Q1 2020 Earnings Call
[music].
Greetings and welcome city.
Well first quarter 2020 financial results conference call. At this time, all participants are named listen only mode. A brief question and answer session will follow the ball presentation. If anyone should require operator systems. During the conference. Please press star zero on your telephone keypad as I noted this conference is being recorded it doesn't.
My pleasure to introduce your host Mr., Stephen Kilmer Investor Relations. Thank you you may begin good afternoon, everyone.
Let me start by pointing out that this conference call will include forward looking statements regarding profound and its business, which may include but does not limited to expectations regarding the efficacy of propel technology in the treatment of prostate cancer, BPH, uterine fibroid and powder pen.
Often but not always forward looking statements can be identified by the use of words such as the plan is expected expects scheduled intense contemplate anticipates believes proposal or variation, including negative variations of such words or phrases or state that certain actions events or results make could would might or will it be.
Taken occur or be achieved.
Such statements are based on the current expectations of management.
The forward looking events and circumstances discussed in the conference call may not occur by certain specified dates or at all it could differ materially as a result of known and unknown risk factors and uncertainties affecting the company.
Including rest regarding the medical device industry economic factors, the equity markets definitely and risks associated with growth in competition.
Although profound has attempted to identify important factors that could cause actual actions events or results to differ materially from those described in forward looking statements. There maybe other factors that cause actions events or results to differ from those anticipated that today that are intended.
No forward looking it states and can be guaranteed except as required by applicable securities laws forward looking statements speak only as of the date I watch their made and profound undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise other than as required by law.
On the call today, representing the company are Dr. urban megawatt Propounds, Chief Executive Officer, and there isn't Davis and the company's Chief Financial Officer, and senior Vice President corporate development.
With that said I'll now turn the call over to Aaron.
Good afternoon, everyone and welcome to our first quarter 2020 conference call on behalf of the management team and everyone. It profound I would like to thank you for your ongoing interest in our company and for those of you who are shareholder should we appreciate your continued support.
I will turn the call overture Rooney in a moment for an update on our commercial activities. However, before I do I'd like to provide a brief update on our first quarter 2020 financial results.
To streamline things all of the numbers I will mention have been rounded and are therefore approximate.
For the three month period ended March 30, Onest 2020, the company recorded revenue of $1.6 million, an increase of 6% from $1.5 million and the first quarter of 2019.
Expenditures for R&D increased $161000 was a three months ended March 31st 2020 compared to the same period in 2019.
Due to increased spending and testing for R&D projects and additional systems applications reimbursement of consultants and the option awards to employees.
This was offset by decrease salaries and benefits from decreased R&D personnel, lower software and hardware costs and an overall decrease in general R&D expenditures.
General and administrative expenses for the first quarter of 2020 were higher by $1.5 million compared to the three months ended March 31st 2019.
The 1.5 million increase was attributed to salary increases and bonuses awarded to management options vesting during the period increased costs associated with being NASDAQ listed including insurance costs increased software cost for cyber security and an overall increase in general cost.
Overall, the company recorded a first quarter 2020, net loss of 3.6 million or 25 cents per common share compared with a net loss of 2.9 million or 27 cents per common share for the same three month period in 2019.
During the first quarter of 2020, we closed an underwritten offering of common shares, including a full exercise of the underwriters over allotment option.
Resulting aggregate gross proceeds of approximately.
$40 million U.S.
Net proceeds will be used to fund the commercial launch of false accrual in the United States and on the continued commercialization of Tulsa, CRO and Sonolith globally.
We also retired our 12 and a half million in principle amount loan with CNBC. Almost 30 months ahead of its maturation date of July 29 2022.
This extinguished olive profound long term debt and translates to total estimated net interest payments savings.
$900000.
How's that March 31st 2020, profound had cash $61.9 million with that I'll now turn the call over to a rent.
Thanks Aaron.
On the 2019 year in coal.
Which was about two months ago.
Talked about what we see as the value proposition Tulsa, particularly focusing on its potential flexibility in treating a variety of prostate disease patient.
Today.
I will focus on our initial commercial experience in the United States and our market entry strategy, including the three primary market segments or delivery channels.
I will also update you on the reimbursement process and its status.
As you already know.
The first commercial patients in the last.
Was treated in early January represented the culmination of several years of development.
During the first quarter. The first two telesat commercial site became operational in the United States.
Our goal has not only been just to demonstrate that Tulsa is a viable treatment for prostate diseases.
But also to confirms the value proposition expects ability.
And the ease with which new users could adopt the technology.
As well has to garner patient feedback on the tolerability of the treatment.
Hi, initial experience to bodes well on all of those Frank.
Both of the first two sites.
Came up to 15 quickly.
And have treated a variety of prostate disease patients ranging from hold Glenda basin prostate split hi list disease.
Hold Glenn intermediate risk 15th.
Partial or full called prostate gland ablation.
And even amazing as long as prostate.
BPH.
We are satisfied with this start and pleased that what we observed in Europe, it's been duplicated in the United States.
We are particularly happy to learn but the patient feedback on treatment Tolerability, it's a positive.
Patients are appreciating that Tulsa is a onetime same day procedure and has reported minimal pain after the procedure.
Many of them, indicating the return of the erectile dysfunction in as little as 24 hours.
We are thrilled with this feedback as it confirms our belief in the long term potential filter technology.
Let me next elaborate further on our tests I do as market entry strategy, having discussed on our last call its focus on pre delivery channel.
The first channel includes urologists, who already specialize in cutting edge alternative treatment.
Prostate disease, knowing that today's options do not meet the standard for their patient population.
We are delighted that doctors see on T in Sarasota.
Who is considered the meeting urologist.
Rationalizing in ablative treatment has become an early adopter of telephone and that his partners are already beginning to visit him.
They consider expanding their practices.
Our strategy is to continue to focus on such leading edge physician, who are already believers in ablation therapy.
And value the Eutelsat technology for its ability to expand the patient population that can be treated.
We will continue to focus on such positions with the goal of partnering with their local imaging center to create telesat treatment Center.
The second and we believe the most important channel from a long term perspective, it's imaging center.
Company.
The second U.S. Tulsa site Bush imaging in the suburbs of Atlanta.
Represent such an imaging center channel.
There are now able to provide a complete solution to their patients.
Prostate disease, and our base diagnosis.
Two M.R. based biopsy.
And our Eutelsat treatment.
This completes solution is this strong proposition for the site as well as a comfort to patients knowing that the same dr. They trust.
For disease diagnosis is now offering cancer treatment.
We are impressed with the speed with which bush imaging adopted the procedure having treated.
Our first eight patients within the first two weeks of installing Tulsa.
So far in Q1.
He said.
One site in each of the first two important channels and both are meeting our expectations.
As you know.
We also have a multi site agreement with the largest imaging company radnet.
Their site initiation did get delayed.
We believe that it is a 90 day delay, but due to the uncertain times, we plan to remain flexible.
The third and strategically very important channel is the creation of center of excellence.
Teaching or opinion, leading hospitals.
Our pipeline for such hospitals to significant and none have indicated anything but enters yeah them for telecom.
But because their priorities have been on the Corona virus, new installations are delayed.
You do not believe that the delays were lost any longer than necessary and will most likely be 90 days, but because of uncertainty they could be as long as 180 day.
Our plan is to remain flexible doing this time and shift our focus to imaging centers.
These centers are not directly involved in treating Corona light as basin and generally feel but this is a good time to evaluate new therapeutic option.
Our experience in the U.S.
He's also consistent with what we saw in Europe.
The European wholesale imaging centers tight continue to operate doing their shutdown.
But clearly the teaching side did experience in 90 day shutdown.
Now that Europe is starting to open again all of the teaching site has indicated.
But they are we starting their TOSA program in the near future and we plan to support their restarts.
In summary.
We consider each of these three total pro delivery channels to be unique and a key part of our strategy to drive adoption.
We plan to tailor our genius support program to fit the needs of each unique channel.
For example.
Working with Radnet and the Bush imaging center to help educate their urology community.
And with the teaching hospitals to drive the next generation of clinical publications.
We are also working with all channels to provide the appropriate content for their social media presence.
In terms of our expected lumber appetite in 2020.
It was only anticipated.
Agreement with about 20 site by year end.
With approximately 15 of those operational.
We now believe that the time to achieve these numbers, maybe delayed by a quarter, perhaps two quarters due to the Kobin 19 and timing.
While we don't have there's lots of visibility into the rest of the here at this early stage in the Tulsa worldwide.
I think it's fair to state that revenue impact from these potential U.S. placement delayed.
Well be somewhat.
Offset by higher than anticipated header system utilization should that continue.
Although eutelsat only operational into site so far.
We remain excited by the early success of the rollout in the U.S.
Particularly the greater than expected initial procedure volumes and a variety of patients being treated.
We are receiving physician feedback that supports that.
One physician said that when evaluating a patient for prostate disease.
The question should be what should I not use tough macro.
Of course, but tell suppose procedure was not be appropriate for all patients but feedback suggests.
The total probe may potentially be one off if not the first treatment option that well urologist.
And their patient consider.
To further supports Tulsa of Internet.
Also encourage listeners.
To visit our newly launched total pro procedure patient web site.
Tell surpluses are dot com.
The site has been designed to provide up to date information on where the Tulsa procedure is available.
Both within the United States and internationally as well as contact forms to reach out to each center directly.
I also encourage listeners to visit independent patients web site.
Like inspired dotcom TV unsolicited unfiltered patient feedback.
The U.R.L. for the toughest specific chat sport, it's fairly lumpy.
So rather than spending out here I ask you visit inspired dot com.
Simply towards telephone.
I'd now like to conclude our opening remarks.
By providing an update on our reimbursement strategy.
As discussed in our last call.
In late 2019, we submitted an application for a health care common procedure coding system T code from the centers for Medicare and Medicaid services or CMS.
So that tells approach procedure.
Also.
As I had mentioned previously.
We see reimbursement as a three year process.
They see you said it that process.
With the C code application they've lost here.
We have had an opportunity to meet with CMS and also with a number of hospital.
The feedback from these discussion.
As long as Trump our consulting.
There is a possibility that an existing code could apply to tell us.
For that reason, we have our Tms.
To set our application aside for now and allows the hospitals to decide if they would like to use that existing code.
We don't.
I see this as a positive or negative.
Rather we see that as a continuation of the profit.
But the existing code does get accepted by the hospital.
Indeed, it would be a positive because it would move us ahead sooner.
If it is not accepted by then we would resubmit RCM application with a high level of confidence.
A new code would be issue.
In either case, we will provide updates.
Development unfold.
So to summarize what they're looking forward to in the near term.
One.
I, just don't tell sub pro type agreement.
Two.
Expanding Tulsa adoption, both in terms of procedure volume and types of patients treated and three.
Progressing tell suppose reimbursement strategy.
By pursuing both appropriate reimbursement code.
This ends our prepared remarks for today.
With that we're happy to take any questions you might have.
Operator.
Thank you will now be conducting a question and answer session.
I asked the question. Please press star one and your telephone keypad confirmation Polyone dictate your line is going to question.
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Sorry.
One moment, please we pull for your question.
Our first question comes from the line of Josh Jennings with Cowen and company. Please proceed with your question.
Hi, good evening, everyone, there and thanks for taking the questions. Congrats on all the progress you made this year.
I was hoping to start.
Start just on the Tulsa pro sales funnel and it sounds like it continues to build and all three channels, but I don't know if there's any incremental details you can provide about where are you still shows funnel sits today or pipeline funnel.
This is two months ago. It at the end of your 19 cough and then just what can you do here in this covert era to tell cultivate increased demand.
Do you have a virtual or I guess marketing platform have some of these are all just been experiencing downtime and have yet have you been able to.
Reach reach out to more practices in more surgeons over the last weeks or months.
Josh. Thank you I hope you can hear me, Okay, Yes, I think the pipeline suddenly continues to build I think we're not quite comfortable giving explicit numbers, but I think that during this time suddenly even the large hospitals.
They are busy with the the pandemic I think the urologist.
Certainly quake open to listening and learning to the next technologies and yes, we are holding Webinars and education programs for for these channels and so we're doing that for.
Imaging centers small imaging centers were doing it for urology communities that are associated with certain imaging centers and certainly we're doing it for teaching hospitals, who sell so I think that is the reason why certainly.
The feedback as I mentioned in our prepared remarks, the feedback certainly is quite positive that as soon as they can and do unto open in a couple of cases, we do have schedules already in place to to get started but I think.
Hi, can certainly switch over to the generally.
The pipeline is good and as things open we feel okay, we feel good.
And we certainly will take advantage of the fact that a lot of urologists are interested in learning to virtual and we are.
Doing those conferences.
Great and then just a follow up on a Anthony Josh Josh that way there yeah, sorry here, Eric I'd, just add I don't think anyone is falling out of our funnel.
And.
We've added to the funnel and of course the last quarter.
I also think.
We've had an interesting pivot.
Where we've said okay. The ones that we thought we could close in the second quarter.
May not get closed in the second quarter, because that or you know the ones that were in opinion, leading hospitals to basically shut down.
And we pivoted or sales and marketing team to independent imaging centers or independent urologists are there happens to be an imaging chain, whose open and ready for business and.
And.
Timing wise, we made just replace some of the opinion, leading faith, we thought would be opening Q2 and may now be opening two three or four we maybe able to replace some of those with independent imaging centers are independent neurologist and imaging chain.
So I'd say.
The final stronger so when it was a rent I don't need to be overly bullish, but I mean I want to be clear that the funnel has been added two and we haven't really lost anyone.
I don't think snakes, those extra details and a follow up just in this cobot 19 era.
You know when it make too much of a stretch, but you commented on the volume the demand that you're centers are experiencing I'm in the United States.
Could could we should we be thinking about patients with localized prostate cancer or we would be ph.
Seeking out.
You know treatments and where I got to the plate of treatments in energy centers or.
Surgical centers outside appointed a hospital and there will be this fear factor for patients to go to and epicenter.
Well to become a scope it.
For for prostate therapy.
To address yet are you seeing any of that and maybe two world, but just wanted it sounds it all together.
Sure No Josh I think that this is exactly how we see it is very cautiously pardon me.
The we are hearing of those we are certainly cautious because they are you know pluses and minuses in last few weeks for sure.
Certainly the imaging centers.
They see this product then.
Significant revenue generator as I mentioned, the full solution approach becomes a strong proposition for them, we see all of those as positives and we see that continuing to happen. We are certainly hearing the fact that patients would prefer to.
Go to some place other than the hospital during this time.
Were also hearing that certainly in the last few weeks.
Some patients do not want to travel. So because these are you know just a couple of centers or as we heard me limited.
During the early stage.
They are a couple of patients who have sort of said, okay I'm going to delay by a few more weeks.
Before I'm ready to travel so.
Generally I think the answer is exactly we're cautious but we are certainly there are suddenly himself those possibilities going forward.
Great and my last question just.
I appreciate your updates on.
The path forward for reimbursement can you give anymore detail on the existing code with level reimbursement.
That's it affords.
And any timelines associated with it its vision by CMS or should be thinking about it just did you describe that center should just use that code currently and and that will be reimbursed or is there. Another I guess decision. We may be two by CMS to open up that existing too.
Thanks again for taking the question sure sure.
So Josh the as I mentioned, we had phone calls where we had meetings in fact with hospitals and the couple of hospitals in fact.
<unk> regular data on one more piece is it's also very good to see I'm treating holquin focal N.P.P.H. of the broad spectrum.
<unk>.
In early days repeating what we've seen in Europe is it really nice to see.
Right and and it makes that in the past Playstation command there.
There are limited more by.
Capacity than they are by <unk>.
And that was my third question. So thanks for answering it like that you had to.
So they'll coming back to the <unk> the questions on the M.F.C.
He code understanding that obviously does not only in evolution in that process and that you do want to be responsible citizens and sometimes how you access it.
Could you elaborate.
More on what code. It is you know what the amount of reimbursement would be associated with that code.
And you know what would be a reason for hospitals. They know that they don't want to to to apply that code.
Show, though so first of all the recommendation has come from the hospital.
So, but it's really a decision decoders need to make at the hospital.
And they are.
Evaluating that option unfortunately, because he's our hospitals and that's where the the delays are that it is going to take some time before we know if they are accepting these hmm.
The the current codes.
I cannot give you this specific numbers because I think that is up to the quota reason P.M.S. until one so I'll stay away from providing the specific numbers.
Number c. code or anything at this time.
Awfully events, I think we might be able to to do it turned me today.
Well.
I think certainly the additional color is that these are codes.
<unk> well originally designed.
For purposes of using M.R.I. guidance.
<unk> interventional procedures.
We in fact talk with consultants who were involved in.
And.
Relation all such codes.
And.
We think that the original intent was.
In line with what we are hearing from the hospital.
So I think as I said, we are.
He just has a process. We think this is a very interesting stuff.
But I.
I think we want to wait until it isn't used and we went to wait until T.M.S. Then further provides guidance that they will accept the hospitals.
Then they shouldn't before we can you know believe that this is going to be a big big positive or negative or anything like that.
Right.
And then you still adult one quick follow up question then.
So <unk>.
<unk> damn breaks open based on the hospitals accepting his code how does that then they'll through to the imaging centres twice in within the vehicles to how with damaging centres be able to play with that.
And so then there is a separate cross that tore emitting centers and we are in the process. So evaluating that process also.
And I think again today I don't have an additional update four year old, but I think as that grows. So you keep you informed.
When a quarterly basis, if if the the development take place, but I think.
Part of the reason why you know we talk about the three channels part because the reason why.
Hospital is the right place to start.
Because they have bad credibility they have the infrastructure to be able to evaluate all of these they have to relationships with the insurance companies and so on and so we want to be able to sort of established the beach had to that channel first and then use that as the guy.
Principles for the other channels.
Right. That's that's really helpful and I'll I'll get back with thank you.
Think so.
Thank you once again, if you would like to ask the question. Please star one on your copy cat.
Speaker, but then maybe necessary to pick up your hands that before passing the sarkouhi.
Our next question.
Line, Brian gotten on with God not security. Please proceed with your question.
Oh gentleman can you hear me okay.
Yes, but I am good afternoon.
For known Aaron first for you, but I've never known used to be overly boast about anything so nice to hear your ideas about the pipeline.
Alright, so the website look great will you be adding news thunders when they start treating patients.
Or when they signed a contract or when they begin marketing have you thought about that.
Oh, yes, we have <unk>.
So that's that's site number one it was you know they made it clear on the website that it is it profound driven upside.
And.
Our goal is not to have every site.
Every site.
On our you know on our website every treatments like Oh goal is to me.
Only have those types that are active we.
Recruiting patience and feeding and as time goes on we will set up threshold.
Minimum treatment that each site would have to be doing in order to qualify to be on that site.
So it is really designed for patients where they can see.
Active places.
We would probably more than likely will have some sections on where clinical trials are going on as well, but we certainly do not planned to add sites.
At the contract.
Okay.
The code.
There are certain member procedures that need to be done either at a hospital or at an imaging center to be successful here I I know in the past some places needs to submit.
510, 30 procedures before C.M.S. would really trying to take a look at.
So the typical <unk> the guidelines from C.M.S. tends to be you know minimum hungry patients.
<unk>.
We we think that we will be able to meet that guidelines.
And so I think.
From the perspective of volume, we're not as concerned as we were last winter.
Okay.
And then when it comes to virtual training.
How are you handling that <unk> was the system developed with the idea proctoring remotely and being able to do this training in this wonderful world we're living in the last eight weeks.
So we are as you can imagine even though we are at two sites.
We are most certainly to our G.D.S. program.
Providing we actually have a person typically at the site.
Because we have some amazing people in the company, who driving and stay there and the volume has been there but.
We are I think our clinical team is do a great job of using networking software.
They have food visibility of the computer screen. The fact that this is primarily driven by a computer screen a full access to the computer screen.
And the urologist or the radiologist have food.
You two video conference with our clinically expert to provide to be able to answer any.
Any question that they might have so.
The remote trunk during actually working very well.
We will continue to mm to add additional features into our software that time goes on but what what we have today, it's working very well.
Terrific good forward thinking and and lastly on on the coding.
And M.R. guided interventional procedures isn't it reasonable to think.
That that coding could be based around another company that done brain procedures using M.R. guided interventional.
I think that the key to this is certainly <unk> interventional because.
The way the reimbursement procedures typically work they said they are cost plot.
And.
One of our obviously key question then key a message to C.M.S. is that indeed, <unk> guided intervention. So I think that to your point I think if it is an M.R. guided intervention.
Then suddenly it's in the same ballpark.
As what we we we should be.
I can't imagine our best interest thought to be too specific.
I understand.
Thank you appreciate the color.
Thank you we have reached the end of our question unanswered question I would like to kind of tobacco over to document or what.
Tomorrow.
Thank you so much for attending the call. This afternoon and please be safe and we look forward to our next calls for the second color. Thank you.
Thank you [laughter] teleconference, you need an afterlife, but this time. Thank you for your participation and have a wonderful bad.
Okay.