Q3 2022 Motus GI Holdings Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Modus GI Holdings Inc. third quarter 2022 financial and operational update. At this time, all participants are in a listen-only mode.

Third quarter, 'twenty, 'twenty, two financial and operational update.

At this time all participants are in a listen only mode.

It will be a presentation by Motus' management team followed by a question and answer session. I must advise you that the conference today is being recorded. I'd like to turn the call over to Garth Russell of [inaudible] Advisors. Please go ahead, sir.

Slowed by a question and answer session.

I must advise you that all of the conference.

All of that the conference today is being recorded.

I'd like to turn the call over to Garth Russell of Lifesize Advisors. Please go ahead Sir.

Garth Russell: Thank you operator, and thank you everyone for joining us for the Motus' GI third quarter 2022 update call today.

Representing the company are Tim Moran, Chief Executive Officer, Andrew Taylor, Chief Financial Officer, and Mark Pomeranz, President and Chief Operating Officer of Modus GI. Before I turn the call over to management for opening remarks, I would like to take a minute to remind you that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to certain risks and uncertainties that could cause actual results to differ.

Hi.

I turn the call over to management for opening remarks.

I would like to take a minute to remind you that this conference call and webcast will contain forward looking statements about the company.

Statements are subject to certain risks and uncertainties that could cause actual results to differ.

Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake any obligation to revise or publicly release the results of any revisions to these forward-looking statements [inaudible] new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K, and our other periodic reports on Form 10-Q and 8-K filed with the SEC. I'd like to turn the call over to Tim Moran, CEO of Modus GI. Tim, the floor is yours.

Are discussed in greater detail in our most recent filings on Form 10-K, and our other periodic reports on Form 10-Q, 8-K filed with the SEC.

I'd like to turn the call over to Tim Brandt CEO of modest Gi Tim floor is yours.

Timothy P. Moran: Thanks Garth, and good afternoon everyone. Thank you for joining our call today. I'm pleased to share an update on our progress through the third quarter of 2022 as well as provide early insight on what we're seeing in the fourth quarter. Following my update, Andrew will provide an overview of our financial performance for the third quarter, and then we will open the call to take your questions. Let's get started.

Following my update Andrew will provide an overview of our financial performance for the third quarter and then we will open the call to take your questions.

Let's get started.

We reported revenue in the third quarter of $278,000, which represents an approximate 50% increase compared with the second quarter of 2022, and our highest quarterly revenue to date. We continue to drive steady quarterly growth since the launch of our Pure-Vu EVS six months ago. With that as an overarching view, let me take a step back and offer some additional color behind the key drivers of our performance in the third quarter.

We continue to drive steady quarterly growth since the launch of our peer view Evs six months ago.

With that as an overarching view, let me take a step back and offer some additional color behind the key drivers of our performance in the third quarter.

Our success is being primarily enabled by the improvements we've made to our technology with the launch of Pure-Vu EVS, as well as the expansion of our commercial reach. Physicians continue to comment on Pure-Vu's efficacy and have been specifically complementary of the rapid setup, enhanced cleansing capabilities, and the flexibility to use at the bedside on the [inaudible] scope. All of these improvements were based upon direct feedback from our customers over the last three years.

Physicians continue to comment on pure views efficacy and have been specifically complementary of the rapid setup enhanced cleansing capabilities and the flexibility to use at the bedside on the dirty scope.

All of these improvements were based upon direct feedback from our customers over the last three years.

This brings me to the number of placements for the Pure-Vu EVS. Through the end of Q3, we now have Pure-Vu in use at 25 hospitals. As expected, most new placements are coming from customers with no prior experience and are comprised of a balanced mix between academic, community, and VA hospitals. While we believe Q3 represented a solid performance, we did see a handful of accounts delay their purchasing decisions to Q4, primarily driven by capital budget constraints and hospitals continuing to manage through staffing shortages. This leads me to our growth strategy and pipeline.

Through the end of Q3, we now have pure view in use at 25 hospitals.

As expected most new placements are coming from customers with no. Prior experience and are comprised of a balanced mix between academic community and VA hospitals.

While we believe Q3 represented a solid performance, we did see a handful of accounts delay their purchasing decisions.

Q4, primarily driven by capital budget constraints and hospitals continuing to manage through staffing shortages.

This leads me to our growth strategy and pipeline.

Now that we've established a solid base of hospitals with Pure-Vu EVS in use, we are incentivizing our sales team to increase same-store sales, meaning going deeper in existing accounts to drive higher quarter-on-quarter utilization within each site. Driving consistent repeat utilization is key to our long-term success as it will provide predictable recurring revenue. It is important that we have a thoughtful approach in each metro market to go deeper while also strategically expanding to new hospitals.

Driving consistent repeat utilization is key to our long term success as it will provide predictable recurring revenue.

It is important that we have a thoughtful approach in each metro market to go deeper while also strategically expanding to new hospitals.

Two metrics we continue to track are procedures by month at each facility and the number of physician users. Expanding our base of physician users is important as it speaks to our ability to extend adoption beyond the initial physician champions that we worked with during the evaluation period. Let me provide an example of the progress we're seeing in this area.

The number of physician users.

Spanning our base of physician users is important as it speaks to our ability to extend adoption beyond the initial physician champions that we worked with during the evaluation period.

Let me provide an example of the progress we're seeing in this area.

As a proxy for what we are expecting to see across our growing base of hospital accounts, one of our VA hospitals in the Midwest has increased their monthly procedure volume by approximately 40% from Q2 to Q3. This is a result of both expanding the number of physician users and our sales teams staying front of mind to be sure the doctors are thinking about the various opportunities where Pure-Vu EVS can benefit customers.

This is a result of both expanding the number of physician users and our sales teams staying front of mind to be sure. The doctors are thinking about the various opportunities where peer view evs can benefit customers.

Turning now to our pipeline, we have outlined our land and expand approach or targeting of additional hospitals within a health system following approval at the flagship center for the use of Pure-Vu EVS. In fact, we have already had success at several hospital networks in getting introduction to associated hospitals and centers. As an example, we recently received systemwide Vac approval at Texas Health Resources Group, a large system comprised of 24 affiliated hospitals, as well as the Methodist Health System in Houston comprised of eight affiliated sites.

In fact, we have already had success at several hospital networks and getting introduction to associated hospitals and centers.

As an example, we recently received systemwide Vac approval at Texas Health Resources Group, a large system comprised of 24 affiliated hospitals.

As well as the Methodist health system in Houston comprised of eight affiliated site.

During Q3, we also announced that the VA system has recognized Modus GI as a sole source provider and a small business. These special designations provide us direct access to the VA's procurement arm, thereby streamlining and shortening purchase decisions insight that expressed interest in deploying Pure-Vu EVS. The VA's population often experience higher rates of inadequate bowel preparation, travel longer distances for care, and can experience longer average wait times. 

These special designations provide us direct access to the Va's procurement arm, thereby streamlining and shortening purchase decisions insight that expressed interest in deploying peer view evs.

The va's population often experience higher rates of inadequate bowel preparation travel longer distances for care and can experience longer average wait times. Additionally.

Additionally, the VA medical centers have a strong desire to provide improved care for their patients and are penalized for referring procedures outside of the VA system. Ensuring a high quality procedure the first time is a top priority.

Ensuring a high quality procedure. The first time is a top priority.

Finally, the VA health care system is not beholden to the reimbursement policies of third-party payers. As a result physicians can use our Pure-Vu EVS system for both inpatient and outpatient procedures. In terms of sizing this opportunity, the Veteran's Health Administration is the largest integrated healthcare system in the United States, with approximately 170 hospitals performing approximately 645,000 colonoscopies over the last three years. We now have Pure-Vu EVS in used at five different VA medical centers, including two new agreements that closed in the third quarter. We are also actively pursuing new VA evaluations across the US, which we expect will result in new commercial agreements in the coming quarters. Now, let's discuss our progress on other key upcoming catalysts.

In terms of sizing this opportunity.

<unk> administration is the largest integrated healthcare system in the United States with approximately 170 hospitals performing approximately 645000 colonoscopy over the last three years.

We now have pure view evs and used at five different VA medical centers, including two new agreements that closed in the third quarter.

We are also actively pursuing new VA evaluations across the U S, which we expect will result in new commercial agreements in the coming quarters.

Now, let's discuss our progress on other key upcoming catalysts.

First, let me provide an update on our outpatient reimbursement study, a large outpatient-focused clinical study evaluating the use of the Pure-Vu EVS system. The study will enroll approximately 1000 patients with the primary endpoint designed to show a significant reduction in the number of aborted or poor-quality exams that lead to an early repeat procedure as defined by the GI tri-society guidelines. This study will be conducted at a mix of academic and community hospitals as well as ambulatory surgery centers, including NYU Langone health. We anticipate initiating this study in the near term with completion expected before the end of 2023.

The study will enroll approximately 1000 patients with the primary endpoint designed to show a significant reduction in the number of aborted or poor quality exams that lead to an early repeat procedure as defined by the GI try society guidelines.

This study will be conducted at a mix of academic and community hospitals as well as ambulatory surgery centers.

<unk> NYU Langone health.

We anticipate initiating this study in the near term with completion expected before the end of 2023.

The study's aim is to generate data quantifying the percentage of patients with inadequate prep and showing the Pure-Vu system's ability to achieve a substantial clinical improvement in those patients compared to the standard of care in a large multi-center trial. The results from this study are expected to support applications seeking reimbursement of the Pure-Vu system when used in certain outpatient colonoscopies.

The results from this study are expected to support applications seeking reimbursement of the pure vu system when used in certain outpatient colonoscopy.

We see a tremendous need in the outpatient market. However, without reimbursement for the Pure-Vu system, it is difficult for us to reach many of these patients. How big is the problem you may ask? The answer is that of the more than 18 million outpatient procedures conducted in the US each year, approximately one in four or almost $4.7 million patients struggle to get a high-quality prep prior to their procedure. This can lead to delayed, aborted, and repeat procedures, which puts a burden on the health care system and the patient, both from a clinical and economic perspective. However, early repeat exams only occur between 10 and 20% of the time as many patients do not come back as prescribed, leaving them at a higher risk for interval cancer.

How big is the problem you may ask.

The answer is that of the more than 18 million outpatient procedures conducted in the U S. Each year approximately one in four are almost $4 7 million patients struggle to get a high quality prep prior to their procedure. This can lead to delayed aborted and repeat procedures, which puts a burden on the health care.

System and the patient both from a clinical and economic perspective.

However, early repeat exams only occur between 10 and 20% of the time as many patients do not come back as prescribed leaving them at a higher risk for interval cancer.

Another pending catalyst that we expect to drive additional growth for our business is the Pure-Vu EVS upper Gi device. We continue to make progress advancing the development of the Pure-Vu EVS Gastro, which is designed to add upper Gi capabilities to the existing Pure-Vu EVS workstation platform. Some of the key enhancements in the EVS system, such as a much larger suction channel, more efficient irrigation jets, a smaller profile and improved flexibility will be further optimized to allow the system to provide broad utility in an upper Gi procedure. This device has the potential to address a significant unmet need by providing improved visualization during challenging upper Gi bleed cases. These procedures can be complex and challenging, with a reported mortality rate of approximately 13%. We believe the addition of an upper Gi solution enhances the overall value proposition of our Pure-Vu EVS platform. In early Q4, we completed an animal and cadaver lab, which provided solid initial feedback on the eventual design of the new device. The product development project is on track with an anticipated launch in 2023.

We continue to make progress advancing the development of the peer view Evs gastro, which is designed to add upper Gi capabilities to the existing peer view Evs workstation platform.

Some of the key enhancements in the Evs system, such as a much larger suction channel more efficient irrigation jets.

A smaller profile and improved flexibility will be further optimized to allow the system to provide broad utility in an upper Gi procedure.

This device has the potential to address a significant unmet need by providing improved visualization during challenging upper Gi bleed cases.

These procedures can be complex and challenging with the reported mortality rate of approximately 13%.

We believe the addition of an upper Gi solution enhances the overall value proposition of our peer view Evs platform.

In early Q4, we completed an animal and cadaver lab, which provided solid initial feedback on the eventual design of the new device. The product development project is on track with an anticipated launch in 2023.

The product development project is on track with an anticipated launch in 2023.

Finally, turning to potential strategic partnerships and collaboration. We continue to pursue various opportunities with strategic partners, both in and outside of the US. We believe success with our commercial program can provide us with potential opportunities in the future. Our focus in evaluating these opportunities is centered upon accelerating our commercial progress and potentially strengthening our balance sheet.

We continue to pursue various opportunities with strategic partners, both in and outside of the U S.

We believe success with our commercial program can provide us with potential opportunities in the future.

Our focus in evaluating these opportunities is centered upon accelerating our commercial progress and potentially strengthening our balance sheet.

With that, I'll now turn the call over to Andrew to provide details on our Q3 2022 financials. Andrew?

Andrew.

Andrew Lawrence Taylor: Thank you Tim, and thank you everyone for joining us today.

We reported revenue for the third quarter of 2022 of $278,000, compared to $141,000 for the same period last year. Revenues for this past quarter also represented an approximately 50% increase over the second quarter of 2022, and were primarily derived from reorders and new customer orders of disposable sleeves, as well as limited workstation sales and rentals.

Revenues for this past quarter also represented an approximately 50% increase over the second quarter 2022.

And we're primarily derived from Reorders and new customer orders of disposable sleeves.

As well as limited workstation sales and rentals.

For the three months ended September 30, 2022, we reported a net loss attributable to common shareholders of $5 million or $1.69 per basic and diluted share, compared to a net loss attributable to common shareholders of $4.8 million or $2 per basic and diluted share for the same period last year.

We reported a net loss attributable to common shareholders of $5 million.

Or $1 69 per basic and diluted share.

Compared to a net loss attributable to common shareholders of $4 8 million.

For $2 per basic and diluted share for the same period last year.

During the third quarter of 2022, net cash used in operating activities and for the purchase of fixed assets was $3.8 million compared to $3.1 million for the same period of 2021.

Net cash used in operating activities and for the purchase of fixed assets was $3 8 million compared.

Compared to $3 1 million for the same period of 2021.

At September 30, 2022, we reported $13.3 million in cash and cash equivalents, which includes our fully funded credit facility with [inaudible] capital. There are no financial or liquidity covenants associated with this facility.

<unk> are fully funded credit facility with <unk> capital.

There are no financial or liquidity covenants associated with this facility.

After the third quarter ended, we sold approximately $5.5 million worth of shares from our existing at the market facility. As a result, our current cash balance is expected to meet anticipated needs through the second quarter of 2023.

As a result, our current cash balance is expected to meet anticipated needs through the second quarter of 2023.

And now I will turn the call back over to Tim.

Timothy P. Moran: Thanks Andrew, and thank you everyone for joining our call today.

We are pleased by the progress our commercial organization continues to make in launching Pure-Vu EVS in the US market. We plan to build on this momentum by driving higher account utilization, while strategically expanding new sites. I'll now ask the operator to open the call for your questions.

We plan to build on this momentum by driving higher account utilization, while strategically expanding new sites.

I'll now ask the operator to open the call for your questions.

Operator: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. To ask a question, please press star one now.

At this time, we will be conducting a question and answer session.

I would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions to ask question. Please press star one now.

We have the first question from the line of Steve Lichtman with Oppenheimer & Co. Please go ahead.

Steven Michael Lichtman: Thank you, evening guys. Tim, I was wondering if you could start with you mentioned a handful of accounts that you think pushed off into the fourth quarter. Can you talk a little bit about the visibility on those purchases and confidence in those coming through before year-end? And then maybe just broadly, I know you talked about balancing between going deeper in current accounts and expanding but maybe talk a little bit about what that new customer account pipeline does look like for you guys at this point.

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Tim I was wondering if you could start with you mentioned.

Handful of accounts that you think pushed off into the fourth quarter can you talk a little bit about the visibility on those.

Purchases and confidence in those coming through.

Before yearend.

And then maybe just broadly I know you talked about balancing between going deeper in current accounts and expanded but maybe talk a little bit about what that new customer account pipeline does look like for you guys at this point.

Timothy P. Moran: Sure, Steve. Thanks for the questions. The first part of the question, in terms of my comments about some accounts that got pushed into Q4, that comment is mainly from a contextual perspective about demand. We wanted to make sure it was clear that the demand has been there, we had a good quarter with nice growth, about 50% over prior quarter, but I think it could have been a bit stronger had it not been for few mainly capital deals Steve that were budgeted and expected to have the funds released in the third quarter and that did not happen, which we've seen before, so they are now on target for Q4. Hopefully, that comes through as planned. We've seen these delays occur and our accounts at times don't have full visibility to when the funds will actually be given to them to make the purchase but we're hopeful that a couple of these that got pushed off will come through in the fourth quarter. We are building a nice pipeline of capital, so eventually, these funds will clear, and it will start to hit the numbers.

The first part of the question in terms of.

My comments about.

Some accounts that got pushed into Q4.

<unk>.

It's mainly from a contextual perspective about demand.

We wanted to make sure. It was clear that the demand has been there we had a good quarter with nice growth about 50% over prior quarter, but I think it could have been a bit stronger had it not been for a.

A few mainly capital deal Steve that.

Were budgeted and expected to have the funds released in the third quarter and that did not happen, which we've seen before so they are now on target for for Q4.

Hopefully that comes through as planned.

We've seen these delays occur.

Our accounts at times don't have full visibility to when the funds will actually be given to them to make the purchase but we're hopeful that a couple of these that got pushed off what will come through in the fourth quarter.

Building, a nice pipeline of capital so.

Eventually these funds will clear and it will start to hit the numbers.

In terms of the approach, so as you mentioned, we've always been focused obviously on driving kind of same-store sales and conviction around the procedure. But I think as we look at the base of accounts now that we've built, it's really important that we drive kind of the stickiness across the board across all accounts. We've been able to now see what great looks like in some of the accounts that I referenced where you're seeing 20% to 40% procedural increase quarter over quarter, but we're not seeing that in all accounts. And when we diagnosed that, what it looks like to us is some of these sites just need a little bit more handholding and our rep to be there and kind of keep things front of mind for the physicians until this becomes muscle memory. Because remember at the end of the day, we're not just a competitive product, we're building a new procedure, if you will, and got to stay front of mind. So as we focus on Q4, we've asked the sales team, and we're incentivizing them to go a bit deeper in their account. That doesn't mean they're not going to expand to other sites, but I want to see some of that same-store sales start to really ramp up across the board. We are still managing across our sales organization anywhere between eight and 12 accounts per rep that they are working for in terms of pipeline, Steve, so we still have plenty of opportunity as you know to be able to both expand and drive utilization.

The approach so as you mentioned, we've always been focused obviously on driving kind of same store sales and conviction around the procedure.

But.

I think as we look at the base of accounts now that we've built it's really important that we drive kind of the stickiness across the board across all accounts, we've been able to now see what what great looks like and some of the accounts that I referenced where youre seeing.

1% to 40% procedural increase quarter over quarter, but we're not seeing that in all accounts and when we diagnosed that what it looks like to US is some of these sites just need a little bit more handholding and our rep to be there and kind of keep things front of mind for the for the physicians until this becomes muscle memory, because I remember at the end of the day, we're not.

Just competitive product we're building a new.

Procedure, if you will and <unk> got to stay in front of front of mind. So as we focus on Q4, we've asked the sales team and we're incentivizing them to go a bit deeper in their account that doesn't mean, they're not going to expand to other sites, but I want to see some of that same store sales start to really ramp up across the board.

Still managing across our sales organization anywhere between eight and 12 accounts per rep.

They are working for them in terms of pipeline, Steve. So we still have plenty of opportunity as you as you know.

And be able to both expand and drive utilization.

Steven Michael Lichtman: Got it. Just in terms of some context, you mentioned some of the growth in higher volume users, on an absolute procedure basis, what does the higher volume user look like right now in terms of the number of procedures per month or any sort of metric you can provide?

In terms of some context, you mentioned some of the growth in higher volume users on an absolute procedure basis, what does the higher volume user look like right now in terms of number of of.

Timothy P. Moran: Really anything north of 10 procedures a month consistently is where we want to see our accounts. And obviously, we think over time as we penetrate more physicians and it becomes kind of second major tool to all of the docs in the unit, we can go much higher than that but north of 10 procedures a month is really what we want to see across the board Steve.

<unk> is where we want to see our accounts and obviously, we think over time as we penetrate more physicians and it becomes kind of second major tool to all of the docs in the in the unit.

Can go much higher than that but.

North of 10 procedures, a month is really what we want to see across the board Steve.

Steven Michael Lichtman: Got it. And then just lastly, you mentioned on track of the Gastro device for next year, can you remind me what your plans are relative to reimbursement? Where will this fall within perhaps on the DRG side and is there anything you need to do from a CPT perspective as you look to launch this product?

What your plans are relative to reimbursement.

Fall within perhaps on the DRG side and is there anything you need to do from a CPT perspective, as you look to launch this product.

Timothy P. Moran: Sure. So just a couple of comments I'll make there. We remain bullish on this upper GI device. There is absolutely a big gap in the market and that's been validated across many physicians and KOLs across the country, and we've got a lot of them providing advisory services, participating in the cadaver and animal labs that I mentioned in the prepared remarks. So we're excited on the development, and it remains on track. Now as it relates to reimbursement and even clinical activities, let me provide a little bit of color and then I'll kick it over to Mark and he can add some additional.

The cadaver at animal labs that I mentioned in the prepared remarks. So we're excited on the development and it remains on track now as it relates to reimbursement and even clinical activities. Let me provide a little bit of color and then I'll kick it over to Mark and he can add some additional.

Initially, a lot of these procedures Steve are happening in the hospital. So we are looking at a DRG scenario, so not dissimilar to the ROI model that we present today as it relates to lower Gi in colons. Now obviously, not avoiding hospitalization nights necessarily, but we believe we'll be able to with our device to really dramatically cut the time down of these procedures. They can have a complex upper Gi bleeder that can take a couple of hours to ultimately get to the source of the bleed and identify and treat that bleed. By providing pristine visualization during the procedure, allowing them to make that procedure go much more quickly, we believe that the benefit of that will be well worth the price.

The ROI model that we present today.

As it relates to lower Gi in Cola is now obviously.

Not avoiding hospitalization nights necessarily but we are able we believe we'll be able to with our device to really dramatically cut the time down of these procedures. They can have a complex upper Gi bleed or that can take a couple of hours to ultimately get to the source of the bleed and and and.

Identify and treat that bleed.

By providing pristine visualization during the procedure, allowing them to make that procedure go much more quickly we believe that the benefit of that will be well worth the price.

We've done some kind of pricing analysis in the market as well and because there is such a gap there and this is a high mortality procedure, we think this is a device that is going to be less about cost, particularly if it is giving them the visualization that they're are seeking today. So let me kick it to Mark, Mark you want to add any additional color as it relates to kind of reimbursement and how we're thinking about that or even clinical activities once we have the device available?

We think this is a device that.

<unk> is going to be less about cost, particularly if it is is giving them. The visualization that theyre. They are speaking today. So let me kick it to Marc if Mark you want to add any additional color as it relates to kind of reimbursement and how we're thinking about that or.

Clinical activities once we have the device available.

Mark Pomeranz: Sure, thanks, Tim. I think Tim hit the highlights on that being it is really again more of that DRG inpatient scenario. And as Tim mentioned, these are high acuity patients and a lot of these patients or significant leaders are being transfused, and they can't get visualization and get in there to IR or more expensive more invasive types of procedures as well, let's say like to avoid and another thing that happens too when they get in they can't see anything like a bleed, they will try to see if they can do similar hemodynamic stabilization on these patients. They're going to have to go back and what they call a second look endoscopy and after again more transfusions and other issues around these patients. It really isn't like in the colon, they could technically say, okay, let me go prep the patient more but for the upper Gi there is really nothing that works well. They will typically try to give erythromycin that choice to [inaudible] digestive track along a little faster, but that really doesn't do much of anything for these bleed patients.

I think Tim Tim hit the highlights.

That being you know it is really again more of that DRG inpatient scenario.

And as Tim mentioned these are high acuity patients and there are a lot of these patients are significant leaders are being transfused.

And they can't get visualization and get in there.

To IR or more expensive more invasive.

<unk> procedures as well, let's say like to avoid and.

And another thing that happens too when they get in they can't see anything like a bleed.

We will try to see if they can do similar hemodynamic stabilization on these patients I'm going to have to go back and what they call a second look endoscopy and after we you know.

And again more transfusions and other issues around these patients.

Really isn't like in the colon.

Technically say, okay. Let me go prep the patient more but for the upper Gi there is really nothing that works well it will typically try to give a erythromycin that choice now digestive.

Digestive track, along a little faster, but that really doesn't do much of anything.

These three patients.

Steven Michael Lichtman: Got it. Thanks, Tim. Thanks, Mark.

Timothy P. Moran: Thank you Steve.

Operator: Thank you. We have the next question from the line of Ben Haynor with Alliance Global Partners. Please go ahead.

Benjamin Charles Haynor: Good afternoon, gentlemen. Thanks for taking my question. Just following up on your response to one of Steve's questions. On the utilization front, you mentioned the kind of consistent repeat utilization being the key to long term growth and on one hand, it's obviously what every company wants. But it sounds in your answer to the earlier question that you may have found a sort of threshold that once an account hits 10 per month, then you'll see utilization accelerated. Is that kind of a fair characterization of what you're seeing there and if they don't get to 10, then it kind of falls out? Any more color there would be helpful.

Just following up on. Your response. Steve's questions on the utilization front, you mentioned, the kind of consistent repeat utilization being the key to long term growth on one hand, it's obviously what every company wants. But it sounds in your. The answer to the earlier question that you. You may have found sort of threshold that. Once an account hits 10 per month, then you'll see utilization accelerated is that kind of a fair characterization. What youre seeing there and if they don't get to 10, and then it kind of falls out any more color there would be helpful.

Your response. Steve's questions on the utilization front, you mentioned, the kind of consistent repeat utilization being the key to long term growth on one hand, it's obviously what every company wants. But it sounds in your. The answer to the earlier question that you. You may have found sort of threshold that. Once an account hits 10 per month, then you'll see utilization accelerated is that kind of a fair characterization. What youre seeing there and if they don't get to 10, and then it kind of falls out any more color there would be helpful.

Steve's questions on the utilization front, you mentioned, the kind of consistent repeat utilization being the key to long term growth on one hand, it's obviously what every company wants. But it sounds in your. The answer to the earlier question that you. You may have found sort of threshold that. Once an account hits 10 per month, then you'll see utilization accelerated is that kind of a fair characterization. What youre seeing there and if they don't get to 10, and then it kind of falls out any more color there would be helpful.

But it sounds in your.

The answer to the earlier question that you.

You may have found sort of threshold that.

Once an account hits 10 per month, then you'll see utilization accelerated is that kind of a fair characterization.

What youre seeing there and if they don't get to 10, and then it kind of falls out any more color there would be helpful.

Timothy P. Moran: Yes sure, Ben. Thanks for the question. So I would say, it's a combination of things when you kind of diagnosis it at the granular level, right? There are different dynamics in each hospital as you would imagine, but I do think 10 is a number that we've now seen our best accounts in terms of volume be able to get to and typically why that happens is one, there are multiple physicians that are utilizing the device. So if it's one of the doctors is not an inpatient service, we're still getting procedures happening and there is not a gap of time before Pure-Vu gets pulled in gets used again so a number of physicians. But also just influencing the team and the staff to be thinking about Pure-Vu as a tool and to be kind of thinking proactively about that patient coming down and being sure that they're giving them the optimal care, and just the reality of change management and all the dynamics with that, you kind of need to be front of mind in certain facilities in order to make sure that they are thinking about this. And the more they think about it and the more they do it, the more it becomes second nature and the more volume we get, so it kind of plays together. 

Each hospital as you would imagine, but I do think 10 is a number that we've now seen our best accounts in terms of volume be able to.

Get to and typically why that happens is one there is.

There is multiple physicians that are utilizing the device right. So if it's one of the DOCSIS is not an inpatient service, we're still getting procedures happening and there is not a gap of time before purely it gets pulled in gets used again so.

<unk> of physicians, but also just influencing.

The team and the staff to be thinking about peer view as a tool and to be kind of thinking proactively about that patient coming down and being sure that theyre, giving them the optimal care and just the reality of change management and all the dynamics of with that you kind of need to be front front of mind.

Certain facilities in order to make sure that they are thinking about this and the more they think about it and the more they do it's more become second nature and the more volume we get right. So it kind of plays together one of the things we're doing Ben.

One of the things we're doing Ben, in addition to just putting a little bit more focus on that from a rep perspective, we are also piloting some contracted clinical heads in a few metro areas to determine if we have someone that was kind of on the ground constantly rotating between our facilities that have the device and being in those accounts, talking about Pure-Vu, grabbing physicians, training them, will that start to drive more same-store sales while our rep is able to then go expand to other sites? So we're looking at that as well. We will provide updates as we get further into it, but that's some action that we're taking differently just kind of try to test that theory that being there drives more procedures.

Some contracted clinical heads in a few metro areas.

To determine if we had someone that was kind of on the ground constantly.

<unk> between our facilities that have the device and.

And being in those accounts talking about pure vu grabbing physicians training them.

Will that start to drive more same store sales, while our rep is able to then go expand to other sites. So we're looking at that as well we will provide updates as we get further into it but that's something that some action that we're taking differently just kind of try to test that theory that being there drives more procedures.

Benjamin Charles Haynor: Okay. And then maybe a little bit of a follow up on that. Once you get to that kind of threshold level, that level of utilization, is it easy to kind of move with the sales force assets to go drive utilization in another account and that account is kind of automatic at that point? Or what are you seeing out there?

Once you get to that kind of a threshold level of that.

The level of utilization.

Is it.

Easy to kind of.

It moves with the sales force assets to go drive utilization another call.

Timothy P. Moran: Yeah exactly. So when you look at those accounts that are doing the most volume for all those reasons I just stated, those are also the accounts that we kind of deem independent, meaning they don't need us to be there for them to either one visit or they don't need help to use it, right? So in some of the accounts where we're not getting as high utilization, oftentimes, that can come down to just comfort level of the staff setting it up and getting it ready or the physician may be only has done a couple of cases, so they're not apt to just grab it. So as we get them up to that level then they become much more independent and we just kind of see the revenue starting to roll in.

Some of the accounts, where we're not getting as high utilization.

Oftentimes that can come down to just comfort level of the staff you know setting it up and getting it ready or the physician may be only has done a couple of cases, so they don't they're not apt to just grab it right. So as we get them up to that level then they become much more independent and we just kind of see the revenue starting to roll in.

Benjamin Charles Haynor: Okay, that's helpful. And then just on the VA situation, that sounds like a great development for you guys. How broad and how quickly do you think these 170 or so VA hospitals could adopt Pure-Vu?

The VA situations.

Situations that sounds like a.

Great development for you guys.

How broad and.

And how quick do you think the <unk>.

170, or so VA hospitals could.

Sure.

Sure view.

Timothy P. Moran: Yeah, So we look at the opportunity as really a good focused area for us to spend our time, and as you would imagine, we've got our sales team acutely focused on any VAs that are in their areas. That system does about over 200,000 colonoscopies a year right across those 170 facilities. So these are high volume accounts. As we talked about there, there are patients oftentimes have higher bowel prep issues, so great target for Pure-Vu. So we're doing a couple of different things. So in addition to just our feet on the ground and the reps getting into these accounts and building relationships, we're also doing kind of from a marketing perspective, we've now done outreach directly to all 170 VAs. That's in the works, but it will be completed before the end of the year. And they're receiving not only information on Pure-Vu but they are receiving the value analysis, ROI model, so all of that information is kind of front and center. So we're trying to soften the ground for the sales team if you will.

We look at the opportunity.

Has really good focused area for us to spend our time and as you would imagine we've got our sales team acutely focused on any <unk> that are in their areas.

That system as it does about over 200000 colonoscopy is a year right across those 170 facilities. So these are high volume accounts as we talked about there.

Patients oftentimes have higher.

Bowel prep issues right. So great target for peer view. So we're doing a couple of different things. So in addition to just our feet on the ground and the reps getting into these accounts and building relationships. We're also doing kind of from a marketing perspective, we've now done outreach to directly to all 170 <unk>.

That's in the works, but it will be completed before the end of the year and they're receiving not only information on pure view, but they are receiving the value analysis ROI model. So all of that information is kind of front and center. So we're we're trying to soften.

Multiple speakers: [Timothy Moran]We also are conducting national webinars. We executed one in September where we had a KOL from VA that's using Pure-Vu on a regular basis, and we were able to invite other physicians from across the country who are working at VA hospitals and we were able to hear directly from one of their colleagues and peers exactly how they are using Pure-Vu and what the benefit has been. So we're scheduling another one of those here in the fourth quarter, and I think bringing all of this attention will allow us to try to accelerate the opportunity. I would say Ben right now, we have probably 15 to 20 VAs that are in our nearer-term pipeline, so over the next couple of quarters that we're going to work towards trying to bring online. We were able to close two in this past quarter, and we've got several that are pending for Q4, so I think you'll start to see us report more closes within the VA now that we've got this designation. [Benjamin Haynor] So it could be you are closing several or maybe even half a dozen a quarter as we look out a couple of few quarters. [Timothy Horan] I think that's reasonable. As we look out into 2023, for each rep, if you break it down across the country, they've got a handful each if not more, so to bring those home, I think seems very realistic.

Executed one in September where we had our kols from VA, that's using peer review on a regular basis.

And we were able to invite us.

Other physicians from across the country, who are working at VA hospitals and were able to hear directly from one of their colleagues and peers.

Exactly how they are using peer view and what the benefit has been so we're scheduling another one of those here in the fourth quarter.

And I think bringing all of this attention will allow us to try to accelerate the opportunity I would say Ben right now we have probably 15% to <unk> that are in our nearer term pipeline. So over the next couple of quarters that we're going to work towards trying to bring online we were able to close two in this past quarter and we've got <unk>.

Well that are pending for Q4, so I think youll start to see US report more closes within the VA now that we've got this designation.

So it could be you are closing.

Several or maybe even half a dozen a quarter as we look out a couple of few quarters.

I think thats reasonable.

As we look out into 2023.

For each rep, if you break it down across the country.

<unk> got a handful each if not more so to bring those home I think seems very realistic.

Benjamin Charles Haynor: Okay, great. Thanks for the color gentlemen. I'll leave it at that.

Thanks for the color gentlemen.

I'll leave it at that.

Timothy P. Moran: Thanks Ben, I appreciate it.

Operator: Thank you. Again, to ask a question, please press star one on your touchtone phone now. The next question is from the line of [inaudible] Chen with H C. Wainwright. Please go ahead.

To ask a question. Please press star one knowing that that's done for now.

Next question from the line of <unk> Chen with H C. Wainwright. Please go ahead.

Unknown Speaker: Hi, congrats on all the progress. This is [inaudible] on behalf of [inaudible]. I just have two quick questions, and a few others have been answered. The first one being, what are your target numbers of hospital placements by the end of 2022 and the end of 2023 if possible? And is the volume of colonoscopy procedures still below normal levels for most hospitals? And lastly, can we expect more publications either in the near term or even 2023? Thank you.

On behalf of the chain.

I just have two quick questions and a few others have been answered.

The first one being what are your target number of hospital placements by the end of 'twenty, two and the end of 2023 if possible.

And as the volume of colonoscopy procedures still below normal levels for most hospitals.

And lastly.

Can we expect more publications either.

And the next in the near term or even 2023. Thank you.

Timothy P. Moran: Sure. Thank you for the questions. Okay, so let me take the first couple and I'll have Mark expand on some publication work that we're doing, and we just had a few presentations at the most recent GI conference, the ACG conference, so we'll circle back on that.

Presentations at the most recent GI conference the ACG conference. So we'll circle back on that but.

Initially, we have not provided publicly a hard number in terms of the number of sites either this year or in 2023. I would expect that there will come a time where we will do that. The reason we haven't is as you hear from my commentary today, this process of getting these accounts up and running and getting them to be sticky requires us to be nimble. So I would rather see us go deeper into the 25 hospitals that have Pure-Vu today and drive revenue than repeat disposable revenue each quarter, quarter in quarter out while we expand strategically with the resources that we have. So if you all recall, we are still a relatively small sales organization. So there are only so many resources and we have to be very efficient and effective with those. So we're not looking to just chase a number and say we got into a 100 accounts, because over time, that may not be a strong sustainable business if you don't have conviction around the procedure. So we will provide more detail in the future as it relates to hard point numbers of accounts, but I think as you've seen, we launched this new product in March and we are now already into 25 accounts, so that can give you a little bit of a sense of run rate.

This this process of getting these accounts up and running and getting them to be sticky.

<unk> us to be nimble right. So we want to see I would rather see us go deeper into the 25 hospitals that have peer viewed today and drive revenue then repeat disposable revenue each quarter quarter in quarter out, while we expand strategically with the resource.

That we have right. So if you if you all recall we have are still relatively small sales organization. So theres only so many resources, we have to be very efficient and effective with those so.

Not looking to just chase a number and say we got into a 100 accounts because over time that may not be.

A strong sustainable business. If you don't have conviction around the procedure. So we will provide more detail in the future as it relates to hard point numbers of accounts, but I think as you've seen we launched this new product in March and we are now already into 25 accounts. So that can give you a little bit of a sense of a run rate.

In terms of hospital procedures, we think that post the COVID period, procedure volumes for colonoscopy certainly feel like they're back to where they were. I think the impact that we're seeing mostly on our business is given the current economy and all of the other macro pressures of this market, capital funds continue to be under pressure as noted in some of the delays that we've seen and some hospitals are still dealing with staff shortages as you probably heard from other companies that have reported, right? So that just puts kind of a bit of elongation on the sales cycle at times in certain areas. So I would say that's kind of our view of the current market dynamics right now, and then let me kick it over to Mark if you could just talk a little bit about abstracts and clinicals.

We think that post the Covid period procedure volumes for colonoscopy is certainly feel like they're back to where they were I think the impact that we're seeing mostly on our business is.

Given the current economy in all of the other macro pressures of this market capital funds continue to be under pressure as noted in some of the delays that we've seen and some hospitals are still dealing with staff shortages as you probably heard from other companies that have reported right. So that just puts.

I have a bit of a elongation on the sales cycle at times in certain areas. So I would say that's kind of our view of the current market dynamics right now and and then let me kick it over to Mark.

Could just talk a little bit about abstracts in clinical.

Mark Pomeranz: Sure. So a few things on abstracts and publications and clinical data in general. As Tim mentioned, we actually had three abstracts presented data at the ACG meeting back in October, which was nice because that was the lowest we've ever had in any one meeting in the history of the company. One of the nice things we're seeing too and also being approached by investigators doing their own research and publishing their own data around Pure-Vu, so we're seeing some independent studies around that which is really nice to see because that shows their conviction around the technology. And also looking at folks besides the big clinical trial that we've talked about for pushing reimbursement, but also working with several folks on investigator initiated type studies where we help support their research as they see things moving forward. So we think that will continue to generate abstracts and some of these things will turn into full manuscripts into next year and beyond.

So a few things on abstracts and publications and clinical data.

In general as Tim mentioned, we actually had three <unk>.

<unk> presented data at the ACG meeting back in October , which was a nice because that was the lowest we've ever had in any one meeting in the history of the company and one of the nice things, we're seeing two and also being approached by is <unk>.

That's the Gators doing their own research and publishing their own data around the peer view.

We're seeing some independent studies around that which is really nice to see because that shows there their conviction around the technology.

And also looking at with folks besides the critical trial that we've talked about for pushing reimbursement, but also working with several folks.

Destiny <unk> initiated type studies, where when we help support their research.

As they think see things moving forward. So we think that will continue to generate abstracts and some of these things will turn into four menu scripts.

Into into next year and beyond.

Multiple speakers: [Unknown Speaker] Thank you so much. [Timothy Moran] Thanks Mark.

Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I'd like to turn the call back over to Tim Moran, CEO for closing remarks. Over to you sir.

Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call back over to Tim Moran CEO for closing remarks over to you Sir.

Timothy P. Moran: Yes, thank you very much operator, and I just want to thank everyone for joining our call today. As I noted earlier, we're pleased with the progress that we're making. The commercial team continues to drive incremental quarterly growth. We have some significant catalysts upcoming that we talked about today during the call, both around the product development opportunity innovation for upper Gi as a new indication, as well as the investments that we're making around additional clinical data to validate the Pure-Vu system, and ultimately work towards reimbursement. So I appreciate your time and attention, and we'll look forward to providing another update at the end of this quarter, so thanks for joining.

As I noted earlier, we're pleased with the progress that we're making that the commercial team continues to drive incremental quarterly growth.

Have some significant catalysts upcoming that we talked about today during the call both around the product development opportunity innovation for upper Gi as a new indication.

As well as the investments that we're making around additional clinical data.

To validate the pure Vu system, and ultimately work towards reimbursement. So I appreciate your time and attention and we'll look forward to providing another update at the end of this quarter. So thanks for joining.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference, you may disconnect your lines at this time. Thank you for your participation.

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