Q3 2020 ICAD Inc Earnings Call
Has that may cause the actual results or events to differ materially from those described in the forward looking statements.
Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of dislike broadcast November 2020.
Hi, Kevin undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call with.
With that said, it's my pleasure to turn the call over to Michael Klein Mike.
Thank you Jeremy good afternoon, everyone.
I would like to focus my comments today on four key areas.
Number one is the sales momentum we are experiencing our business number two the launch of our innovative risk assessment software, which is the only breast cancer imaging product in the market offering near term two year risk assessment score the score that indicate the future likelihood of disease and.
Number three our recent distribution agreement with change healthcare, which opens up an expansive new sales channel enterprise oriented integrated delivery networks. These are clusters of strategically important clinical sites, Boston with one or more major academic medical center at the core.
Number four further acceleration of Xos IOER t. offerings for brain cancer, which is now rapidly moving into multi site multinational trial.
That will further validate the technology.
While simultaneously eliminate we often overlooked fact, that's off is already regulatory clear.
And commercially available.
I'd like to start highlighting a few financials, which will also address the first point above specifically data hi catch sales momentum.
Third quarter total revenue up 7.1 million represents a 28% growth over our second quarter we.
We are pleased to report that the revenue growth for our flagship high margin profound AI technology grew 44% over our Q2 2020.
In our detection business, we are we anticipate hitting an emblematic milestones in the coming months. This is the upcoming one south inflation.
Found since.
And our first encounter in early 2019.
Okay. One third of these installations will have occurred during the course of this tab then this makes us, especially proud to rapidly approach this milestone.
We also anticipate the launch of our next generation profound AI offering in the first half of 2021.
All of that we have learned along with a true but imaging data that we gathered since our launch of profound AI will soon manifest and then even more intelligent profound AI 2021 release.
In the first half of next year.
We believe that this next generation release of profoundly.
We'll continue to drive broader market adoption and expand our first mover advantage.
Buyer unparalleled performance and what customers will see as a steady cadence of ever improving our.
Our value proposition is highly extensible and there are few if any technology that get back with yours. We also anticipate deeper penetration into accounts as we begin to upgrade and expand our substantial installed base.
Next generation AI technology.
While the growth of the offering.
And offerings is the core value drivers for Ikang. We also had significant growth in our therapy business.
Q3 saw product sales increased 250% compared to Q2 product sales.
No on a small base of Q2 revenues, we are pleased with the robust growth of Xos capital equipment.
Last product sales in Q3 also increased 59% over Q3 of 2019.
It is worth noting that in Q3 total international sales represented 25% of GAAP revenues. In addition, Q3 2020 owed US revenues grew 80% over Q2 and actually grew 100% over Q3 2019.
Our investments in targeted international commercial initiatives and the expansion of our distribution network is beginning to pay dividends.
Our growing O us business, along with our multiple sales channels and our broad geographic go to market strategy allows I got to have a balanced sales growth portfolio. We can now sales and over 25 countries. We believe this helps us mitigate single market challenges and provides a.
Level of insulation should a single geographic area have a brief period of disruption.
Now, while we achieved the mentioned 28%.
Revenue growth in Q3, we simultaneously maintain the 21% operating expense reduction we achieved in the first half of this year, we were very diligent in maintaining our operating expenses at 6.7 million in Q3, the same level of expense we had in Q2.
We therefore generated clear leverage in Q3 by growing our topline 1.5 million over Q2 with no corresponding increase in expenses. We are pleased that we achieved 44% growth in our profound hi product, while keeping our expenses flat this was it.
Total company effort and indication of rising to the occasion sales.
Accounts growth combined with cost control as well as productivity gains allowed us to significantly reduce I can't pre tax loss to 1.8 million in Q3.
We also maintained cast at just over 22 and a half million.
These numbers are part of a very deliberative plan and trajectory to achieve positive cash flow and EBITDA in our core detection and therapy businesses. So.
For those who have asked about current market dynamics, particularly with this and then still whether we continue to see totally open mammography screening sites, many with extended hours and we can't time slots.
Sites are now quite efficient at safely screening and scheduled flight scheduling properly spaced patients.
The clinical community as well as patients are increasingly aware of the risks of delaying screening mammograms with over 280000 cancers detected in the us each year and more than 1 million worldwide every year.
Breast cancer represents its own form of a pan again.
It's one that we've had every year for generations. It is well known that spending delays result in more serious later stage cancers clinicians hospitals industry advocacy groups and yes, even payers are all aligned and collaborative efforts to ensure that.
Regularly scheduled screening mammograms continue and are performed with proper cadence with that let me move on to point number two as mentioned above.
This is the recent launch of our new risk assessment offerings for mammography. So let me clarify that our truck sales risk product is not the same as our current per pound AI offering.
The current profound I detect technology focus is on identifying cancers that may be detectable today.
The federal Reserve's focuses on tomorrow's possible cancers, specifically our risk product focuses on features that are suggest about potential cancer that may emerge 24 months from now.
For federal risk provides a novel one of a kind of risk assessment capability for clinicians and patients. It provides a personalized near term risk score again looking forward 24 months current models are less precise and focus on either lifetime risk.
Were five and 10 year risk profound risk is the privatized outcome of an eight year collaborative journey during which hundreds of thousands of images were collected and it is the result of intense efforts working with researchers at the prestigious Karolinska Institute we build.
Leave that the fruits of this effort in many ways will define the future of risk adaptive breast cancer screening.
Let me offer one illustration of the potential value of profound risks through years of studying hundreds of thousands of images, we clearly observe that 9% of women have exceedingly high for a fair around risk scores patients going into this portion of the risk spectrum than eight times.
Greater likelihood of presenting with breast cancer in the next 24 months.
When compared to women core in a general risk category.
This same would using today's advanced Threed tomosynthesis damaging supported by area for detection may actually have an undetectable or sub visual cancer as of right now.
Radiologist supporting with the world's best to May detect no sign of cancer today, even though 9% of the 40 million women screen in any one year. They have an 800% greater cancer detection risk two years from now now simple math suggests a hit.
The impact of it.
Up to 3.6 million women each year in the us alone.
Four times that worldwide.
Now this in our view is truly a hidden gem.
This data was presented at our recent innovation day and was published in a peer reviewed radiology journal called Radiology, just three months ago.
Okay rapidly evolved from a vendor to a broad base productivity and workflow solutions partner offering decision support capability across broad networks out there, saying their value proposition had significant appeal to lodge and sophisticated hospitals, particularly those that opera.
Within an integrated delivery networks or ideas. These ideas will now represent a larger portion.
I can't go to market strategy.
And partnering to change health care, we've opened up a new market and a new sales channels and with this agreement, we effectively expand our commercial capability and we'll collaborate with multiple new sales specialists, who along with US we'll service that they handguard for an emerging pay per patient revenue MA and finally the.
Touch on point number for my last point I'd like to review some of the development and Interop of radiation therapy, or what we call I O R. T. Archean issue to appear involved with the treatment of our current Glioblastoma is referred to as GBM and as we discussed it last month's well attended innovation day.
The updated the updated data unbelievable XOMA, so significant improvement in overall survival and as important progression free so vulnerable and patience with recurrent glioblastoma patients treated with doctor or a T. One but in this trial.
After they received the surgical visit.
Dramatically higher overall survival numbers and months of progression free survival in comparison to patients who are treated with external beam radiation therapy, which would then combined with other systemic therapies.
After surgical precision.
The problem with data on the use of 10 to 12 minutes the radiation applied during Serge that's caught the attention of positions that luminary site in both the U S and Europe and other parts of the World. It is earned US a seat at the table, which has taken the form of an international Glioblastoma.
Expert panel consisting of over 18 highly seeing physician represented by top neuro oncologist radiation oncologist and neurosurgeons.
The objective.
The bill consensus on our clinical trial design, the inclusion criteria and the endpoint. The goal is to further validate glioblastoma capability and build upon the results of our ongoing study at the European Medical Center.
Patient treatment for this multi site international study will come in within the coming months.
Study will enroll between 80 and 100 patients over an approximate two year timeframe progression free survival will be one of the efficacy data and points. It is a very meaningful and.
That will privately and regulatory and regularly be reported on during the course of the next 24 months, we anticipate being able to potentially see initial data on disease free progression, perhaps as early as mid 2021.
Our efforts and Glioblastoma are being led by Doctor Santana history.
A world renowned neuro oncologist at the John Wayne Cancer sense, now I had the pleasure of conducting an interview with Doctor <unk> is part of our online.
Nation day in late October you'll find the full interview replayed.
Oh Doctor cause Jerry.
Driving the details of our study and the promise of golf R. G. P. M on our website and again look for the inauguration day video on our Investor Cat. So.
In summary, despite involving clinical operating dolt as we navigate our way through Covid.
We have made significant progress on key themes ones that I've mentioned above.
That's a briefly some of the one we see significant revenue growth over queue to a cross eyed cat and particularly in our high margin broke out AI product offerings, which grew 44% number too profound risk for two D and three D introduces a new product category, a true game changer and <unk>.
Cancer screening in this area, we can clearly say that there are indeed few runners on the extra mile and three or partnership agreement would change childcare opens up a new sales channels, one potentially rich with opportunity enterprise and integrated delivery now.
And finally for we're now on the verge of commencing an international clinical study from the treatment of Glioblastoma with near term delivers deliverables that would likely be observable and that 2021, we believe ikat as well positioned for sustainable success, we have significant growth countless in both detection.
And therapy businesses, we are confident that we have the right plan in place to execute on these on these opportunities we are driven simply by a very key metric that we always keep top of mind. This is return on invested capital R. O I see and anticipate continued pies movement towards.
<unk> stated EBITDA and cash will ghosts are strong cash position enables us to carry for it from the above standard objective with an appropriate cadence I'd now like to turn the call over to Scott Theravada Scott.
Good afternoon, everyone and thank you Mike I will now summarize our financial <unk> results for the third quarter ended September 30th 2020.
Given the ongoing considerations of COVID-19, we believe it is useful to compare a sequential revenues from the prior quarter. In addition to our year over year comparisons.
On a sequential basis for the third quarter versus the second quarter of 2020.
Total revenues of 7.1 million increased 28%.
Detection revenues, a $5.3 million increased 28% driven by a 44% increase in detection product revenue and therapy revenues of $1.8 million increased 27% driven by a 251% increase in therapy product revenues.
As Mike noted the sequential revenue growth and our detection in therapy businesses. During the third quarter was achieved while maintaining our previously implemented cost reductions with operating expenses at approximately $6.7 million for both the second and third quarters of 2020.
Importantly, our actions to reduce operating expenses and 2020.
Resulted in a decrease of 1.3 million or 16% as compared to the third quarter of 2019.
Which allowed us to withstand a year over year decrease in third quarter revenues point 7 million or 9% as compared to $7.9 million in the third quarter of 2019.
On a segment basis detection revenues decreased point $8 million from 6.1 million, two 5.3, or 13%, which was offset slightly.
By an increase in therapy revenues of 1 million or 4%.
On the company's activities included salaries travel marketing and sales and other targeted cost areas, including cost that may be associated with less immediate objectives and those remain ongoing through the third quarter as well.
Overall, we are pleased with the execution of our cost control measures through the last two quarters.
We will stay disciplined in our cost management of operating expenses going forward and we'll continue to manage the timing of our investments with anticipated revenue growth.
Importantly, we continue to appropriately invest in targeted growth initiatives, such as profound AI risk in GBM or glioblastoma to generate future opportunities and increase shareholder value.
Moving on to our profit metrics GAAP net loss for the third quarter of 2020 reflects an improvement of $1.2 million to a loss of $1.8 million or eight cents per diluted share.
Compared with a GAAP net loss of $3 million or a loss of 15 cents per diluted share for the third quarter of 2019 note that Q3 19 included a point 9 million loss on the fair value of the debentures that have now been retired.
Okay strategy for our new profound day I risk product.
This groundbreaking technology uniquely combines age breast density and subtle mammographic patterns, including those that may not be apparent to the human eye, resulting in a highly accurate your risk assessment. We are extremely excited about this benefit the benefits the software can offer to both clinicians and especially <unk>.
Patience and have begun putting in place the key initiatives relative to expanding are clinical validation on a global basis, including developing K O L research sites and clinical centres of excellence with multi ethnic multi geographic date of diversity all of this aimed at driving adoption globally as.
A reminder, for Sunday I risk is now available for to the mammography in the U S and Europe with a plan to follow on relief in 2021 globally are.
<unk> with profound day I risk is to move mammography from what today is an age based screening paradigm.
To a risk adjusted screaming paradigm in other words precision screening individualized for each woman.
In the us about half of the woman who are at average risk for breast cancer fall into a dense breast category and are therefore considered to be at higher risk and some U S. States. These women are recommended for supplemental screening by ultrasound. This create the operational bottlenecks as it is just not feasible to scan <unk>.
50% of the population with ultrasound. Moreover, ultra sound does not reimbursed everywhere, it's a supplemental modality, resulting in out of pocket patient payment for a large percentage of women, who just don't benefit from it.
<unk> provides more accurate stratification, which may lead to supplemental screening being applied to a smaller but correctly targeted percentage of women and to lowering total cost location spend overtime.
Building clinical evidence with high impact studies is an important focus area for us our first significant body of clinical evidence was generated through the recent radiology publication, which Mike highlighted earlier.
In this study risk demonstrated statistically significant superior a U C performance at two years as compared to multiple multiple commonly used risk assessment models. A C is a standard performance measurement for a technology that incorporate sensitivity and specificity into a single metric of over.
For all performance.
You've been Blessed day that will be important in our efforts to drive clinical adoption of risk globally.
There are updates over the coming months as we move forward with it's exciting lunch.
<unk> I'd like to discuss our recently signed distribution agreement with changed health care and a bit more detail.
We believe the ability to integrate profound AI interchanges digital mammography solution will be a key differentiator for us.
16 and June 2019.
According to the study findings as of May 2020, overall survival. After initial GBM diagnosis ranged from 16 to 59 months in the I O R. T group compared to five five to 38.5 months in the E. B R. T group researchers completed that I O R. T over current G B M.
Is feasible and provides encouraging local progression free an overall survival with a manageable toxicity profile.
Competing with our 10 minute procedure versus weeks of competing treatment. While this is a highly favorable competitive landscape under normal conditions.
It's amplified during the COVID-19 error.
As we continue our lobbying efforts to reverse this rule. We're also aligning our sales force into this new model.
For on the telephone.
You will hear is three Tom prompted technology request.
Is your question has been answered and you would like to withdraw your registration of Pizza is no one followed by their three.
One moment please for the first question.
The first question comes to the line of Dave, particularly with JMP Securities. Please go ahead.
Great Thanks, and congrats on other progress.
Mike You mentioned the one.
1000, profound AI and then.
I think you said you had something like 7200.
I mean could we actually anticipate that.
In your installed base is this kind of an overlay or and add onto the AI product how will you charge for it how much would it be.
And then I had some questions on the change agreement as well thanks, Yeah.
<unk> apps on your phone, we want to get people into the product and.
And we're still fine tuning the price and then we will likely into and I think you can anticipate we'll have sort of the in store add on capability.
Our goal is to get into a broad base of accounts penetrate many accounts as many as possible and layer. In addition, though.
Additional technology, we're not done yet we're not done yet we see an additional.
Additional sets of capabilities, even beyond what you've heard today.
That so each account to us when we look at the five year value of those accounts, we don't think of it as one sale now we think that the recurring revenue from service and the add on sales that will come from the other products that we are going to introduce I'm, sorry, I can't be too too precise on that number but I think you'll you'll be glad we weren't precise on the number of.
We fine tune, our price and entry points.
Yes, no that's good Mike Thank you and with respect to the change agreement.
Are there any anything you can share with us about their their market share today, how much you think you can get.
What competing products if any are prevalent in their base today and.
Starting to cloud and I should also say the margins for this business or in the 90%.
And that there are no service there you don't need service people to go in and it's a exquisitely elegant solution, we will provide clarity for our investors on the impact of growth on the pay per click model I can tell you that for this year, we see that we see the growth of this segment having it.
A low single digit percentage impact on the current year's revenue and that's because as pay-per-click dark.
Being tabulated they started low and then they get the full year next year and they repeat and it becomes repeatable and recurring and high margin and then you lay on other deal. So it's a story that we will be building from 2021 off but it's gonna have a very modest impact this first year, but street.
Typically it positions us for layering on other Saturday fields that are high margin and also allows us an opportunity to replicate this with other eye AI capabilities.
Oh, well well articulated Mike. Thank you I appreciate it.
The next question comes on a pair osland from Craig how long capital group.
Corporate physical has driven everybody.
Kinda want to follow up on Jean and and David's question on on profound risk.
Obviously, it's early.
You do have to see Mark in Europe.
And just thinking in terms of of kind of positioning in the market Europe is obviously.
Come a lot further in terms of risk based screening versus age based like we are here. So when you are over there now with the product like profound risks are you finding that that's actually a lead generator or profound proper.
Whereas historically I've always thought of as you mentioned earlier, Mike profound risk would kind of be in and.
And add on or an adjunct feature to to go to the flagship profound AI here is it in the reverse actually in Europe because of the pull through or put forward a demand given that they have that risk focus there.
Yeah. It's a really good question fair and I think it's time to sort of I don't know you get called the the business models in Europe. They track patience over the course of a lifetime. These are mostly government sponsored health care for it matters to them what happened to this patient 345 years and.
And because of that the price of missing a cancer that could be detected today, having its show up as a cancer two years from now and that is the dance cancer cause.
The money.
So wow, so I'm, sorry may use double readers double human readers and of use that as a elisa cannot move to to let's say the base product for county, I, but they might feel that the W. Arena human relocatable at least short term is cost effective or clinically.
This undeniably provide the value proposition, that's meaningful to them from an economic and political and societal perspective, but the reason we want.
Is that the all the dynamics line up well in Europe, and as the U S becomes increasingly focused on and we see this even on a business on the value of care and the value equation, Lucy more and more interested in the U S. But.
We won't be leading outside the U S and they will be case studies and that'll be generated and government program and we're off the same as translating in parts of the one can imagine sci-fi Kaiser or let's say staff Malacia, most who also track their patients over time would be very interested in this type of all and as.
You said it may actually have a tailwind affect the reverse tailwind effect and bring profound AI base the taxes today and and as you said almost in a reverse fashion.
[laughter].
Excellent very good so speaking of.
Value proposition, if we switch over to to the I O R T size.
Stacy you mentioned.
Notion of of you know lobbying to try to get IRT included in the R. O. A P. M next year that it's been delayed the July.
Given the most recent data that you have put out there in terms of patient follow up and in terms of where the R. O. A P. M stands today, even with your exclusion the economics had have closed substantially.
Are you really focusing or at least at this point are you anticipating focusing specifically on those 30% of the ZIP code's that that that are going to be subject to a model is that where you go to market in the U S really is going to reside for now or.
How might you approach the other 70% too.
Yeah My questions Pat a couple of things in there first of all when we think about how we will approach C. M. S. N and we already have reached out to C. N S and in fact, we've already had a restaurant back to our NFL letter, which came in about a week's time frame and CMS.
Did he.
<unk> further dialogue with soft and also you know other stake holders as they think about potentially refining the model right now we don't know what the outcome at this level of course, but I thought it was a little bit encouraging that we received a response back so quickly and a willingness to at least have that discussion you know I'll just make a basket.
Uhm and then your question about how we're targeting our sales for so you know obviously now there's a delay in the ruling right in the implementation and it's still be July of next year. So we still have some time, but we will start to target. Those geography, you said are in the 30% where there is that much.
Much narrower gap between us and the competing treatment does not to say will abandon the other areas because I think that there are other dynamics going on such as the data.
Momentum that we have that are going to continue to give us a good chance of being successful in all of the geography Goodbye.
Isn't that 30% certainly we eliminate.
A lot of the economic hurdles that we've had to jump over for many many years because that delta is now so small and the cost of our technology. So much Alaska compared to the competing technology. So I do think that's a no brainer that we'll be able to have more success in that 30%.
That makes sense, one last question and just one it maybe more anecdotal.
And.
Of our silly that it is causing more of an interest in using a tool like profound AI too.
Be able to sort of prioritize which when you really don't want to wait to bring back in pursuing a mammogram right. So.
So I think the difference is that we now have a little bit of data to see what happens during the first few months of the pandemic and thats raising the urgency level.
Okay. If I can add on to that I had the big shortage some variance here with you.
You might say first generation.
Okay.
My time running or too so it's when we acquire biologic already.
Around that to your point between the second year. Unlike the third year in that window, and we're hitting that second year.
And the ends in December January the following things happened one is exactly would say stock that the data started.
And it's the data from many sites not there's one and not just the FDA is the most visible data comes in we got our big trade show coming up in December the data darts coming out.
Number two you start getting de Ya.
There are no further questions at this time I'll now turn the call back to Mike Klein for closing remarks.
Okay. Thank you I want to thank everybody for Ah Hey, we did not hanging with US today I know, there's a lot of earnings call today, So I'll just.
Sum it up by repeating some of my introductory comments or in the four point.
One is that in Q3, we generated significant revenue growth as compared to Q2, and again seems achieved to balance sales and an array of geographically diverse customers and profoundly I was the primary growth driver with 44% over Q2 held expenses flat and we had.
Strong growth in U.S. as well as a U.S. locations number two were found AI is risk could be a true game changer, and you've heard our our discussions on that and we'll be as transparent as we can with how that continues to build in the market. This product is significant commercial potential and.
Yeah, we're looking for for the introduction of three D. in early 2021, and number three or distribution agreement with change healthcare provides us with a new channel for profound AI and we expect that this relationship will expand it will start layering in a pay per patient model and we will.
Precisely provide color to all of our investors and analysts on how that will build from a modest level in 2021 do we hope the surging tied to multiple years with high margin recurring predictable revenue and finally glioblastoma is off I or t. offering presents in emerging and it.
Then there are the large opportunity for value creation and treatment of patients.
We are working with world renowned for clinicians and we are extremely excited to very shortly begin our multi site multinational clinical trial and with that I want to thank everybody for hanging it was that.
I know, it's a busy day lot of earnings calls are backed up at around this time, well, we look forward to a.
Talking with folks individually seeing folks it.
Coming to the Investor conferences and are continuing to do our best to earn your trust with the your investments and.
Okay. Thank you very much and have a great rest of your day.
That does conclude the kind of call for today, we thank you for participation and please disconnect your line.
[music].
Okay.