.
Our next question is from Ram Selvaraju with A. C. Wainwright. Please proceed with your question.
Thanks so much for taking my questions and congratulations on a really solid quarter here. Firstly, I wanted to drill down a little bit further to what you envisage to be the long term plan, the long term goal for expansion of the number of sales reps in the field. And if you could please relate that to the target prescriber base, because it seems as though the prescriber base is enormous relative to the number of sales reps you currently have. And I just wanted to know kind of what's the ultimate goal, what's the ultimate sales Rep number objective that you have relative to the prescriber base that you're targeting?
Thanks for the question. I appreciate it. So in general, we were at 12% and our goal was to grow by 50% in a systematic way. We think probably over time, in the short term, probably up Closer to around 40 is where we're thinking, to kind of cover the complete territories that we're looking at. But that can change, obviously, depending on Our rollout of smoking, which is we may go in a number of other different areas with smoking as well as an indication.
Obviously, we know it's outside of psychiatry as well. So I think just to give you kind of a short term thought, that's sort of the thinking.
Okay. And then just a couple of questions regarding the revolving reimbursement picture. Are you seeing an evolution in the thinking among reimbursement agencies regarding coverage of deep TMS procedures in patients who may already have had DPMS applied once at least once in their prior treatment history, or are you seeing that remaining effectively static? And then the second question is whether you are seeing any changes in the thinking among reimbursement agencies with respect to Prior authorizations, the number of prior treatments, for example, in the context of MDD?
So is your first question, I assume is also related to depression, correct?
Correct, yes.
Yes. So in general, without getting too technical and too deep, There are a couple of things that when your depression patients come in, they look for response and someone to get to remission. And if somebody has a response of the technology, the payers will continue to actually pay for TMS treatments in the future, which I think is important. And we've shown in a head to head study that our response rates are actually higher So I think that's an important indicator. So and remember that depression is episodic.
So as soon as somebody gets to remission, if they come back and Another episode of depression as long as they respond to the technology, currently the payers are paying again. And then to your second question, as I mentioned, initially when TMS started getting reimbursed by payers on a broader, wider scale. They started for filled medications And the recent trend starting at about late 2019 has been moving down from 4 down to 2. We've seen, as I mentioned in My prepared remarks that that trend continues of going down from 4 down to 2, in some cases even 1, which I think is just Extremely helpful with all the details around where medications and After the first medication, there's only roughly about a 50% chance that there'll be a response and then it just gets worse and worse after the next medications. So getting it down closer to one failed treatment, I think, is going to be a continued trend that happens.
Okay. And then on the reimbursement front also, I wanted to ask if you expect any additional draft LCDs before the end of this year?
I mean, we are hopeful to it. I can't give guidance around it. I was in my last couple of calls, including the last one that we had, I was very hopeful that we would end up getting at least one coverage just from the receptiveness of the conversations We're having around OCD and then boom the day after the call we got one and then a couple of days later we got another one and then the third one. So I'm hopeful, but I can't give guidance on it. It's really very hard to predict.
But I think one additional thing there, Ram, is that We have actually met with all the Medicare providers, all of the MACs And introduced all the information to them already.
Great. And then with respect to the smoking cessation controlled launch, Can you just give us a bit more color on how the kinetics of the launch are going to dovetail with what you expect Could be evolution in the reimbursement picture there?
Yes. Again, it's probably too early to kind of predict How that will go? Obviously, we have done a bunch of work around Understanding the reimbursement landscape in smoking and also trying to understand exactly what our strategy is moving forward, I think it's really important as we've done with OCD to be focused on gathering post marketing data and also making sure that we're publishing that data in an appropriate way to give us further evidence to support any reimbursement efforts moving forward.
And we have reached the end of the question and answer session. I will now turn the call over to Chris von Yako for closing remarks.
Thank you so much. I'd like to thank all the investors and other participants for their interest in Brainsway. With that, please enjoy the rest of your day.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.