Q4 2022 Profound Medical Corp Earnings Call

Okay.

Good day, and thank you for standing by welcome to the profound medical fourth quarter and full year 2022 financial results Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you need to press Star one one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one one again please.

Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Stephen Kilmer Investor Relations. Please go ahead.

Thank you good afternoon, everyone. Let me start by pointing out that this conference call will include forward looking statements.

Within the meaning of applicable securities laws in the United States and Canada.

All forward looking statements are based on per pounds current beliefs assumptions and expectations and relate to among other things expectations regarding the efficacy of the Companys treatment technologies results of future clinical trials, the ability to obtain coating and our reimbursement from third party payers anticipated financial performance business prospects strategies regulatory developments.

Market acceptance and future commitments.

Such statements involve known and unknown risks uncertainties and other factors that may cause actual results performance or achievements to be materially different from those implied by such statements. No forward looking statement can be guaranteed.

Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this conference call.

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.

For the benefit of those who are new to the profound story I would also like to take a moment to summarize our business profile in developed markets customizable incision free therapies for the ablation of disease tissue.

We are currently commercializing Tulsa pro technology that combines real time, MRI robotically, driven transfer urethral ultrasound and closed loop temperature feedback control.

The technology is designed to provide customizable and predictable radiation free ablation certified prostate volume.

Could be protecting the Eureka and rectum to help preserve the patient's natural functional abilities.

Tulsa Pro is CE marked health care proves Empire pipeline K cleared by the FDA.

In the U S and deploy a pure recurring revenue model for Tulsa pro whereby we charge customers on a per procedure basis for Tulsa Pro consumable medical devices and services associated with extended warranties.

Outside of the United States, primarily in supply of capital and consumables.

And service models separately as the situation warrants that.

We are also commercializing funnel is an innovative therapy.

Computed platform for the CE Mark for the treatment of uterine fibroids and palliative pain treatment of bone metastases.

Finally, it has also been approved by the China National Medical products administration, but is based on the treatment of uterine fibroids and has recently obtained FDA approval.

Turning device exemption for the treatment of Hospira.

Hospira Osceola.

Business model for finally systems, it's currently a onetime sale of capital equipment.

On the call today, representing the company are Dr. Arun <unk>, <unk>, Chief Executive Officer, and Chairman and Richard <unk>, The company's Chief Financial Officer with that said I'll now turn the call over to Richard.

Good afternoon, everyone.

Welcome to our fourth quarter.

22 conference call.

On behalf of the management team and we wanted to profile.

Like to thank you for your ongoing interest in our company.

For those of you who are shareholders.

We appreciate your continued interest and support.

I will turn the call over to Arun in a few moment for an update on our commercial activity.

However, before I do.

I would like to provide a brief update on our fourth quarter 2022 financial results.

To streamline things.

All of the numbers will refer to have been rounded.

So darrin proximate.

For the three months period ended December 31, 2022, the company recorded revenue of $1 3 million.

With the full amount coming from recurring revenue.

Fourth quarter 2022 revenue increased 26%.

$1 million from the same period in 2021.

Which also did not include any capital revenue.

That said.

Our capital project pipeline in markets outside U S is strong.

And we do expect to have capital revenue in the future periods.

As previously stated we only sell capital in the U S market.

Gross margin for the three months.

And year ended December 31, 2022.

44% and 45% respectively.

Compared to Q.

50%.

43% for the same period of 2021.

While our gross margin is good at this early stage.

As the recurring revenue increases.

We expect the margin will improve from the current level.

Long term we.

We expect our gross margin to be better than 75%.

Regarding revenue Outpaces capital Rabbit.

Total operating expenses in the 2022 fourth quarter, which consist of <unk>.

R&D.

<unk>.

And selling and distribution expenses.

Nine four.

$4 million.

A decrease of 8% compared with $10 $2 million.

In the fourth quarter of 2021.

Primarily due to decreased.

Noncash share based compensation expenses.

We expect our.

Net cash burn related to operation.

To be in the $550 million range theme.

<unk>.

Financial year 2022.

Breaking that down partner.

Expenditure.

Our R&D.

Decreased 34%.

On a year over year RBC to $3 1 million.

G&A expenses.

Decreased by 35% to $2 1 million.

And selling and distribution expenses decreased by 27% to $1 7 million.

Partially offsetting the decreases in R&D.

Net.

And selling and distribution expenses.

Recognize and noncash impairment.

<unk> $2 5 million.

In the fourth quarter of 2022.

Presenting all of the goodwill associated with the finally business.

As the return to business in China.

<unk> to be delayed due to COVID-19.

Net finance costs.

For the 2022 fourth quarter was half a million dollar.

Consistent with the same three month period up 2021.

Overall.

The company recorded a fourth quarter 2022, net loss of $9 5 million.

<unk> 46 per common share.

Paired with a net loss of $10 2 million or 49.

Sure.

Three months period in 2021.

As at December 31, 2022, profound had cash of $46 5 million.

Gains on the company's current Barnes rate.

We believe that its current cash position.

Sufficient to fund operations into Q1 2025.

With that I will now turn the call over to Laura.

Thank you Richard.

Beginning with our financial performance.

Recurring revenue continues to meet expectations.

Was the sole driver of this quarter's revenue increase compared to Q4 2021.

We reported no capital equipment sales for the quarter largely due to continued COVID-19 related headwinds in select markets, such as Japan and China.

While we do not believe this is representative of the future we cannot predict when international capital sales will resume at or above the rate we have reported in previous quarters.

Regardless our.

Men task is.

Driving utilization of Tulsa in the United States.

As you know it is a game changing technology and the hurdles that we have space mostly.

Led to the changes.

Wired to instill the new practice of a substantive new technology.

We believe that the flywheel of adoption of our technology is finally, turning and it will gain speed in 2023.

By the end of Q4 2022.

Utilization of Tulsa began to grow at the rate of about 5% per month.

And now with the installed base of 35 systems, we believe that growth rate is sustainable and will likely increase.

As arguable logistics continue to gain more experience.

Now that we have been over 3000 cases.

We have also analyzed.

What type of cases are being done commercially.

As that is a critical early indicator of the potential of the adoption of our technology.

From the very beginning we have indicated.

That our technology has the potential to treat a significant part of the prostate cancer patient population.

And now our commercial patient treatment data is proving it.

Over 50% of patients being treated with telecom.

<unk> prostates larger than 40 cc.

And we have treated prostates as large as 250 <unk> in size.

Bring the full range of the potential patient population.

As to the stage of the disease treated approximately half of the patients we have treated.

With mid stage disease.

But I'm, particularly pleased to see that over 30% of patients being treated.

Belong to higher risk categories from Great group, three up to five or very high risk patients and we have even treated many positive patients.

About 60% of our patients treated received whole gland ablation about 30%.

<unk> greater than 50% prostate ablation.

But less than whole gland at about 15% receive focal ablation, which is less than 50% of the property.

All the data put together.

Clearly indicates that Tulsa can be used to treat the vast majority of the prostate cancer patient population.

Bottom line.

We believe that the precision of Tulsa, which enables our clinicians to treat cases with confidence.

The flexibility of Tulsa, which allows them to use it for a variety of patient population.

Our compelling clinical data are all factors that continue to give us confidence in driving widespread adoption of Tulsa.

2022 was also an unusual year and circumstance.

Dr. <unk> <unk>, our first commercial use that.

Hardly any cases in the year as he was busy switching from this old practice to becoming the chief <unk> officer at Halo Dx.

Now that he is there.

He is looking to start using <unk> again for a majority of these cases.

He is also training his colleague.

At four sites to make <unk>, the first line treatment option for prostate cancer.

In another situation.

Our red that site, which was slow to start.

Finally finish the first 50 patients.

Pleased with their outcomes they've opened their second site in Arizona.

Which is off to a very good start.

Similarly.

A number of sites that we're cautious when they started have now completed the first 30 to 50 cases.

And have confirmed that they are clinical outcomes.

As good as that is the tact trial.

Or better as they have the flexibility.

The ability to customize treatment and commercial settings.

Generally speaking.

These sites are now looking to increase utilization and are open to treating a wider variety of patients.

Yes.

Another growth driver that.

We are seeing is that the number of treating sites continue.

To increase and the teaching sites that have done about 50 cases.

We are adding at least one more urologists.

To use the technology.

Which has the potential to increase the overall site usage at that site.

Summarizing on the usage of Tulsa in the U S.

No doubt it has been tough.

But as I mentioned before.

Flywheel of adoption is turning in the right direction.

As our physicians gain more experience and the number of sites continue to increase we believe that the adoption rates will increase.

The other key main driver of adoption as you know is reimbursement.

At least 12 of the hospital systems began to use the temporary C code approximately.

In 2022.

These sites are also getting payments in the range that they are satisfied with.

Our goal is to continue to educate the sites on the proper use of the code and we find that the sites that are using it.

Has have a backlog of patients.

In the approximate range of three to four months.

As for the permanent code.

CPT category one code.

The next Ama's CPT Committee meeting is scheduled to be in Chicago from May 4th two may 6th.

And consideration.

Of the unique Tulsa code is on the agenda.

According to this agenda. The summary of the results and actions of this meeting will be published on or before June 2nd.

You might recall last year, we pulled back as the utilization data.

That was submitted reflected only 2021 data.

But this year, 22% to <unk> 2022 data is included.

And we believe.

It is substantially higher and sufficient to get over that utilization threshold.

Another difference this year is that the application is completely sponsored by the relevant societies.

And profound is not equal sponsor.

Which may give more credence to the application and the process.

We are now less than two months away from this milestone.

Potential major inflection point.

And we're looking forward to discussing it further on the Q1 analyst call in early May.

In addition to the progress we have made in driving utilization of Tulsa in the us.

And.

On the revised filing of the CPT code application.

We've also made progress.

On the clinical front.

We expect at least three additional substantive publications this year in peer reviewed journals.

As well as at least eight podium presentations at relevant conferences, including the EUA.

440, <unk> presentations regarding Tulsa took place earlier this week at the society of Interventional Radiology annual meeting.

Our captain trial recruitment continues.

And we remain confident that preliminary results from this prospective.

Randomized comparative trial.

With radical prostatectomy can be announced in early 2025, which will coincide with the effectiveness of the permanent CPT code.

Approved.

Increasing utilization of Tulsa in U S.

Achieving approval of the permanent CPT code.

And continued recruitment and captain trial there.

We remain the main agenda of our company.

I'm also pleased to tell you that we have submitted our first Tulsa AI software to.

To the FDA for clearance.

I encourage you to visit our website.

That describes this product in.

In our updated corporate presentation that was posted.

Few minutes ago.

I know that AI has become a big buzzword in the recent past.

Our program is more than two years old.

And it is designed to have.

Specific purpose.

Improving Tulsa treatment planning times, as well as making it continuous learning system.

As I mentioned before.

We have a significant amount of image based patient data.

We have said over.

54 million parameters.

Over 7000 images.

Into our AI engine.

Along with validated 1300 treatment plants.

Were manually produced by our expert physicians to treat their patients.

The Tulsa AI is now.

Add on software module.

That can be added to Tulsa pro.

And the module has the ability to produce.

Adjusted treatment design base.

Based upon its learning from the database.

The suggested design.

It's primarily about saving treatment planning time.

But given that it is based upon prior successful treatments.

It also gives our urologists.

Additional confidence.

In the automated plan.

We have.

Reviewed the module.

With the FDA.

And have received clear guidelines.

As to what it will take to achieve clearance.

Which include testing for.

Alignment of the suggested design.

Physician treatment plan on.

On a prospective basis.

We believe this is doable by summer of this year.

At which point, we will submit the final data sets.

<unk> to the FDA for approval.

We're very excited about the first AI product.

This internally developed capability will serve us to make Tulsa continuous learning system.

As we automate.

Area aspects of the Tulsa pro system as well.

As the patient care continuum.

Summarizing.

We believe that the flywheel of Tulsa pro adoption.

It is accelerating at a rate of 5% per month growth.

And we will likely further against team in the second half of the year.

We also believe that achieving an installed base of 50 Si systems.

In the United States.

By end of 2023.

Is very possible.

We look forward to reporting on the progress.

The application of the category, one CPT code, which we believe will be a major inflection point for our company.

We expect that the captain trial.

Which are already recruiting at a pace faster than any other.

Parroting trial in prostate cancer.

We will continue to recruit at a good pace.

Enable preliminary results in early 2025.

And finally.

We are excited about our Tulsa.

Sure.

If cleared by the FDA later this year.

It has the potential to not only significantly reduce treatment planning time, but also give our clinicians.

Essential added confidence.

Further driving adoption.

This ends our prepared remarks for today with that.

Michele and I are happy to take any questions you might have.

Operator.

Thank you as a reminder to ask a question press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from Michael Sarcone with Jefferies. Your line is open.

Hey, good afternoon, and thanks for taking my questions.

Good afternoon.

First question you had talked about exiting 2022 with utilization growth at about 5% per month can you just talk about how thats been tracking through the first two months of the year and how you expect that to ramp.

Course of the year.

Yes, Michael that's a simple question simple answer and we are definitely tracking at that 5% per month right now.

Okay. Thank you.

Yes, I'm sure you have more.

No I think thats fairly straightforward I think.

The some of the new installed base.

As they begin to get more experience I think they will.

Continue to increase also which is why.

Sure.

<unk>.

Guess submitting right now in the second half, we can do better, but 5% is definitely there.

Yes.

Understood. Thank you and then just one more.

How do you think about the pace of system placement through the year in the U S.

Sure Michael.

<unk> is definitely very strong.

And I think that as I said in the prepared remarks, getting the 50 <unk>.

This year is we think is very feasible.

And I think continuing to increase that number substantially in 2024.

In the range of maybe 75 is doable.

So I.

I think what our anticipation here is that the current sites will come.

<unk> continued to increase utilization and the number of sites will also continue to increase.

Okay. Thank you.

Thank you.

<unk>.

One moment for our next question.

Our next question comes from Rahul <unk> from Raymond James Your line is open.

Good afternoon, everyone Richard Steve. Thanks, So much for taking my questions.

So congratulations on having.

<unk> application included in the May meeting.

Recognizing that after last year to withdraw the application primarily based on number of patients now referred to.

Not a 2000 patient you've referred to several conference promises.

And publications over the last year, maybe you could just give us a little more color in terms of how.

These are the key criteria in terms of Derisking calculations that are out there.

Anyhow.

That was in the application that helped to Derisk it.

Sure.

No. It's a good question I mean that is one of the big big milestones that we need to.

Achieved this year.

And.

I think some of the.

Things that can be pretty sure.

The number of patients.

Were treated in 2020.

Two.

But tulsa is higher than.

The number of patients that were included in prior filings of other technologies in prostate cancer that were approved.

So I think that on that basis.

We have crossed the utilization hurdle, which was the main issue last time.

But I do think that.

One of the things that we've witnessed as we were communicating with the societies.

The enthusiasm of the Society's also has continued to increase.

And.

For that reason.

The Society basically said we've got this huge.

You don't need to even if you choose not to want to sponsors.

They will take it from here.

I think.

To be honest that is a very good sign because majority of the applications that do get sponsored by the society we.

I'll go through get through.

Sure.

So.

I know, it's not a guarantee of anything but I do think that the clinical data is there.

Society supported the utilization there.

I think that we're sort of in the mainstream so.

I am most certainly much more enthusiastic and optimistic about it than I was last year.

There is always a backup plan.

<unk>.

And.

If for some reason new issue does come up.

We do have September meeting this year, so if so.

So I think that.

There is no issue that I know at the moment, but if a new issue does come up I think we have the opportunity to go back in September and that will still keep the effectiveness.

On January 25.

Great. That's really helpful. Thank you thanks, everyone.

So my question is on on the Captain trial.

You indicated that the.

Looking at the central preliminary data in 'twenty, five and of course, you've been balancing the resourcing of the trial and of course your commercial efforts could you give us a little bit more color in terms of how recruitment is going.

And sort of any other milestones that we might be able to count on or.

Book to Bill for early 'twenty five.

Sure.

As I said in the prepared remarks.

We are recruiting.

Good pace with Cote.

We're about 25% done.

In the trial.

And number.

Number of sites has now increased to 13.

As compared to eight.

About six months ago, I think there are probably another two or three sites have expressed interest in <unk>.

Participating so probably we will go to maybe 15 or 16.

Within the next 90 days or so.

We have.

We have a really good team that is following up on recruitment and so the number of patients being recruited even in the first two months of 2023 is higher than what we were doing in 2022. So I do feel pretty optimistic that we will be able to complete <unk>.

Movements from time.

In the first half of 2024.

And that means that we should be able to produce.

Six two.

Six to nine months data by Q1 2025.

And if you look at the pact trial data.

What we.

We find is that once you cross the six month Mark.

There is high level of predictability of where that patient is going in the future.

And so that I think.

It will serve us well that history will serve us well.

So your other question in terms of the other clinical publications.

We do expect five year data to be coming out this year, which is.

The final.

Uh huh.

Dataset that urology community looks for.

Don't anticipate any.

Significant differences given the trend that we've seen in the first four years.

But that will be certainly on other datasets that will come out.

There is a European trial that will start that was also a comparative trial, which we sort of pattern.

Our captain trial behind that trial.

I will start announcing their numbers starting this upcoming.

Meeting in May.

So I think that will also start to service some early indicators.

The comparative study.

Great. That's actually very helpful. Thank you very much and I think only one quick last question great to see this year, we're looking at.

AI, enabling.

The program.

You talked about potential completion of the prospective patients by the summer so would it be reasonable to assume that the five 10-K would go in by the fall and we'll be looking at the response from the FDA early 'twenty four.

Yes, I think.

So that is the plan.

Obviously you have to.

So the FDA, but that is certainly the plan.

We'll be able to get this product in the market in early 2024.

And.

I think the only other color I can give you.

Every urologist that we have presented this to.

Has given amazingly positive feedback so that is the word.

Yeah.

Don't use the word.

But this is something very very.

Excited about I think it is the first.

A family that will be coming out.

And I think the continuous learning process the continuous learning of this technology.

I believe has the potential to.

Actually continue to improve clinical outcomes and I think that's the part that is most exciting.

This.

Some videos that are being placed on our website.

Including the Tulsa AI videos.

And youll actually be able to see it so.

So you'll be able to see for example, there's a click.

The automatic treatment plan shows up on the screen and then Youll see the Penn will show up in these urologists.

The modifications, where they see fit and then they go to the next one for you actually be able to see how well this technology works.

Great. Thanks.

Thanks, again, everyone and thanks for taking our questions will get back in the queue.

Thank you.

We have a question from Ben Hayner from Alliance Your line is open.

Hey, good afternoon, gentlemen, thanks for taking my questions.

First off for me on the CPT one code.

So nice step the societies are sponsoring.

Guys don't need to.

Spot for yourselves as well.

Curious if you guys are the society.

Any consultants, we deal with on that.

Have any data dealing with the hit rate.

By only the societies versus sponsored by the societies in the company and so on and so forth.

Yes.

Statistically it's hard to find it.

I think there are two things Ben.

Good where sort of.

Relying on a little bit.

One is that.

When we submitted the application last year.

Really the only issue that had come up was the utilization rate.

2021.

As 2022 data and as I said.

<unk>.

Other than what the <unk> approved for.

Other products so.

I think that probably the.

Good way to think about it.

Other thing is that the societies.

Certainly are seeing the bids and the league there.

So.

Sure.

So I think there certainly seem to be confident.

I cannot tell you statistically I don't think I have any data like that.

Okay. I was just curious because I have never seen.

Happened across any answer.

Yes.

Okay. That's fair enough and then that's helpful.

I will say I will say, it's pretty exciting.

Obviously, you have the discussions with the FDA can you share how many cases that you expect to do to be able to submit the data that the FDA.

I was looking for.

Yes, most certainly.

We've done.

<unk> hundred 15 that we did share with the FDA.

We think we will do another 20 to 30 additional ones.

And there are actually three subsets that they have requested.

Types of data that they requested.

None of them actually will require.

<unk> patients.

Sure.

These are more comparison.

Simulations or a core lab, where.

Urologists over radiologists will.

Draw there and they will look for comparison to the automated plan, so I think that.

We have about 80% of what the FDA is looking for.

We'll get the rest of it done in the next couple of months.

And we.

Given that what you've already done.

Meets the criteria that we should be able to.

Some of that and we should be decent.

Yes.

Hi, there.

Okay. That's helpful.

Sure.

The whole thing is presented to us so far has been universally positive.

Looking at the presentation here and you've got the handful of more modules that you're initially talking about is that all of the territorial system for thermal boost procedure optimization is that all going in with this FDA submission.

Then.

I'll start with that one I mean is there any.

Specifically that guess.

These folks.

More excited.

One feature or others within the.

Yes.

So Ben first of all of these are two separate applications one of them is for the country assistant.

One is for.

The boost.

And I think to be honest.

The feedback we're getting is very positive for both of them. The first one I think.

And the.

There is a psychological shift that is taking place as you know this is sol game changing technology that when we first talked about that hey, you need to use an MRI to do this.

There is little hesitation that first shows up though I've never use MRI before.

And that is now shifting to hey, I am going to look at MRI images from the perspective of treating that patient and I'm looking at the biopsy data and I'm looking at now how im going to design the treatment and that is a very.

<unk> perspective than the perspective of the radiologists redesigning, who is actually diagnosing and theyre looking at the cellular structure.

From the MRI and Theyre not thinking about designing a treatment plan. So these are two very different things that they have to do and I think that that urologists are now who have done this.

Getting to that stage thing okay.

Using these images for a different purpose and so when we.

Presented to them the idea of automated treatment planning using this knowledge and then being able to assimilate what that means to them in terms of not just <unk>.

Time, but the confidence that the treatment design is based upon the knowledge of several.

Patients who have been treated successfully in the past.

That's the key point.

The feedback we're getting is unbelievable.

Unbelievable.

So.

As usual I would it be processing.

Make sure we deliver on this.

<unk>.

We feel this way.

<unk> project, we started over two years ago, and we have an amazing.

AI team and a company with both the capability and I think this is the beginning of it.

No.

Putting AI into our product.

Okay.

That's great.

Any clarification.

Contour and assistant is what's going on in this initial FDA submission and then there's other things beyond that that all of that will come behind us.

That's correct the country might be the first one and then we'll produce other things and we'll bring you up to speed as we do other things, but at the moment. There are two applications. One is the country in our system. The second one is the government boost.

There are in FDA considerations.

Okay got it and then it sounds like you've got a pretty busy year coming up here in terms of clinical publications and podium presentations.

If I recall correctly.

Study data or at least some of it is likely to be presented at the.

European Association of Urology is coming up here.

Not too long.

Yes.

Yes.

Yes.

Okay.

That's help delineate between HIFU in Tulsa.

The data comes out or is that something that you just don't know.

Unclear at this point.

We're not in the AWP tightened there obviously, because the publication Theyre doing all of the analysis.

My information is not 100%.

Keurig, probably but.

My Best guess is because these are different technologies that they will have to delineate them.

Okay.

Well great.

In terms of that.

Okay.

Thanks for taking the question I'll go ahead Sir.

The first publication that the first podium presentation at the <unk>.

I think it will be interesting.

There was going to.

Yeah.

But we got that.

Yes.

CPT, one code coming up.

Just a couple of few months here. So yes, so on ice two months yes.

Yes, that's two months, a very eventful mark you're right.

Well, thanks for taking the questions.

Congrats on all the progress.

Thank you. Thank you so much.

Thank you and our next question comes from Frank to Cayman with Lake Street. Your line is open.

Hey, Thanks for taking my questions I wanted to just start with asking about you mentioned some of your latest new users starting to build a three to four month backlog, it's great to hear the patient funnel being built out on those I was wondering if you could talk a little bit more about those and maybe talk.

To some of the bottlenecks there facing to getting those patients through the funnel.

Sure.

Frank.

It's just like any other thing is that the.

It's an entirely new technology, yes, we had tact clinical data that looked good but all of that was initially sort of the market entry that this sort of set to them. This is a technology that we want to.

Evaluate archrock.

And.

I think as you've seen many of these sites that started a couple of years ago have now done.

<unk> hundred or maybe even 30 cases.

And they have down done their evaluations and based upon those evaluations, they're saying this is a technology here.

Is here for the future and they want to start increasing its usage.

And so.

To provide a little bit more color on what youre asking is.

As they increase.

We're looking at.

What's my backlog.

And how many wells.

Of the.

Physicians are my practice.

<unk> to be Tulsa users, how much MRI time, do I need to allocate for my pipeline of patients and so on so I think what we're seeing is they get to a couple of two or three months backlog and then they are saying I've got to increase mine capacity and that capacity it might be.

Adding a urologist, adding some more and more time and.

Our training another technician and so on that's how they're sort of.

Slowly, but surely get into it.

I Hope I've answered your question Frank.

No. That's perfect. That's helpful color and then I wanted to just ask one more on Dr. <unk> evaluation process I understand he's always been an early user of profiling technology, but when you switched over to Halo dxd.

Ron an extensive evaluation process to.

Evaluate some of the other alternative prostate cancer treatment options or was he pretty dead set on implementing Tulsa across all the sites.

So.

Somewhat he told us.

And this was sort of been last fall early winter time is that he and halo.

As he was joining.

They evaluated multiple technologies.

And.

What are the primary criteria.

The U S.

They felt that Tulsa.

<unk> was the most standardized way of treating the patient.

All of these alternative technologies that they looked at.

It was the most scalable technology.

And so their goal is they did not want to standardize on something that could be very user.

Your allergy skill base.

They wanted to have a technology that it could sort of grow.

Over to many many practices and that was it.

Very large part of his criteria.

Okay, Great I'll stop there thanks for taking the questions.

Sounds great. Thanks, Frank.

One moment.

Our next question comes from Brian <unk> from <unk> Securities. Your line is open.

Hi, guys a couple of questions for you.

First congrats on the CPT AMA meeting.

That's terrific is there any ability to use the C code in an outpatient setting.

In the interim.

And what do you guys think about though.

Yes, that's a good question so the.

The C code right now is not on the air.

Which is the outpatient setting list.

And as part of this as a separate.

Conversation, we have actually made the request.

To CMS directly.

They should consider.

And it basically involves safety.

It involves whether or not patients who are being treated today.

Our daytime patients.

Or not.

And we do have.

Really very strong data that our patients go home the same day.

And with respect to safety.

You don't even create an incision.

<unk>.

It's hard to say whether they will.

Except this criteria or not but certainly that is a possibility bryan.

Okay.

That would be important to continue to drive adoption between now and when you get a full CPT code.

Did I hear you.

I don't want to be shortsighted, because that's not the way I think but can you give us an idea of how installs are going in this quarter and have you really got in the bigger picture question is have you gotten past the bottlenecks for installed installs that you've discussed in the past.

I think we.

We are very deal oriented company.

We have data on.

<unk>.

From the time.

We start we get a contract to the time.

We treat the first patient in.

<unk>.

When I look at that information.

Suddenly during the Covid period, I think those times.

Were running as long as six.

Six to eight months and you saw that because the installed base sort of was delayed and that suddenly the lost.

Three or four months, where we're finally getting up the install base curve. So if I look at the latest data.

I think we have been able to cut it down from 6% to at least three months now.

And I do think that.

As time goes and things in the hospitals begin to get from normal, which we are certainly seeing that we will be able to cut it.

Our target, which is about 60 days.

Okay that would be much more manageable and give you a little more clarity.

Another bigger picture question.

Are you seeing docs switching.

Any of their days from prostatectomy to Tulsa.

Well, that's a very good question actually.

It's something that I actually watch very closely.

In terms of who is switching to Tulsa in general and generally.

To be honest these are actually robotic surgery.

Who are switching to Tulsa.

And.

I mean to be honest not only that.

I'm watching we're watching them.

We have many of them who are.

I actually explicitly I kind of ask them.

Like why are you doing culture.

And why did you switch this case from robotic.

Prostatectomy to Tulsa.

And and I'm getting to be honest.

Really.

Comments that that is why.

My confidence level is increasing.

And I'm happy to share some of these comments.

With you.

I mean.

One of the sites that had done 30 cases for example.

They were like very slowly doing cases and.

And then.

I actually talked with them and I said.

You guys started by saying we're going to do.

30% to 40 per year, you have taken longer to get there.

They kind of confirm that what they were really doing is they wanted to do at least 30 cases.

And see how their patients were doing before they really increase their usage and so they basically said look we.

Have done these cases, we have now confirmed that our own outcomes.

Our.

Similar to the tact clinical trial outcomes that is what they were looking for.

And they said now that we have confirmed the clinical trial outcomes.

We think the Tulsa is going to be.

To be honest because you.

He said this is going to be one of the big three.

It's gonna be Tulsa is gonna be robotic prostatectomy, it's going to be radiation.

I said, okay. This early stage I'll take that over time, we would think about who is the number one.

That space.

And.

I'm happy to say like I'll share. One anecdotal example, with you, which is which really had an impact on the actions.

So I was I attended the case with one of our urologists.

And for some reason robotic prostatectomy actually came up as a conversation and.

He said that he had was doing a robotic case a week prior to this.

And that actually lost the robotic arm lock the needle and took them about 30 minutes to find it and everything was good and no problem well.

What he said was he said while he was looking for that needle.

He said this would have never happened with Tulsa.

You said you guys don't realize how inherently safer this technology.

So.

And it really had an impact on me is that we talk about safety.

Talk about clinical outcomes.

These urologists are now seeing in real work.

So, yes, it's taking longer but I'm finding that the reasons that theyre, giving a really really didn't quite frankly I'm happy about that.

One of them to test our technology.

Steve.

Terrific.

I'm going to ask a couple of more and then because I think I'm at the end of the airline.

You talked about this 5% per month without the anti.

Can you talk about I think you said Halo was going to be a multi center group and he's training additional urologists and he will actually come online.

This month.

Where are these additional centers going to be and do you think you'd get into all the NFL cities.

Throughout the balance of this year.

We.

So first of all you're right.

Hum.

And then when the Tulsa. Another interesting example of how it just takes longer to build.

He was asking originally.

I'm going to start by end of last year, but.

Because of some approvals that were needed in the state of Florida.

We have nothing to do with Emaar.

Technology.

It was related to the site.

Another 90 days to get going so.

Definitely.

Uh huh.

Slated to start in the next couple of weeks.

But to answer your questions.

There are two of these sites are Florida sites, one is certain his original site, which is soda.

There is another site, which is Jacksonville, Florida also and then there are two sites in California.

So those are the first four sites.

<unk> talked about.

Adding sites there.

Relatively.

Good pace, but again the same model is let's get these sites going let's get through all of the <unk>.

Different things that can cause delays or recruitment so on let's create efficient process and then most certainly the idea is that we will grow.

And build additional sites.

Great.

Net they've got two open they've got Dr. Hung running the one here in Arizona, where are the additional site is going to be for them and do you think you can grow that into the 10 plus that you had hoped for when you originally signed the contract.

Overtime.

Yes, I think so I think that again, David something similar they did their first 50 cases.

Analyze it and then decided yet.

They want to they have been.

Very supportive of the CPT application they have.

Educate some of the society members.

There.

Because that is.

Their primary customer.

Is it.

Reimburse, they're not very big cash site.

Arizona, it's actually a whole cash and they are doing very well.

But the message is they all have identified the next two sites already they actually purchased.

New MRI for these sites and we think certainly later this year there'll be operational.

And.

I think once we have certainty on the CPT code.

And if we do get approval to be able to use the C code in the U S.

<unk>, then I think you will see.

Foster adoption, but certainly those two things need to happen for them to go beyond the four that we're talking about.

Great.

Two last questions, one vesey tack too.

Are you close to completion on that.

Yes, I think we're a couple of patients away.

And we will get to the about the 140 150.

<unk> thousand 850, and we'll close it out so.

We have five year data.

Sure and then we'll continue to add those newer patients and you'll start to see the impact of that in the <unk>.

Final outcomes.

Okay last question for me does this shift from ultrasound biopsy.

Hi, Inbar biopsy help with this shift to the inboard Tulsa procedure.

Yes. So this is sort of the long term.

Dialogue, Brian and I think over the next.

Couple of years, certainly we will be talking about it because I think right. Now we are so focused on our short term getting the sites going in and getting the.

CPT code ruling, but you're you're on your thinking there.

The way that we're kind of thinking is that.

But Tulsa does is that it for the first time enables it.

Very <unk> centric strategy from screening the patients diagnosing the patient to <unk>.

Our centric.

Biopsy to then Tulsa treatment and then follow up.

<unk>.

You've.

All of a sudden become a continuum of care from beginning to the end.

And there is a lot of dialogue in the urology community about this.

Thank God.

<unk>.

Has to some extent it is going from.

I have never used <unk> before so now I can see it outside now as I said in the prepared remarks that I can think about.

From the perspective of treatment design rather than diagnosis.

Two.

I, probably said all my own MRI.

And so I think that shift is.

Again, it's not going to happen in one day, but I definitely can tell you that there are number of urologists, who are thinking that way already.

Terrific I'll get back in line. Thank you so much.

Thank you Brian .

Thank you one moment for our next question.

We have a question from Scott Mccauley from paradigm capital Your line is open.

Thanks, gentlemen.

Keep it quick.

Just wanted to follow up on the AI software.

Down the road is that something you see as being kind of default it's packaged in with.

The kind of per procedure cost.

That's kind of currently you're currently charging or is that something you see as a potential add on or upgrade.

To that subscription.

<unk> approved and commercialized.

Yes, Scott good question. So the way we are structuring this is Tulsa pro.

Is one cost.

Patient.

And there is going to be a value proposition for each of the module that we provide to the hospital or the urology practice.

And our plan is.

There will be some kind of remuneration to our company for those module. So it does not.

A.

Free add on it will have its own value proposition and it will either have a.

Additional price associated with it or it will have certain other commitments associated with it but most certainly it is an.

Increase in the value proposition of our company.

Absolutely.

And then I think I just missed it but.

Talk to you are saying there is about $5 million to $6 million range.

Kind of expected for some of the expenses I think I may have missed what that was if you could reiterate that.

Is it for me.

I think thats from a.

Third question I think thats the burden.

Yes.

So you said do you have anything to add to that or so good.

No so basically what we're saying.

Got it.

We are expecting to hold firm on our burn rate in order to maximize our runway and that's how we're getting the confidence that the cash that we have on hand will give us the runway to go through all the way to Q1 2025.

We'll make sure that we adjust our reverse in between to make sure we invest in the right areas like sales and marketing and we will adjust the cost in the other places to keep there arent great stable.

Got it thank you gentlemen.

Thank you.

One moment.

We have a follow up from Brian <unk> from <unk> Securities. Your line is open.

Alright, So rochette open the door talk about the sales force growth. If you would I think you have for now.

Where are you going to be investing in the sales force this year clinical reps genius.

Feet on the Street Hunter Farmer, what are you guys thinking about yes.

So Brian we are aggressively adding to our sales team right now given the pipeline and the larger installed base.

In summary form the answer is all of the above we are adding.

New hunters because of the demand in the pipeline that is growing we need to close those deals.

We're definitely hiring some really really good.

Farmers, who can take the sites that are.

They have already created for example, 50 cases and for one that their demand in terms of our presence is loss lot less than what it would be for the newer sites and then for the newer sites that were bringing on.

Adding genius services. So that we can continue to support them like we did.

Earlier guys.

The answer to that is absolutely all three of them were adding aggressively right now.

Great. Thank you.

Thank you and I'm showing no other questions I'd like to turn the call back to Dr. <unk> for closing remarks.

So thank you so much.

I think there is definitely a lot going on.

Someone said in the call it.

The next couple of months will be very interesting.

And I really appreciate the questions because we are we are.

Are doing something that is very unique and there are so many dimensions to it that.

Happy to answer your questions and thank you for everything.

I look forward very much to the Q1 call. Thank you again.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Good day, and thank you for standing by welcome to the profound medical fourth quarter and full year 2022 financial results Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session. You May press star one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one again please.

The adviser today's conference is being recorded I would now like to hand, the conference over to your speaker today, Stephen Kilmer Investor Relations. Please go ahead.

Thank you good afternoon, everyone. Let me start by pointing out that this conference call will include forward looking statements within the meaning of applicable securities laws in the United States and Canada.

All forward looking statements are based on per pounds current beliefs assumptions and expectations and relate to among other things expectations regarding the efficacy of the Companys treatment technologies results of future clinical trials, the ability to obtain coding and our reimbursement from third party payers and anticipated financial performance business prospects strategies regulatory developments.

Acceptance and future commitments.

Such statements involve known and unknown risks uncertainties and other factors that may cause actual results performance or achievements to be materially different from those implied by such statements. No forward looking statement can be guaranteed.

Nurses are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this conference call.

Undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information future events or otherwise other than as required by law.

For the benefit of those who are new to the profound story I would also like to take a moment to summarize our business profound develops the markets customizable incision free therapies for the ablation of disease tissue.

We are currently commercializing Tulsa pro technology that combines real time, MRI robotically, driven transfer urethral ultrasound and closed loop temperature feedback control.

The technology is designed to provide customizable and predictable radiation free inflation certified prostate volume back.

Protecting the urethra and rectum to help preserve the patient's natural functional abilities.

<unk> has CE Mark healthcare proved and 5500 K cleared by the FDA.

In the U S.

<unk>, a pure recurring revenue model for Tulsa pro whereby we charge customers on a per procedure basis for Tulsa Pro consumable medical devices and services associated with extended warranties outside.

Outside of the United States, primarily in supply of capital and consumables.

Service model separately as the situation warrants that.

We are also commercializing funnel is an innovative therapy.

Targeted platform for the CE Mark for the treatment of uterine fibroids and palliative pain treatment upon capacity.

Finally, it has also been approved by the China National Medical products administration.

In face of treatment of uterine fibroids and has recently obtained FDA approval.

Turning device exemption for the treatment of <unk>.

Hospira as Osceola.

The business model for finally assistance is currently at one time sale of capital equipment.

On the call today, representing the company are Dr room, NOI per balance Chief Executive Officer and chairman.

And Richard <unk>, the company's Chief Financial Officer.

That said I'll now turn the call over to Richard.

Good afternoon, everyone.

And welcome to our fourth quarter 2022 conference call.

On behalf of the management team and everyone at profile.

I'd like to thank you for your ongoing interest in our company.

For those of you who are shareholders.

We appreciate your continued interest and support.

I will turn the call over to Earl.

A few moments.

Update on our commercial activity.

However, before I do.

I would like to provide a brief update on our fourth quarter 2022 financial results.

To streamline things.

All of the numbers, we will refer to have been around it.

So they are proximate.

For the three months period ended December 31, 2022, the company recorded revenue of $1 $3 million with.

With the full amount coming from recurring revenue.

Fourth quarter 2022 revenue increased 26% from $1 million from the same period in 2021.

Which also did not include any capital revenue.

That said.

Our capital project pipeline in markets outside U S is shrunk.

And we do expect to have capital revenue in the future periods.

As previously stated we only sell capital in the U S market.

Gross margin for the three months.

And year ended December 31, 2022.

44% and 45% respectively.

Compared to Q.

50%.

43% for the same period of 2021.

While our gross margin is good at this early stage.

As our recurring revenue increase is weak.

We expect the margin will improve from the current level.

Long term we <unk>.

In fact, our gross margin.

Can be better than 75%.

Regarding revenue outpaces capital revenue.

Total operating expenses in the 2022 fourth quarter, which consist of.

R&D.

DNA <unk>.

Selling and distribution expenses.

Nine four.

$4 million.

A decrease of 8% compared with $10 $2 million.

In the fourth quarter of 2021.

Primarily due to decreased.

Noncash share based compensation expenses.

We expect our net cash burn related to operation.

To be in the $550 million range theme.

<unk>.

Financial year 2022.

Breaking that down further.

Expenditure.

For R&D.

Decreased 34%.

On a year over year basis to $3 1 million.

G&A expenses.

Decreased by 35% to $2 1 million.

Selling and distribution expenses.

Increased by 27% to $1 $7 million.

Partially offsetting the decreases in R&D.

And selling and distribution expenses.

Recognize and noncash impairment.

<unk> at least $2 5 million.

In the fourth quarter of 2022.

President King all of the goodwill associated with the formal business.

As the return to business in China.

Tenuous to be delayed due to COVID-19.

Net finance costs for.

For the 2020 through fourth quarter.

Half a million dollar.

Assistant with the same three month period of 2021.

Overall.

The company recorded a fourth quarter 2022, net loss of $9 5 million or 46 cents per common share.

Compared with a net loss of $10 2 million or <unk> 49 per common share for the same three month period in 2021.

As at December 31, 2022 profound had cash.

$46 5 million.

Gains on the company.

<unk> burn rate we believe.

That is current cash position is.

The fish yet to fund its operations into Q1 2025.

With that I will now turn the call over to Ara.

Yeah.

Thank you Richard.

Beginning with our financial performance.

Recurring revenue continues to meet expectations.

And was the sole driver of this quarter's revenue increase compared to Q4 2021.

We reported no capital equipment sales for the quarter largely due to continued COVID-19 related headwinds in select markets, such as Japan and China.

While we do not believe this is representative of the future we cannot predict when international capital sales will resume at or above the rate we have reported in previous quarters.

Regardless, our men task is about driving utilization of Tulsa in the United States.

As you know it is a game changing technology and the hurdles that we have space, mostly related to the changes required to instill the new practice of a substantive new technology.

We believe that the flywheel of adoption of our technology is finally, turning and it will gain speed in 2023.

By the end of Q4 2022, the utilization of Tulsa began to grow at the rate of about 5% per month.

And now with the installed base of 35 systems. We believe that growth rate is sustainable and will likely increase has argued allergist continue to gain more experience.

Now that we have been over 3000 cases, we have also analyzed what type of cases are being done commercially.

That is a critical early indicator of the potential.

The adoption of our technology.

From the very beginning we have indicated that our technology has the potential to treat a significant part of the prostate cancer patient population.

And now our commercial patient treatment data is proving it.

Over 50% of patients being treated with Tulsa.

Prostates larger than <unk>, and we have treated prostates as largest 250 <unk> in size covering the full range of the potential patient population.

As for the stage of the disease treated approximately half of the patients we have treated.

Those with mid stage disease, but I'm, particularly pleased to see that over 30% of patients being treated belonged to higher risk categories from great group three up to five or very high risk patients.

And we have even treated many paviour to patients.

About 60% of our patients treated received whole gland ablation.

35% received greater than 50% prostate ablation, but less than whole gland at about 15% receive focal ablation, which is less than 50% of the property.

All the data put together.

Clearly indicates that Tulsa can be used to treat the vast majority of the prostate cancer patient population.

Bottom line.

We believe that the precision of Tulsa, which enables our clinicians to treat cases with confidence.

<unk> ability of Tulsa, which allows them to use it for a variety of patient population and our compelling clinical data are all factors that continue to give us confidence in driving widespread adoption of Tulsa.

2022 was also an unusual year and circumstance.

Dr <unk>.

Our first commercial you that.

Hardly did any cases in the year as he was busy switching from this old practice to becoming the chief <unk> officer at Halo Dx.

Now that he is there he.

He is looking to start using <unk> again for a majority of these cases.

He is also training his colleague at four sites to make Tulsa, the first line treatment option for prostate cancer.

In another situation.

Our radnet site, which was slow to start.

Finally finished the first 50 patients.

Pleased with their outcomes. They have opened their second site in Arizona.

Which is off to a very good start.

Similarly.

A number of sites.

We're cautious when they started have now completed their first 30 to 50 cases.

And have confirmed that they are clinical outcomes.

As good as that in the tact trial.

Or better as they have the flexibility to customize treatment and commercial settings.

Generally speaking.

These sites are now looking to increase utilization.

And are open to treating a wider variety of patients.

Yes.

Another growth driver.

We are seeing is that the number of treating sites continue.

To increase and the teaching sites that have done about 50 cases.

Adding at least one more urologists to use the technology.

Which has the potential to increase the overall site usage at that site.

Summarizing on the usage of Tulsa in the U S.

No doubt it has been tough.

But as I mentioned before.

Flywheel of adoption is turning in the right direction.

As our physicians gain more experience and the number of sites continue to increase.

We believe that the adoption rates will be.

Increase.

The other key main driver of adoption as you know is reimbursement.

At least 12 of the hospital systems began to use the temporary C code approximately.

In 2022.

These sites are also getting payments in the range that they are satisfied with.

Our goal is to continue to educate the sites on the proper use of the code and we find that the sites that are using it.

Has.

Backlog of patients in the approximate range of three to four months.

As for the permanent code.

CPT category one code.

The next Ama's CPT Committee meeting is scheduled to be in Chicago from May 4th two may 6th.

And consideration.

Of the unique Tulsa code is on the agenda.

According to this agenda. The summary of the results and actions of this meeting will be published on or before June 2nd.

You might recall last year, we pulled back as the utilization data that.

That was submitted.

The only 2021 data.

But this year 22%.

2022 data is included.

And we believe.

That is substantially higher and sufficient to get over that utilization threshold.

Another difference this year is that the application is completely sponsored by the relevant societies.

And profound is not equal sponsor, which may give more credence to the application and the process.

We are now less than two months away from this milestone.

Potential major inflection point.

And we're looking forward to discussing it further on the Q1 analyst call in early May.

In addition to the progress we have made in driving utilization of Tulsa in U S.

And.

On the revised filing of the CPT code application.

We've also made progress.

On the clinical front.

We expect at least three additional substantive publications this year in peer reviewed journals.

As well as at least eight <unk>.

Liam presentations.

Relevant conferences.

<unk>.

Sure.

440, <unk> presentations regarding Tulsa took place earlier this week at the society of Interventional Radiology annual meeting.

Our captain trial recruitment continues.

And we remain confident that preliminary results from this prospective randomized comparative trial.

With radical prostatectomy can be announced in early 2025, which will coincide with the effectiveness of the permanent CPT code is.

Approved.

Increasing utilization of Tulsa in U S.

Achieving approval of the permanent CPT code.

And continued recruitment and captain trial.

The main agenda of our company.

I'm also pleased to tell you that we have submitted our first Tulsa AI software.

To the FDA for clearance.

I encourage you to visit our website.

That describes this product in.

Our updated corporate presentation.

Was posted.

A few minutes ago.

I know that AI has become a big buzzword in the recent past.

Our program is more than two years old.

And it is designed to have the specific purpose of improving Tulsa treatment planning times as well as making it a continuous learning system.

As I mentioned before.

We have a significant amount of image based patient data.

We have said over 54 million parameters from over 7000 images into our AI engine, along with validated 1300 treatment plans.

That were manually produced by our expert physicians to two.

Treat their patients.

The Tulsa AI is now an add on software module.

That can be added to Tulsa pro.

And the module has the ability to produce suggested treatment design.

Based upon its learning from the database.

The suggested design.

It's primarily about saving treatment planning time.

But given that it is based upon prior successful treatments. It also gives our urologists.

Additional confidence.

In the automated plan.

We have.

Viewed the module.

With the SBA.

And have received clear guidelines.

Two what it will take to achieve clearance.

Which include testing for alignment of the suggested design.

With physician treatment plan on.

On a prospective basis.

We believe this is doable by summer of this year.

At which point, we will submit the final data sets.

To the FDA for approval.

We're very excited about the first AI product.

This internally developed capability will serve us to make Tulsa continuous learning system.

As we automate.

<unk> aspects of the Tulsa pro system as well.

As the patient care continuum.

Summarizing.

We believe that the flywheel of Tulsa pro adoption.

He is accelerating at a rate of 5% per month growth.

And will likely further gain steam in the second half of the year.

We also believe.

Achieving and installed base of 50 Si systems.

United States.

By end of 2023.

Is very possible.

We look forward to reporting on the progress of the application of the category one CPT code, which we believe will be a major inflection point for our company.

We expect that the captain trial.

Which are already recruiting at a pace faster than any other comparative trial in prostate cancer.

We'll continue to recruit.

Good pace.

<unk> preliminary results in early 2025.

And finally.

We are excited about our Tulsa AI initiatives.

If cleared by the FDA later this year.

It has the potential to not only significantly reduce treatment planning time, but also give our clinicians.

Essential added confidence.

Further driving adoption.

This ends our prepared remarks for today with that.

Michele and I are happy to take any questions you might have.

Operator.

Thank you as a reminder to ask a question press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from Michael Sarcone with Jefferies. Your line is open.

Hey, good afternoon, and thanks for taking my questions.

Good afternoon.

First question you had talked about exiting 2022 with utilization growth at about 5% per month can you just talk about how that's been tracking through the first two months of the year and how you expect that to ramp over the <unk>.

Course of the year.

Yes, Michael that's a simple question simple answer and we are definitely tracking at that 5% per month right now.

Okay. Thank you.

Yes, I'm sure you have more.

No I think thats fairly straightforward I think.

The some of the new installed base.

As they begin to get more experience I think they will.

Continue to increase also which is why.

Sure.

<unk>.

Guests submitting right now the second half, we can do better, but 5% is definitely there.

Yes.

Understood. Thank you and then just one more.

How do you think about the pace of system placements through the year in the U S.

Sure Michael.

<unk> is definitely very strong.

And I think that as I said in the prepared remarks getting the 50 by end of this year is we think is very feasible.

And I think continuing to increase that number substantially in 2024.

And the range of maybe 75 is doable.

So I.

I think what our anticipation here is that the current sites will.

<unk> to increase utilization and the number of sites will also continue to increase.

Okay. Thank you.

Thank you.

One moment for our next question.

Our next question comes from Rahul Sargassum from Raymond James Your line is open.

Good afternoon, everyone reshevsky. Thanks, so much for taking my questions.

So congratulations on having.

The key application included in the May meeting.

Recognizing that gives you after last year to withdraw the application primarily based on number of patients now referred to.

More than 3000 patients you've referred to several conference promises.

And publications over the last year, maybe you could just give us a little more color in terms of how.

These are the key criteria in terms of derisking without using that or if there was anything else.

That within the application that helped to Derisk it.

Sure.

It's a good question I mean that is one of the big big milestones that we need to.

Achieved this year.

And.

I think some of the.

Things that can be pretty sure.

The number of patients.

Were treated in 2020.

Two.

With Tulsa is higher than.

The number of patients that were included in prior filings of other technologies in prostate cancer that were approved.

So I think that on that basis.

We have crossed the utilization hurdle, which was the main issue last time.

But I do think that.

One of the things that we've witnessed and we were communicating with the societies.

And does the awesome of the societies also has continued to increase.

And.

For that reason.

The Society basically said we've got this you don't need to even if you choose not to want to sponsor.

They will take it from here.

And I think to be honest that is a very good sign because the majority of the applications.

I do get sponsored by the Society.

Go to get through.

Yeah.

So.

I know, it's not a guarantee of anything but I do think that.

The clinical data is there.

The society supported their utilization of their.

I think that we're sort of in the mainstream so.

I am most certainly much more enthusiastic and optimistic about it than I was last year.

There is always a backup plan in our company.

And.

If for some reason a new issue does come up.

We do have September meeting this year, so if so.

So I think that.

There is no issue there I know at the moment, but if a new issue does come up I think we have the opportunity to go back in.

September .

That will still keep the effectiveness.

January 25.

Great. That's really helpful. Thank you thanks, Brian .

So my question is on on the Captain trial.

You indicated that the.

Looking at potential preliminary data in 'twenty, five and of course, you've been balancing the resourcing of the trial and of course your commercial efforts could you give us a little bit more color in terms of how recruitment is going.

And sort of any other milestones that we might be able to count on or.

Look too before early 'twenty five.

Sure.

As I said in the prepared remarks.

We are recruiting.

Good pace with Cote.

We're about 25% done.

In the trial.

And a number.

Number of sites has now increased to 13.

As compared to eight.

About six months ago, I think there are probably another two or three sites that have expressed interest in <unk>.

Participating so probably we'll go to maybe 15 or 16.

Within the next 90 days or so.

We have.

We have a really good team that is following up on recruitment and so the number of patients being recruited even in the first two months of 2023 is higher than what we were doing in 2022, So I do feel pretty optimistic that we will be able to complete.

Hootman sometime.

In the first half of 2024.

And that means that we should be able to produce.

Six.

Six to nine month data.

Q1 2025.

And if you look at the pact trial data.

What we.

We find is that once you cross the six month Mark.

There is high level of predictability of where that patient is going in the future.

And so that's I think.

It will serve us well that history will serve us well.

So your other question in terms of the other clinical publications.

We do expect five year data to be coming out this year, which is.

The final.

All right.

Data set that urology community looks for.

Don't anticipate any.

Significant differences given the trend that we've seen in the first four years.

But that will be certainly on other datasets that will come out.

Baird.

European trial that will start that was also a comparative trial.

So the pattern.

Our captain trial behind that trial.

They will start announcing their numbers starting this upcoming.

<unk> meeting in May.

So I think that will also start to service some early indicators of.

The comparative study.

Great. That's actually very helpful. Thank you very much here and you'll indulge one quick last question Greg.

Great to see the shift you are looking at.

Enabling optical.

The program.

You talked about potential completion of the prospect of patient by the summer so would it be reasonable to assume that the 500 10-K would go in by the fall and we'll be looking at a response from the FDA to early <unk>.

Sure.

Yes, I think.

So that is the plan.

Obviously, we have to.

So the FDA, but that is certainly the plan that we will be able to get this product in the market in early 2024.

And.

I think the only other color I can give you.

Every urologist that we have presented this to.

Has given amazingly positive feedback so that is the way.

I don't use the word excited very often but this is something very very.

Excited about I think it is the first.

A family that will be coming out.

And I think the continuous learning process the continuous learning of this technology.

I believe has the potential to.

Actually continue to improve clinical outcomes and I think that's the part that is most exciting.

This.

Some videos that are being placed on our website.

Including the Tulsa AI videos.

And youll actually be able to see it so.

So you'll be able to see for example, the.

There is a click.

The automatic treatment plan shows up on the screen and then Youll see the pen will show up in these urologists just makes the modifications where they see fit and then they go to the next one for you actually be able to see how well this technology works.

Great. Thanks.

Thanks, again, everyone and thanks for taking my questions I'll get back in the queue.

Thank you.

We have a question from Ben Hayner from Alliance Your line is open.

Hey, good afternoon, gentlemen, thanks for taking the questions.

With me on the CPT one code.

So nice that the societies are sponsoring that you guys don't need to.

Sponsoring yourselves as well, but I was curious if you guys are as a society.

Many consultants we deal with on that.

Have any data dealing with the hit rate when it's sponsored by only the societies versus sponsored by the societies in the company and so on and so forth.

Yes.

Statistically it's hard to find it.

I think there are two things meant that.

Good where sort of.

Relying on a little bit.

One is that.

When we submitted the application last year.

Really the only issue that had come up was the utilization rate.

2021.

As 2022 data and as I said.

But it's better than what the <unk> approved for other products. So.

I think that probably the.

Good way to think about it.

Other thing is that the societies.

Certainly are seeing the bids and the league there.

So.

So I think there certainly seem to be confident.

I cannot tell you statistically I don't think I have any data like that.

Okay. I was just curious because I have never seen.

Happened across any answer.

Yeah.

Okay, that's fair enough and then.

Thats helpful.

Pretty exciting.

Obviously, you have the discussions with the FDA can you share how many cases that you expect to do to be able to submit the data that the FDA.

I was looking for.

Yes, most certainly.

We've done.

<unk> hundred 15 that we did share with the FDA.

We think we will do another 20 to 30 additional ones.

And there are actually three subsets that they have requested three types of data that they requested.

None of them actually will require.

<unk> patients anymore. These are.

More comparison.

Simulations or a core lab, where.

You all are just over a radiologist.

Draw there and they will look for comparison to the automated plan. So.

Thank you.

We have about 80% of what the FDA is looking for we will get the rest of it done in the next couple of months.

And we feel that given that what we've already done.

Meets the criteria that we should be able to.

Some of that and we should be decent.

Base.

Hi, there.

Okay. That's helpful.

Hello.

The wholesale you presented to us so far has been universally positive.

Yes.

Patient here and you've got a handful of more modules.

Initially talking about does that.

Hi, Julianna assistance of thermal boost the procedure optimization is that all going in with this FDA submission.

And then.

On top of that what I mean is there.

Specifically that guess.

These folks.

More excited.

One feature or another within the.

Yes.

So Ben first of all of these are two separate applications one of them is for the country assistant.

Second one is for.

Boost.

And.

To be honest.

The feedback we're getting is very positive for both of them. The first one I think.

You mentioned the.

There is a.

Psychological.

Shifting that is taking place.

This is Sol game changing is the technology that when we first talked about that hey, you need to use <unk> to do this.

There is little hesitation that first shows up I've never using MRI before.

That is now shifting to hey, I am going to look at MRI images.

From the perspective of treating that patient.

And I'm looking at the biopsy data and I'm looking at now how im going to design the treatment and that is a very different perspective than the perspective of the radiologists redesigning who is actually diagnosing and theyre looking at the cellular structure from the MRI and Theyre not thinking about.

Designing a treatment plan. So these are true.

Three different things that they have to do and I think that that urologists are now who have done this.

Getting to that stage, saying, okay I'm using these images for a different purpose and so when we.

Denver to them the idea of automated treatment planning.

Using this knowledge and then being able to assimilate what that means to them in terms of not just.

Time, but the confidence that the treatment design is based upon the knowledge of several.

Patients who have been treated successfully in the past that.

That's the key point.

The feedback we're getting is unbelievable.

Unbelievable.

So.

As usual I would it be processing.

Make sure we deliver on this.

We feel this way.

The project, we started over two years ago, and we have an amazing.

AI team and the company was built the capability and I think this is the beginning of it.

No.

Putting AI into our product.

Okay. So then just.

Yes.

Great.

Any clarification there.

Contour and assistant is what's going on in an initial FDA submission and then there's other things beyond that that all of that will come behind us.

That's correct the country might be the first one and then we'll produce other things and we'll bring you up to speed as we do other things, but at the moment. There are two applications one as the country and assist in the second one is the government boost.

There are in FDA considerations.

Okay got it and then it sounds like you've got a pretty busy year coming up here in terms of clinical publications and podium presentations.

If I recall correctly.

Study data or at least some of it is likely to be presented.

European Association of Urology, just coming up here.

Not too long.

Yes.

Yes.

Yes.

Okay.

That does delineate between HIFU in Tulsa.

The data comes out or is that something that you just don't know.

Unclear at this point.

We're not in the AWP tightened there obviously, because the publication Theyre doing all of the analysis.

My information is not 100%.

<unk> probably but.

My Best guess is because these are different technologies that they will have to eliminate them.

Okay.

Well great.

In terms of that.

Okay.

Thanks for taking the question I'll go ahead Sir.

The first publication that the first podium presentation at the <unk>.

I think it will be interesting in may.

That was going to.

Yes.

But we got that.

Hugh.

CPT, one code coming up.

Just a couple of few months here. So yes, so on ice two months yes.

Yes, that's two months at very eventful months, you're right.

Good deal thanks for taking the questions.

Congrats on all the progress.

Thank you so much.

Thank you and our next question comes from Frank to Keenan with Lake Street. Your line is open.

Hey, Thanks for taking my questions I wanted to start with asking about you mentioned some of your latest new users starting to build a three to four month backlog, it's great to hear the patient funnel being built out on those I was wondering if you could talk a little bit more about those and maybe talk.

To some of the bottlenecks there facing to getting those patients through the funnel.

Sure.

Frank.

It's just like any other thing is that the.

It's an entirely new technology, yes, we had tact clinical data that looked good but all of that was initially sort of a market entry that this sort of set to them. This is a technology that we want to.

We evaluate our time.

And.

I think as you've seen many of these sites that started a couple of years ago have now done.

50, <unk> hundred or maybe even 30 cases.

And they have down done their evaluations and based upon those evaluations were saying this is a technology here.

Is here for the future and they want to start increasing its usage.

And so.

To provide a little bit more color on what youre asking is.

As they increase their looking at.

What's my backlog and how many of the.

Physicians are my practice.

B Tulsa users.

<unk> MRI time, do I need to allocate.

Sure my pipeline of patients and so on so I think what we're seeing.

As they get to a couple of two or three month backlog and then they are saying I've got to increase mine capacity and that capacity it might be adding a urologist, adding some more and more time and.

Our training another technician and so on that's how they're sort of.

Slowly, but surely getting to it.

I Hope I've answered your question Frank.

No. That's perfect. That's helpful color and then wanted to just ask one more on Dr. <unk> evaluation process I understand he's always been a.

Early user profiling technology, but when you switched over to Halo DXP.

Ron an extensive evaluation process to <unk>.

Evaluate some of the other alternative prostate cancer treatment options or was he pretty dead set on implementing Tulsa across all the sites.

So.

Frank there's somewhat he told us.

And this was sort of been last fall early winter time is that he and halo.

As he was joining.

They evaluated multiple technologies.

And.

What are the primary criteria.

The U S.

Was that they felt that.

Tulsa was the most standardized way of treating the patient.

All of these alternative technologies that they looked at.

It was the most scalable technology.

So and so.

Their goal is they did not want to standardize on something that could be very user.

Allergy.

Base.

They wanted to have a technology that it could sort of grow over.

Over to many many practices and that was it.

Very large part of his criteria.

Okay, Great I'll stop there thanks for taking the questions.

Sounds great. Thanks, Frank.

One moment.

Our next question comes from Brian Gagnon from Gagnon Securities. Your line is open.

Hi, guys a couple of questions for you.

So congrats on the CPT AMA meeting.

Terrific is there any ability to use the C code in an outpatient setting.

In the interim.

And what do you guys think about it though.

Yes, that's a good question.

So.

The C code right now is not on the air.

Which is the outpatient setting list.

And.

As part of this as a separate.

Conversation, we have actually made the request.

To the CMS directly that.

And that they should consider.

And it basically involves sale.

50.

It involves whether or not patients who are being treated today.

Our daytime patients.

Or not.

And we do have.

Really very strong data that our patients go home the same day.

And with respect to safety.

We don't even create an incision.

<unk>.

It's hard to say whether they will.

Except this criteria or not but certainly that is a possibility bryan.

Okay.

That would be important to continue to drive adoption between now and when you get a full CPT code.

Did I hear you.

I don't want to be shortsighted, because that's not the way I think but can you give us an idea of how installs are going in this quarter and have you really got in the bigger picture question is have you gotten past the bottlenecks for installed installs that you've discussed in the past.

I think we.

We are very deal oriented company.

We have data on.

From the time.

We start we get a contract to the time.

We treat the first patient in.

<unk>.

When I look at that information.

Finally during the Covid period, I think those times.

Were running as long as six.

Six to eight months and you saw that because the installed base.

Was delayed and it's only the last.

Three or four months, where we're finally getting up the install base curve. So if I look at the data data.

I think we have been able to cut it down to from 6% to at least three months now.

And I do think that.

As time goes and things hospitals begin to get to more normal, which we are certainly seeing that we will be able to cut it too.

Our target, which is about 60 days.

Okay that would be much more manageable and give you a little more clarity.

Yes, another bigger picture question.

Seeing docs switching.

Any of their days from prostatectomy to Tulsa.

Well, that's a very good question actually.

It's something that I actually watch very closely.

In terms of who is switching to Tulsa in general and generally.

To be honest these are actually robotic surgery.

Who are switching to Tulsa.

And.

I mean to be honest not only that.

I'm watching we're watching.

We have many of them who are.

I actually explicitly I kind of ask them.

Like why are you doing culture.

And why did you switch this case from robotic.

Prostatectomy to Tulsa.

And.

Im getting to be honest.

Really really.

Comments that that is why.

My confidence level is increasing.

And I'm happy to share in fact, some of these comments.

With you.

I mean.

One of the sites that had done 30 cases for example, they were like very slowly doing cases.

And then.

I actually talked with them and I said well do.

You guys started by saying we're going to do.

30% to 40 per year, you have taken longer to get there.

They kind of confirm that what they were really doing is they wanted to do at least 30 cases.

And see how their patients were doing before they really increase their usage and so they basically said look we.

Have done these cases, we have now confirmed that our own outcomes.

Sure.

Similar to the tact clinical trial outcomes that is what they were looking for.

And they said now that we have confirmed the clinical trial outcomes.

We think that Tulsa is going to be.

To be honest because you.

You said this is going to be one of the big three.

It's gonna be Tulsa, it's gonna be robotic prostatectomy is going to be radiation.

I said, okay. This early stage I will take that overtime, we'll think about who is the number one.

That space.

And.

Yes.

I'm happy to say like I'll share. One anecdotal example, with you, which is which really had an impact on the actions.

So I was I attended a case with one of our urologists.

And for some reason robotic prostatectomy actually came up as a conversation and.

He said that he had was doing a robotic case a week prior to this.

And that he actually lost the robotic arm locked a needle and took them about 30 minutes to find it and everything was good and no problem well.

What he said was he said while he was looking for that needle.

He said this would have never happened with Tulsa.

You said you guys don't realize how inherently safer this.

<unk>.

So.

And it really had an impact on me is that we talk about safety, we talk about clinical outcomes.

These urologists are now seeing in real work.

So, yes, it's taking longer but I'm, finding the reasons that theyre, giving a really really different.

Frankly, I'm happy about that.

One of them to test our technology.

C to something else.

Terrific.

I'm going to ask a couple of more and then because I think I'm at the end of your line.

You talked about this 5% per month without the R&D.

Can you talk about I think you said Halo was going to be a multi center group and he's training additional urologists and he will actually come online.

This month.

Where are these additional centers going to be and do you think you'd get into all the NFL cities.

Throughout the balance of this year.

So.

First of all Youre right.

<unk>.

And then it's also another interesting example of how it just takes longer to build.

Well does that he was actually originally.

I'm going to start by end of last year, but.

Because of some approvals that were needed in the state of Florida.

We had nothing to do with our technology.

It was related to the site.

To another 90 days to get going so he is definitely.

Uh huh.

Slated to start in the next couple of weeks.

But to answer your questions.

There are two of these sites are Florida sites. One is certainly his original site, which is soda.

There is another site, which is Jacksonville, Florida also and then there are two sites in California.

So those are the first four sites, we have talked about.

Adding sites there.

Relatively.

Good pace, but again the same model is let's get these sites going let's get.

All of the <unk>.

Different things that can cause delays or recruitment and so on.

Create efficient process and then most certainly the idea is that we will grow.

And build additional sites.

Great.

Radnet they've got two open they've got Dr. Hong running the one here.

In Arizona.

Where are the additional sites going to be for them and do you think you can grow that into the 10 plus that you had hoped for when you originally signed the contract.

Overtime.

Yes, I think so I think that again, David something similar they did their first 50 cases analyze it and then decided yet.

They want to they have been.

Very supportive of the CPT application they have.

Educate some of the society members.

There.

Because that is.

Their primary customer.

Is it.

Is reimbursed, they're not very big cash site.

In Arizona, it's actually a whole cash and they are doing very well.

But the.

Message is they all have identified the next two sites already Theyre actually purchased new MRI for these sites and we think later this year there will be operational.

And.

I think.

Once we have certainty on the CPT code.

And if we do get approved to be able to use the C code in the east.

Then I think you will see.

Foster adoption, but certainly those two things need to happen for them to go beyond the four that we're talking about.

Great.

Two last questions just one <unk> tack to are you close to completion on that.

Yes, I think we're a couple of patients away and we'll get to the about the 140 150.

Patient 350.

We will close it out so.

We'll have five year data.

Next year, and then we'll continue to add those newer patients.

Start to see the impact of that in the final outcomes.

Okay last question for me does this shift from ultrasound biopsy.

Hi, Inbar biopsy help with this shift to the inboard Tulsa procedure.

Yes. So this is sort of a long term.

Brian and I think over the next.

Couple of years, certainly we will be talking about it because I think right now we're so focused on our short term getting these sites going in and getting the.

CPT code ruling.

But you're you're on your thinking there.

The way that we're kind of thinking is that.

But Tulsa does is that it for the first time enables.

Very <unk> centric strategy from screening the patients diagnosing the patient to <unk>.

Our centric.

Biopsy to then Tulsa treatment and then follow up and.

You that all of a sudden become a continuum of care from beginning to the end.

And there is a lot of dialogue in the urology community about this.

And I think that.

It.

To some extent it is going from okay. I have never used <unk> before so now I can see it outside now as I said in the prepared remarks that I can.

Think about <unk>.

Try it from the perspective of treatment design rather than diagnosis.

Two.

I, probably should all my own MRI.

And so I think that shift is.

Again, it's not going to happen in one day, but I definitely can tell you that there are number of urologists, who are thinking that way already.

Terrific I will get back in line. Thank you so much.

Thank you Brian .

Thank you one moment our next question.

We have a question from Scott Mccauley from paradigm capital Your line is open.

Thanks, gentlemen.

I'll keep it quick.

Wanted to follow up on the AI software.

Down the road is that something you see as being kind of default it's packaged in with.

The kind of per per procedure cost.

That's kind of currently you're currently charging or is that something you see as a potential add on or upgraded.

That subscription once that's approved and commercialized.

Yes, Scott good question. So the way we are structuring. This is Tulsa pro is one cost per patient.

And there is going to be a value proposition for each of the module that we provide to the hospital or the urology practice.

And our plan is that there will be some kind of remuneration to our company for those modules.

Not.

Hey.

Free add on it will have its own value proposition and it will either have a additional price associated with it or it will have certain other commitments associated with it most certainly is.

Increase in the value proposition of our company.

Absolutely.

And then I think I just missed it but.

The top of the same as <unk>.

$5 million to $6 million range.

That's kind of expected for some of the expenses I think I may have just missed what that was if you could reiterate that.

That's it for me.

I think thats from a.

<unk> question, I think thats the burden.

Yes.

So you said do you have anything to add to that or feel good.

No. So basically what we're saying is we are expecting to hold firm on our burn rate in order to maximize our runway and that's how we're getting the confidence that the cash that we have on hand will give us the runway to go through all the way to Q1 2025, and we'll make sure that we adjust the levers.

<unk> can make sure we invest in the right areas like sales and marketing and we will adjust the cost in the other places to keep there arent great stable.

Got it thank you gentlemen.

Thank you.

One moment.

We have a follow up from Brian <unk> from <unk> Securities. Your line is open.

Alright, So rochette open the door talk about the sales force growth. If you would I think you have for now.

Where are you going to be investing in the sales force this year clinical reps genius feed.

On the Street Hunter Farmer, what are you guys thinking about yes.

So Brian we are aggressively adding to our sales team right now given the pipeline and the larger install base.

In summary form the answer is all of the above we are adding.

New hunters because of the demand pipeline that is growing we need to close those deals.

We're definitely hiring some really really good.

Farmers, who can take the sites that are.

They have already created for example, 50 cases and for one that their demand in terms of our presence is loss lot less than what it would be for the newer sites and then for the newer sites that were bringing on.

Adding genius services. So that we can continue to support them like we did.

Earlier guys.

The answer to that is absolutely all three of them were adding aggressively right now.

Great. Thank you.

Thank you and I'm showing no other questions I would like to turn the call back to Dr. <unk> for closing remarks.

So thank you so much.

I think there is definitely a lot going on.

Someone said in the call. The next couple of months will be very interesting and I really appreciate the questions. Because we are we.

We are doing something that is very unique and there are so many dimensions to it that.

Happy to answer your questions and thank you for everything.

We look forward very much to the Q1 call. Thank you again.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.