Q2 2023 Nano-X Imaging Ltd Earnings Call
how Wonderful love. Good morning and thank you for standing by. Welcome to the Nanox second quarter 2023 earnings call. At this time all participants are in a listen only mode. After the speakers presentation there will be a question and answer session. To ask a question during the session you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised.
To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to my cabinet investor relations. Please go ahead. Good afternoon and thank you for joining us today.
Earlier today, NANOX Imaging Limited released financial results for the quarter-ended June 30, 2020-30.
The release is currently available on the Investor section of the company's website.
Eris Meltzer, Chief Executive Officer, and Ron Daniel, Chief Financial Officer, will host this morning's call.
Before we get started, I would like to remind everyone that management will be making statements during this call that include forward looking statements regarding the company's financial results, research and development, manufacturing and commercialization activities, regulatory process operations and other matters.
These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today and may not be updated in the future.
Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date.
Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission.
Management will also refer to certain non-GAAP financial measures to provide additional information to investors.
a reconciliation of each non-GAAP financial measure to the nearest GAAP financial measure.
provided in the company's press release file today.
The non- GAAP financial measures include non-gap net loss, attributable to ordinary shares.
Non-GAP costs of revenue, non-GAP gross profit, non-GAP gross profit margin, non-GAP research and development expenses, non-GAP sales and marketing expenses, non-GAP general and administrative expenses, non-GAP other expenses, and non-GAP gross loss per share.
With that, I'd like to turn the call over to Erez Meltzer. Thanks Mike and welcome all to the Nanuk second quarter 2023 earnings conference call.
Throughout this quarter, we achieved significant advancements across multiple and enable us to deploy the Nanooks Arc in the US for the indication of use cleared by the FDA. As previously announced, we are in the process of establishing a US demo as part of our strategic approach.
for our US commercial activities. We have decided to shift this first unit and our now planning to install the unit.
in a clinical setting rather than a standalone commercial site.
The system is planned to be installed in an East Coast facility and will expect to start Generate revenues alongside training and demonstrations.
We believe that this first site will serve a dual purpose. First, as a training and demonstration center for the NEMUCS-R, which will provide potential buyers with live demonstration of the technology, which we believe is essential for informed acquisition.
purposes by healthcare practices, hospitals and health systems.
Secondly, we believe the clinical site can raise awareness of the Nanooks arc and monkey opinion leaders, radiologists and hospital system personnel.
The first Nod-of-God system was shipped from Israel and arrived in the US for installation in the clinical site, which we expect to open
Based on market analysis of the US market of clinician imaging administrators and directors, stakeholders recognize the clinical benefits of the Nanooks art.
and its more affordable approach to advanced imaging techniques.
Furthermore
Outpatient facilities such as skilled nursing facilities, freestanding emergency clinics, and pulmonary clinics showed interest in adopting the Nanux Arc.
Specifically, because such facilities typically do not have CT capabilities, and we believe such facilities view the Nanux Arc as the more affordable way to keep patients in-house for advanced imaging needs combined with a 2D x-ray.
Outpatient facilities also express potential interest in our MSUS business model, which we believe reduces the risk of an upfront purchase because the cost is based on equipment use. We believe that gathering further clinical evidence will strengthen the support of our technology.
Our US Go To Market Strategy is comprised of three primary components.
Customer targeting.
building a sales team and using a hybrid business model.
In terms of the customer targeting, we believe several factors impact willingness to adapt to our system, including the type of facility, its current imaging capabilities and imaging volume, and geographic locations, namely a rural versus northern. Our aim is to strategically engage segments that show early adaption potential such as orthopedic clinics, skilled nursing facility, free standing emergency departments, and urgent care facilities. We intend to continue to build clinical evidence, particularly with the US market, to support the adaption of our system.
as well as reimbursement mechanisms specifically with commercial payers. We have strategically re-aligned our focus to enhance our presence in the US market. Our initial effort in commercialization and deployment within the US will be directing.
will be supported by the existing international Manox organization.
For our business model in the US, we intend to use a hybrid approach combining a usage-based MSAS model with a CAPEX model to help promote adoption based on different segments. We have designed a training program to promote dynamics art.
we intend to use a combination of pilot size, training, sales and marketing efforts to help meet customer needs.
These aspects of our business strategy will require us to hire additional experienced healthcare business development professionals
who will be charged with raising awareness.
of the Nanooks Arc among physicians, hospital, urgent care operators, and large health systems throughout the USA. To support these important efforts, I intend to increase my personal presence in the US and make myself available of meeting for meetings with potential customers, as well as as investors who would like to have an in-depth conversation about our technology, commercial strategy, and future strategic plans. We look forward to providing further details in the upcoming month.
With respect to the rest of the world deployment, turning to our commercialization efforts outside of the US, we continue to make significant progress in multiple countries.
with respect to the rest of the world deployment. Turning to our commercialization efforts outside of the U.S., we continue to make significant progress in multiple countries, principally in Africa.
As we have previously announced, we have an agreement with the Distinguished Morocco.
and are working to accelerate deployments.
We have deployed a Nanox Arc system in a prominent hospital in Morocco.
that is a major healthcare provider in the southern region of the country.
The distributor in Morocco received appropriate clearance to conduct certain scans with the Nanuk's Ark.
Subject to the clearance, the nanoxar system has generated human images on incoming patients at the hospital including chest.
In Nigeria, we have installed the NanoxARC system, which we accept will become operational upon receipt of the necessary regulatory approvals and certification that has been formally submitted to the local authorities, the NNRA, to facilitate clinical activities.
we hope to begin generating human images in the very near future. As previously reported, we have already placed the system in Ghana at the UGMC hospital mainly for training purposes.
Meantime, our distributor has submitted the specific Nanux R device for approval to the Ghana Food and Drugs Authority for commercial use.
We anticipate receiving an initial response in the fourth quarter of 2023.
And in addition, we have engaged a clinical research organization
to potentially hold clinical trials in both Morocco and Ghana, subject to local regulatory approvals. In alignment with our global initiatives, and as announced in the past, we establish a partnership with BioVentures for Global Health, BVGH, a nonprofit organization dedicated to solving global health issues by forming connections between people, resources, and ideas. We completed the first phase of this program.
and are excited to begin the second series in just a few weeks, which involves a series of expert-led seminars to train Nigerian and other African healthcare professionals on imaging topics. We also regularly host radiologists, distributors, representatives from hospital systems, investors, and analysts at Nanuk's headquarters in Israel to discuss the Nanuk's Arc system in detail and conduct live demonstrations of the systems on site, providing first-hand insight into the capabilities of the Nanuk's Arc. I'm happy to report that these meetings resulted in very positive feedback in writing. All of those efforts constitute just the beginning of our goal to help people achieve better health outcomes. Lastly, on this front, as part of our series, for the purposes of developing next generation security scanning and non-destructive testing, we have a chip maker located in Switzerland. We have proceeded to phase two, lab-to-fab development, which is expected to manufacture...
sample chips by the end of this year and provide production of chips in Q1 2024. For the commercial production of our digital X-ray tubes for use in Nanox R, we plan to engage third-party manufacturers and suppliers based on, among other things, cost effectiveness. We are currently developing both ceramic and
and glass-based digital X-ray tubes for use in Nanox R. Our Korean facility is currently our primary manufacturer and supplier for our ceramic digital X-ray tubes.
and we are working with a third party for the production of glass-based digital X-ray tubes. For example, we recently started testing glass-based digital X-ray tubes.
Digital X-ray tubes manufactured by CEI.
The testing includes performance, integration and radiation testing.
Furthermore, we are negotiating with additional third parties to produce the digital X-ray to you.
Along with our existing manufacturing facilities in Israel and Korea, we believe these developments further strengthens our future supply of both ships and tubes.
The two key components of the non-Rx are to support
The scaled deployment of the Nonox Arc Units
In an additional step towards optimizing our mass manufacturing capabilities, we have initiated collaboration with Scanray for Nanux RX Systems assembly at scale.
Scanray, a medical equipment manufacturer, meets essential standard requirements and serves as a supplier for prominent global medical entities.
It is also the parent company of CEI, our Italian provider of glass-based digital X-ray tubes.
With robust technological manufacturing capabilities in India, we plan to leverage, in the coming years, of the Nonox Arc.
With robust technological manufacturing capabilities in India, we plan to leverage in the coming years of the Nonix Arc deployment.
Regarding regulatory, I'd like to now turn our attention to regulatory and clinical trials updates. I'd like to now turn our attention to regulatory and clinical trials updates.
On April 28, 2023, we obtained a 510k clearance from the FDA to market the Nanux Arc, including the Nanux Cloud, it's a company cloud-based infrastructure.
The Nanux Arc is a stationary X-ray system intended to produce
Tomographic images of the human MSK system are objective to conventional radiology on adult patients. The approved device is intended to be used in professional healthcare facilities or radiological environments such as hospitals, clinics, and hospitals.
imaging center, and other medical practices by trained radiographers, radiologists, and physicians.
in other medical practices by trained radiographers, radiologists, and physicians. This version of the Nanux R
It has the required capabilities to scan MSK chest and abdomen.
and to provide 2D X-ray images conventional radiography subject to local regulatory approvals. We are also continuing to pursue the CE mark in the European Union with our notified buddy aiming to submit during Q3 of 2023.
In Israel we are pursuing the Ammar clearance, the Israeli medical device listing
The required technical file was completed and submitted in early July 2023 and we expect a decision in the few months.
Clinical. As previously discussed under health sync-y permit, we started to collect clinical sample images of multiple human body anatomies.
We have completed first phase of clinical sampling and have begun the second phase. We are in the final stages of approval of additional clinical sites in Israel and this additional trial aims to utilize the Nanox Arc subject to receiving the final approval from the institutional IRB. This trial will aim to assess the diagnostic capabilities of Nanox Arc in detecting chest and lung diseases. Installation of the Nanox Arc is expected to be completed within a month.
in the ADAPT trial with the National Health Service in the UK. To date, all five of the testing sites in the UK have signed the collaboration agreement. And in addition, three sites, Cambridge, Southampton, and Bradford, have begun sending images to the Nanox Cloud Platform, and we expect two more sites in Nottingham and Cardiff to begin sending images very soon.
Nanox AI is currently engaged in showcasing the product across a range of platforms to 10 integrated delivery networks in both the United States and in other regions.
With that, I would like to turn the call over to Randelil, Chief Financial Officer, to review our financial results.
Thank you, Eric. We reported a gap net loss for the second quarter of 2023 of $17.4 million, compared with the net loss of $19.6 million in the second quarter of 2022. Revenues for the second quarter of 2023 were $2.6 million.
and the gross loss was 1.7 million dollars on a GAAP basis. Revenues from the teleradiology services for the same period was 2.5 million dollars with a gross profit of 0.4 million dollars on a GAAP basis and a gross profit of 0.9 million dollars on a non-GAAP basis.
which represents the gross profit margin of approximately 14% on a gap basis and 36% on a non-gap basis.
The increase in the company's revenues in the second quarter of 2023 is mainly due to the increase in the number of radiology that engage in rating during the overnight and weekend shifts. The decrease in the gross profit margin on a gap and a non-gap basis is mainly due to an increase in the cost of the company's radiology due to the incentive payments which the company provides.
in the amount of 0.7 million dollars, mainly due to an increase in the headcount in connection with the development of the Nanox Arc system, which was partially offset in part by a decrease in share-based compensation of 0.3 million dollars, an increase in research and development grants that the company has received.
marketing expenses for the second quarter of 2023 were 0.38 million dollars as compared to 1.1 million dollars for the comparable period in 2022.
We have already tested and scanned human and the other anatomies.
Yes.
So basically this is the.
The plan that we move forward in order to enhance our ability to do the clinical to provide the clinical data and explore the opportunities for that feature intended use.
Okay got it. Thank you so much for taking our questions I'll hop back in the queue.
Thank you. This is all the time we have for questions. Thank you for your participation in today's conference. You May now disconnect have a great day.
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