Greetings and welcome to Pulse Biosciences' 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. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Philip Taylor of Investor Relations.

Thank you, operator. Before we begin, I would like to inform you that comments and responses to your questions during today's call reflect management's views as of today August 9, 2021, only and will include forward-looking statements and opinion statements including, predictions, estimates, plans, expectations and other information. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission. Our SEC filings can be found on our website or the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements. We will also discuss certain non-GAAP financial measures. Disclosures regarding these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures can be found in the press release. Please note, that this conference call will be available for audio replay on our website at pulsebiosciences.com on the News and Events section of our Investor Relations page. With that, I would now like to turn the call over to President and Chief Executive Officer, Darrin Uecker.

Hello and thank you all for joining us this afternoon. On today's call, I will share with you our key accomplishments and business updates from the second quarter that have positioned us for success, as we begin the second half of the year. Ed will then provide details from the field on the status of our controlled commercial launch. Sandy will share our detailed financial results and then I will conclude and open up the call for a question-and-answer session. Our goal at Pulse Biosciences has always been to offer bioelectric medical solutions that deliver clinically differentiated outcomes for unmet needs of patients and clinicians. As of the first quarter of 2021, the commercial launch of the CellFX system is underway and we are in the process of implementing our technology in select leading aesthetic dermatology clinics. We continue to build on the positive momentum from previous quarters and are excited by the progress of our interactive and collaborative Controlled Launch program with clinicians. We ended the second quarter with 49 clinics participating in the Controlled Launch, following onboarding 34 new clinics across the US, Europe and Canada during the quarter. We are on track to complete onboarding for the program in the third quarter. And at this point, we believe up to 80 participating clinics will enable us to achieve our Controlled Launch program objectives. Clinics are actively treating patients and the transition of clinics from Controlled Launch to commercial use by opting to acquire the CellFX system after completing the Controlled Launch program has recently begun. Another highlight in the quarter was the receipt of Health Canada approval for the CellFX system. We are very pleased that we now received approval in the three key geographies we targeted for initial commercialization. Our team was prepared to expand the…

Thank you, Darrin. I'm very pleased to report we are making great progress with the Controlled Launch program and I'm excited to share the details with you today. Following initial use of the CellFX System, over 1,000 procedures have been completed at over 49 participating clinics across three geographies globally. Key opinion leaders or KOLS continue to add to our body of knowledge about the capabilities of our unique cell-specific NPS technology for a wide variety of common lesions. The scientific groundwork laid by the investigators who spearhead the clinical research studies with the CellFX Systems did a tremendous job providing clear evidence that has been published in peer-reviewed medical journals that support the unique safety and efficacy profile of NPS in clearing difficult-to-treat lesions in a controlled clinical study setting. Our global Controlled Launch program is achieving our intended goals by providing real-world validation of clinical and commercial best practices as well as the value of the CellFX System that they will share with the next wave of likely early adopters. Our Controlled Launch experience with these leading aesthetic dermatology clinics around the world as setting the stage by transitioning to a broader commercial introduction of the CellFX System to early adopters of energy-based technologies. In the second quarter, we expanded the Controlled Launch initiative to selected Canadian key opinion leaders soon after receiving our medical device license for the CellFX System from Health Canada. Like our US and European Controlled Launches, our first KOLs in Canada were poised to lead the way in their respective market and provide their peers the benefit of the early clinical and commercial experience, working closely with our direct distribution sales team in Canada. You may recall that the primary objective of our Controlled Launch is to ensure early positive patient and physician…

Thank you, Ed. For the second quarter of 2021, operating expenses were $14.8 million compared to $11.4 million for the prior year period, an approximate $3.5 million increase year-over-year. Operating expenses for the three months ended June 30, 2021 and June 30, 2020 included $2.4 million of non-cash stock-based compensation. The year-over-year increase in operating expenses was primarily driven by the expansion of commercial and operational infrastructure including increased head count to support commercialization activity. As I move into the discussion of our operating expenses, I'll focus my comments on our adjusted or non-GAAP results to provide insights into the underlying trends in our business. Please refer to today's press release, for a detailed reconciliation of non-GAAP measures with the most comparable GAAP measures. Research and development expenses, consist of salaries and related expenses for manufacturing research and development personnel as well as clinical trials and consulting costs related to the design, development and enhancement of our potential future products. Non-GAAP research and development expenses increased by approximately $1.5 million to $6.4 million for the three-month period ended June 30, 2021 from $4.9 million during the same period in 2020, primarily due to increases in personnel, facility-related costs and consulting and outside services in support of our FDA submissions and new application development. We expect the incrementally elevated research and development expenses compared to the prior year period, to remain at approximately these levels for the remainder of the year, as we continue to invest in CellFX System application expansion initiatives. Sales and marketing expenses consist of salaries and related expenses for commercial personnel including marketing and commercial operations as well as professional fees, trade shows, sponsorships and other promotional activities. Prior to receiving FDA clearance CE Mark and Health Canada approval for the CellFX System. Sales and marketing expenses…

Thank you, Sandy. This is an exciting time for Pulse Biosciences, as we are entering the third quarter of our Controlled Launch program. As part of the program, our participating clinicians are learning more about our technology every day. And we are actively supporting them, in any way we can. The initial feedback that we've received from our KOLs so far, into the rollout has been incredibly positive. And we are looking forward to hearing additional success stories in the coming months. We have begun the commercial transition of select sites marking an immense milestone for Pulse Biosciences on our journey to recording our first revenues, and broader commercialization in the fourth quarter. The positive clinical data that continues to come in reinforces our commitment to developing new applications for the CellFX System, for the benefit of our patients. We are capitalizing on the strong momentum that we have gained within the last few quarters. And we are well on our way to establishing widespread adoption and utilization of the CellFX System, and NPS technology, and towards our mission of building a viable company. Joining me now, for Q&A, are Edward Ebbers, Executive Vice President and General Manager Dermatology and Sandra Gardiner, Executive Vice President and Chief Financial Officer. Operator, please open the call for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And o [Operator Instructions] Our first question is from Chris Cooley with Stephens. Please proceed.

Good afternoon. And thank you for taking my questions. And congratulations on the continued progress there with the CellFX System. Just two from me ….

Thank you, Chris.

Hi. Thank you. Just two for me, here at the outset, I appreciate the additional color you provided about the ramp-up of your KOL sites. And that's leading to the five months versus the initial three months' conversion time. I'm curious though if you could maybe go a little bit deeper there, in terms of the types of lesions where they're initially utilizing the system, if there's any variability there in terms of just the initial usage, the wait time, when we think about indications for use? And then, maybe that could then help us kind of better understand, how these additional protocols and learning learnings would apply to the second wave of adopters. And then, as just a quick follow-on if I may for Sandy, I'm not sure if you're willing to do this at this juncture, but any additional color that you could provide in terms of the expectations for the EU commercial team build-out, either in terms of the scope of that but also the related costs and just kind of the timing on that build-out would be greatly appreciated. Thank you.

Thanks Chris. Those are great questions. So let me jump in with number one, and this is Darrin. I'll start off and then I'll probably hand it over to Ed to add some additional color. And so your question is on sort of the ramp-up and what we've seen in the controlled launch in terms of lesions being treated and how we think that's going to carry forward. So, yes, I think it's -- the Controlled Launch has gone very much as we anticipated in terms of clinics experiencing this technology for the very first time in a commercial setting. And so as you know we have quite a bit of clinical data. We have peer-reviewed publications in the treatment of sebaceous hyperplasia and seborrheic keratosis, and as we discussed on the call today also cutaneous non-genital warts. And so as Controlled Launch sites started up the initial sites, those were really the lesions that they predominantly were looking to treat. So largely treating lesions that we have clinical data that's published on and that lends itself well to the mechanism of action of our NPS technology and the CellFX System. And so from a lesion perspective those are the things that they initially focused on. From a timing perspective, I think, you can probably imagine that these early clinics brought patients in, began to treat these lesions, and then followed those patients both for lesion clearance, but ultimately the healing of those treatments and how they resolved over time. And I think the thing we've observed is that these initial sites really were thoughtful and methodical in terms of how they batched and treat those patients and treated a first group of patients, followed those patients over maybe 30 to 45 days and then treated a next set of…

Yes. From the very beginning, we recognized that our mechanism of action to target cells would lead to these initial applications but also would cause physicians to lead to other types of lesions that have the same kind of architecture. That is the composite cells that sit on top of the dermis. So it sort of develop confidence with our initial lesions that quickly went to other difficult to address lesions and are seeing the same type of mechanism of action benefits with these other kinds of lesions that we saw with the top three that we've done our studies. So we expect more of that in the future, again as we anticipated with our mechanism of action based messaging.

And then Chris the second question I think, I'll hand that one over to Sandy in terms of the European build-out.

Hi, Chris.

Hey, Sandy.

So during the course of the six months that we've gone so far this year, we have largely built out the European team. We have approximately seven individuals in Europe across the commercial organization. That includes the leaders as well as the clinical application specialists, the ones that would be driving utilization. And this is across the major geographies that we're looking at so Germany, France, Spain, et cetera. So for the rest of the year, we may add a couple more but I would say that with the seven folks that we have, at least for completion of this year and looking to turn to – from Controlled Launch to commercial launch. We're largely set. So I don't see a major expansion there because we did have fulfilled many of those positions in the first half of this year.

Thank you for that color. I misunderstood. I thought you were implied that you were accelerating there in your comments. My mistake. Congrats on a great quarter.

Thanks a lot, Chris. Appreciate it.

Our next question is from Anthony Vendetti with Maxim Group. Please proceed.

Thanks. I was wondering if you can give us an update on the FDA, IDE approval for the feasibility study for BCC. I know – maybe I missed this in the beginning but you were going to enroll 30 patients. And is that still on schedule? And are you expecting completion of that by the end of 3Q?

Yes. Hey, Anthony, yes thanks, good question. Yes we are on track in that BCC study as I mentioned in the prepared remarks, we have now enrolled 18 patients out of the total 30 and we are on track to enroll those up to 30 patients by the end of the third quarter here.

Okay. And then the pivotal study is to follow. And is that still scheduled for first half 2022? And any more details on what that pivotal study may look like?

Yes. Well we don't have any more detail right now. I think our current plan is to first complete this feasibility study, which as I mentioned is 30 patients. The patients get an initial treatment then there's an excision approximately 60 days later. And then that tissue is analyzed by the study pathologists. So we will complete enrollment in the third quarter. You can imagine then at 60 days until that excision is done and then there'll be some time to analyze that tissue. And so our estimate is still I think that in the first half of 2022, we hope to start a pivotal trial in BCC. Now that being said there's a lot between here and there in terms of completing the feasibility study and also collaborating with FDA which we will certainly do as it will be an additional IDE approved study. So there's still work to be done with FDA. We have not talked about any of the parameters of the pivotal trial at this particular point. But we're really excited about this particular application and the quick start that we have here in the feasibility study. There's a lot of interest with our -- all of our physicians that we're working with on this including all the Controlled Launch sites are really kind of excited to see how that application progresses through the regulatory and clinical process. So it still looks like the first half of 2022, but a lot of work to be done between now and then.

Good to now. That's a great update. And obviously that's a large market as well as some of the ones that you said you're still growing a pipeline for including acne and overactive benign growth caused by overactive sweat gland. So I was just wondering are those still very much in the early stage of sort of mapping out your strategy there, or is there any other detail you can give on some of those other markets?

Yes. That's a great question. So yes, I would say those are early in the process. As you know we've done some early feasibility work in some of those things that you've mentioned and we're really sort of mapping our strategy and beginning to talk to FDA about some of these additional applications and indications. And I think what we're trying to do is sort of as we have kind of regulatory and clinical milestones upcoming around those or having for example an IDE approved then we can begin to share more detail on exactly what those studies look like, how long we think they'll progress and then what potentially comes after them like we've done with BCC. But we certainly have a number of other things in the pipeline and we really do look forward to sharing some of the milestones that will be coming with those in the not-too-distant future.

Okay. Great. And then, I guess, just lastly it seems like everything is on track with the 75 KOLs. I know by the end of the year or before the end of the year expect to generate revenues is there any more detail on the timing? And in terms of the feedback that you're getting from the KOLs are there any tweaks that you're already making either to the protocol or the device in any way or anticipating to make, or is it too early? Are you going to wait for the feedback from all 75?

So Anthony let me comment first just on the, kind of, feedback we're getting in any tools we're making. So I would generally say the feedback we're getting is great. I would say also we're learning stuff every day and every week and every month that we're in this Controlled Launch program. And those learning’s are certainly leading to us tweaking various things we're doing that includes training. It includes conversations with physicians around patient selection and lesion selection. As you can probably imagine we're in over 50 clinics at this particular time. And we work with some really talented physicians and they have new ideas and new thoughts about technique and different things that they would like to try and should try based on the mechanism of action of our system. So I think that this Controlled Launch program is all about that. It's all about learning and tweaking. As far as the system goes, I would say largely, no, we haven't made any substantive changes to the system. The system has been functioning really well. All the systems in the field have operated really well, no issues with anything as far as we're concerned. So we have lots of ideas about how to improve things all the time. But I think as far as that goes the Controlled Launch has been going very well and we're taking all the feedback we get and putting it into new training programs and education programs and other things. So with regard to revenue, I'll let Sandy jump in.

Hey, Anthony. So in the prepared remarks, you've heard Darrin say that we're starting now to see the transition from the Controlled Launch clinics participants into commercial. So we'll start to see some of the utilization revenue from that in the third quarter. But in terms of commercial revenue that would actually be heavily weighted towards the fourth quarter. We're still on track to begin the full commercial launch in the fourth quarter of this year.

Okay, great. That’s great. That’s a lot of good color. Thanks. I’ll jump back in the queue.

Thanks Anthony.

Our next question is from Sean Lee with H.C. Wainwright. Please proceed.

Good afternoon guys, and thanks for taking my questions. Congratulation on a great quarter. Just maybe a little bit more on the upcoming 510(k) applications for extension work. So I was wondering with the data analysis expected to finalize this quarter and next quarter, would you be releasing some of those data ahead of your submissions?

Ahead of the submissions, most likely not. I mean, I think a lot of the data rollout follows the cadence of some of the meetings, some of the big meetings in this area. But I think as it relates to clinical data that's going to go into a submission to FDA, it's typical to get that to FDA and get that through the process before going out publicly with it.

I see. And my second question is on the educational side, because this sounds like just building out the KOLs support and building out the educational side is very important for the broader commercialization of the device. I was wondering how -- what's the longer term plan of that beyond? Is it just going to be KOL symposiums and talks at the key meetings, or is there a larger plan on how to reach the smaller clinic specialty?

Yes. So, excellent question, and I'll -- let me just comment quickly, and then I'll hand it over to Ed. So, I think just one comment I'll make is, you always as a company be highly focused on physician and patient, education and training. So, it's our firm belief that a technology like this, which is a new technology into a market the key to success in the field and adoption, high rates of adoption, is all to do with education and training. So, we will have an organization that will be highly focused on that. We pride ourselves on our team being very well trained and educators themselves in terms of the technology and what they can do in the field with the clinicians and their entire staff at these clinics. So, I think we never see a scenario where we go away from doing that. It's obviously heavily weighted now on a Controlled Launch program. And also this program is really all about helping us to create those best practices around how we do training and education in the field going forward. So Ed, any additional comments there?

Just that we've had our first evidence of Controlled Launch sites submitting abstracts based on the Controlled Launch experience at meetings coming up later in this quarter. So that's certainly what we had hoped for as part of this Controlled Launch is to see increased trafficking in new data from something other than our controlled clinical trials, which is really a good sign with the new energy-based technology. The other observation is that physicians are really used to the world of Zoom calls, so the opportunity for us to connect physicians in the Controlled Launch both with each other as well as with prospective purchasers to convey their experiences is something that we plan on in the third and fourth quarter. So this cross fertilization that's the whole point of the controlled launch is very much an ongoing growth stage of the company and something that our sales team is very used to catalyzing with the Controlled Launch sites and the respective positions that tend to follow them. So, I expect to see more of that in the coming quarters.

Thanks for the additional color and those helpful mix I have.

All right. Thanks a lot, Sean.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Darrin Uecker for closing remarks.

Thanks, operator, and thank you everybody for joining our call. We very much appreciate the support always and the great questions and we look forward to our upcoming calls.

This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation and have a great day.