CapsoVision, Inc.

Good afternoon and welcome to CapsuleVision's third quarter 2025 earnings conference call. All participants are in a listen-only mode. After the presentation, we will have a question and answer session. So if you'd like to ask a question, please press star and the number one on your telephone keypad. Otherwise, if you'd like to withdraw your question or your question has been answered, please press star one again. Thank you. I will now turn the call over to Lee Salvo. Investor Relations for Capsovision. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for Capsovision's third quarter 2025 earnings call. Joining me today are Johnny Wang, President and Chief Executive Officer, and Senior Vice President of Finance, David Garcia, as well as Doug Atkinson, Senior Vice President of Sales. Before we begin, please remember that today's remarks include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-Q filed by us with the SEC. These forward-looking statements speak only as of the date of this call, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Our call today will cover the following agenda. Johnny will begin with an update on Capital Vision's business, target markets, and recent highlights from our pipeline development. Then, Dave will walk through a commercial update and recent financial results. After our prepared remarks, we'll open the call up for Johnny, David, and Doug to take your questions. With that, I'd like to turn the call over to Johnny Wang, CEO. Johnny?

Thank you, Lee, and good afternoon, everyone. ExoVision's vision has always been clear to make early, accurate, and accessible VI disease detection available to patients everywhere. Our long-term vision remains to deliver an ingestible capsule drug cream for multiple cancers, FWGO, gastric, pancreatic, liver, and colorectal in a single non-invasive procedure powered by advanced imaging and AI. We delivered a strong third quarter, highlighted by 19% year-over-year revenue growth, a 31% increase in new account generation, and the milestone of more than 151,000 patients having used our capital can plus system to date. This result reflects the growing market adoption and the strong physician engagement as more clinics embrace the advantages of our wire-free panoramic TEMPTL technology. TEMPTL 10 Plus provides a complete 360-degree view of the small bowel with a 97% completion rate, giving physicians the clarity and the efficiency may need for accurate diagnosis. Combined with our secure cloud-based workflow, providers can review cases anytime and anywhere without the presence of servers or hardware. That same cloud infrastructure continues to build a vast de-identified image database that fuels our proprietary AI development. On the pipeline development front, we have continued to make exciting progress that I'd like to share. First up, we continue to invest in AI to improve our existing products and the major significant progress with the clinical study to demonstrate the benefits of incorporation of our AI technology into capsule chem class. We currently plan to submit the related fighting case application to the FDA by year end of 2025. This updated timing represents a slight delay from our previously anticipated timing due to resource constraints on our third-party biostatistic station. To mitigate further delays, we have contracted with an additional biostatistical consulting group. We expect that it will take approximately six months for the FDA to review our application, and the pending clearance commercialization is planned to begin shortly thereafter. Capital Vision is, to our knowledge, the only capital endoscopy company with a true in-house AI core competency. The scale and the quantity of our growing image data shows inherent in our cloud-based architecture creates a powerful foundation for training AI models and uncovering new clinical insights that will continue to set our platforms apart. And because our system is fully cloud-based, it eliminates the need for on-site servers reduces costs and downtime, and removes the IT burden for clinicians. The result is a CI-enabled diagnostic platform designed to deliver efficiency, accuracy, and accessibility to GI practices across all settings. We also made important progress extending our pipeline with the recent submission of an application for breakthrough device designation to pursue use of our non-invasive capsoendoscopy system to enable earlier detection of pancreatic ducted adenocarcinoma. A major milestone in our mission to bring screening to one of the deadliest cancers worldwide. And it represents an important step in capso vision Leading to expand our cancer-based diagnostic platform beyond small bowel and address some of the most challenging diseases in gastroenterology. Pancreatic duct ethyl carcinoma, the most common form of pancreatic cancer, has a five-year survival rate of only 8%, largely because it is diagnosed as advanced stages that cannot be treated. Currently, no early screening tools are recommended to identify the disease at a treatable stage. CAPSTOL regions pursue the prevention use of CAPSTOL-10 UGI endoscopy to identify pancreatic disease at an early stage. The device's unique panoramic imaging capability enables clear visualization of the uterine papilla, a small ball landmark that controls the release of digestive fluids from pancreas. Changes in the papilla's appearance can be associated with pancreatic abnormalities and may serve as early indicators of disease. Unlike traditional endoscopic or imaging procedures, Hepstocan UGI is completely non-invasive. Patients similarly swallow a pure-sized camera. eliminating the need for sedation, intubation, or recovery time, while enabling physicians to review detailed images through a secure cloud-based system. The SDS Breakthrough Devices Program is designed to expedite the development and review of technologies that may offer more effective diagnosis or treatment for life-threatening conditions where no adequate alternative exists. If granted, the designation would allow capsaicin regions to work closely with the FDA to accelerate development and share upcoming clinical studies for the regulatory new process. We are also advancing our capsaicin choline program Our Gen 1 510K submission is currently under FDA review, and we have begun enrolling patients in our pivotal study for the Gen 2 capsule. This version incorporates enhanced optics and AI for improved accuracy, and it's on track for submission in the second quarter of 2026, with potential clearance in the fourth quarter of 2026. We are also very pleased to be partnering with Canon Incorporated on next generation imaging technology. Earlier in the third quarter, we entered into a development agreement focused on creating advanced CMOS imaging sensors with higher resolution and a dynamic range. These sensors are designed to further enhance image quality and performance. in future versions of our capital endoscopes, supporting our goal to deliver the most precise and reliable visualization in the industry. Finally, we continue to build our organization for growth. Following our successful IPO earlier this year, we were pleased to welcome Mr. David Garcia as Senior Vice President of Finance. His deep financial leadership and the capital markets experience will be instrumental as we move into the next stage of execution and growth. Overall, Q3 is a strong quarter across the board, commercially, operationally, and strategically. All progress in AI are the advising pipeline for early detection of major cancers, and the continued expansion of capital can plus adoption of reaffirms our competence in leading the next generation of non-invasive AI-enabled GI screening and diagnostics. I will now turn the call over to Dave to cover recent commercial and operational highlights, as well as our financial results for the third quarter. Dave?

Thank you, Johnny. I'm thrilled to join CapsaVision and be part of a team that's redefining what's possible in GI diagnostics. I've already been impressed by the talent and energy across the organization, and I look forward to getting to know everyone and to engaging with our investors and the broader Wall Street community in the month ahead. Turning to commercial highlights. As of September 30th, 2025, Capsocam Plus for small bowel screening has been used by more than 151,000 patients across the U.S. and internationally. In the third quarter of 2025, approximately 8,336 patients used our system, compared to approximately 6,961 in the third quarter of 2024, representing year-over-year growth of 20%. Today, our technology is protected by 82 U.S. patents, reinforcing our strong foundation in IP and clinical innovation. In addition, the device is reimbursed under CPT code 91110, supporting adoption across both private practices and hospital systems. A key strategic advantage of our approach to the GI market is the ability to leverage our existing sales infrastructure as we expand into additional indications. Importantly, we expect that the same call point for CapsuleCam Plus will serve as the entry for CapsuleCam Colon once it has been approved for commercialization, creating a built-in cross-sell opportunity without requiring significant increases in headcount. While we expect to scale over time, as of September 30th, 2025, our U.S. direct sales team included 26 representatives supported by seven regional sales managers and trainers. Internationally, we're gaining traction with four representatives in Germany, and we continue to efficiently expand into high-potential global markets through distributor partnerships. New account generation grew 31% in the third quarter of 2025 over the comparable quarter in 2024, demonstrating continued physician adoption of our capsule for use in small bowel screening, as well as the impact of approvals in pediatric patients over two years old and remote ingestion of the capsule, furthering the benefits of telemedicine. We were also encouraged to see a 24% increase in GI clinics and mega GI groups, which we define as those with more than 150 providers with multiple locations and in multiple states in the third quarter of 2025 over the same quarter last year. Although our historical focus has been on private gastroenterology practices, we are now achieving momentum in hospitals and GPOs as incumbent contracts come up for renewal. In the third quarter of 2025, hospital systems customers increased 26% over the prior year. Turning to our financial performance, for the third quarter of 2025, total revenue was $3.5 million, reflecting 19% growth compared to the third quarter of 2024. This was driven by an increase in the number of Capsotam Plus capsules sold. Our gross margin was 54% for the quarter, consistent with our expectations as we scale. Operating expenses were $9.9 million, a $2.5 million increase from the quarter of 2024, driven primarily by an increase in expenses associated with the development of the new CMOS under the development agreement with Ken and Inc., and the increase of general and administrative expenses due to higher payroll and benefits expenses and stock-based compensation expenses associated with the executive officer departure and higher professional service expenses, including audit, legal, and consulting fees as we were operating as a public company. Net loss was $7.9 million for the third quarter of 2025 compared to a net loss of $5.8 million in the third quarter of 2024. We ended the quarter with $17.8 million in cash and equivalents an increase from 1.1 million at June 30th, 2025. At the beginning of the quarter on July 3rd, 2025, we completed our initial public offering and received total net proceeds of 23.4 million. We also announced a development agreement with Canon to design and evaluate next generation CMOS image sensors for future versions of our capsule endoscopes. While not intended for CapsuleCam Plus or CapsuleCam Colon, this collaboration marks a key step in advancing our innovation pipeline and imaging capabilities. In July 2025, we made a prepayment of $1 million. R&D expenses for this agreement, recognized in the third quarter of 2025, were $1.6 million. Accrued liability balance as of September 30, 2025, was $0.6 million. Now I'd like to turn the call back to Johnny for some closing remarks.

Thanks Dave. As we look ahead, we are entering one of the most exciting periods in Capsule Vision's history. We have clear momentum across every part of the business. From the continued commercial growth of Capsule King Plus to the expansion of our pipeline into new indications like Colon and the Pampreas. to the advancement of our AI-assisted diagnostics. Our application for breakthrough device designation for pancreatic screening reflects both the urgency of data-made needs and the promise of our technology to detect disease earlier when treatment can still make a difference. In addition, continued development of our AI module for Capsule Chem class has the potential to make a endoscopy faster and more accurate than ever before. As with our CactoCAN colon program progressing and the additional development efforts underway with partners such as Canon, we are steadily building a comprehensive platform that can transform how gastrointestinal disease pieces are detected and managed. Following our successful IPO, we are thanking our leadership team and executing our clear growth plan. I'm confident that the combination of our advanced imaging, proprietary AI, fully cloud-based architecture gives us a strong foundation for long-term success. I want to thank our employees for their dedication and creativity. Our clinical partners, for their collaboration, and our investors for their continued support. Together, we are redefining what's possible in GI screening, making early, accurate, and patient-friendly diagnosis a reality. We look forward to updating you on our continued progress next quarter. At this time, Dave, Doc, and I would be happy to take your questions. Operator, can you please open the line?

Thank you. If you'd like to ask a question, please press star and the number one on your telephone keypad to raise your hand and enter the queue. If you'd like to withdraw a question, simply press star one again. Thank you. And we will take our first question from Bruce Jackson from the Benchmark Company. Please go ahead.

Hi, good afternoon. Thank you for taking my questions. First, I want to ask a pipeline question. So with the AI feature, if you're going to be submitting that in the fourth quarter, what does that do to the other milestones in that program? So does the approval also move forward a quarter? I think we were looking at maybe first quarter next year originally. Would that go to the second quarter?

Bruce? Thanks for the question. It normally takes three to six months, so it should be available in the second half. As soon as you get it cleared, we will launch it in the market.

Okay. And then a question on the operating expenses. So you mentioned that there was a $1.6 million charge or fee for the Canon agreement. That would bring kind of like the core R&D rate in and around maybe 4.5 million. Is that kind of the level we should assume going forward?

Yeah, thanks. This is Dave. So the 1.6 million expense for R&D for Canon, think of that as a one time in nature for Q3. So going forward, you can take that out.

Okay, perfect.

All right, that's it for me, thank you.

Thank you.

Thank you.

Our next question comes from the line of Kyle Bowser from Ross Capital Partners. Please go ahead.

For Kyle, thanks for taking our questions. First one for me, congrats on applying for Breakthrough designation. for pancreatic cancer. With that application, is there any sort of clinical data that you're able to use in application and maybe any key highlights there that you can provide for us?

Yes, we do have a small feasibility study conducted about six years ago. Yeah, so it's a small study, 20 subjects, but Two with cancers, we saw both of them. We actually is two out of two out of 20. So it's perfect number, although the study is small. So that make us decide to pursue this great opportunity.

Great. Now that's very helpful. And then maybe just to touch on the collaboration with Kodak, In terms of timing there, will that be used, you know, in the capsic MBGI with the pancreatic, for pancreas? Will it be that later iterations? Maybe just an update on the timeline there.

Can you say it again? Sorry.

Yeah, so just with Kodak, the Kodak collaboration.

Canon Incorporated CMOS sensor. Yes, yes. Please go ahead.

Yeah, so kind of what's the timing? Just an update on the timeline there. Will that be used for the pancreas capsocam, or will that be used in later iterations, that imaging?

Actually, for pancreas pivotal study, we will move ahead without waiting for this Canon sensor. Canon sensor, we expect to be ready in 2026 and going to capsule in 2027. Then for the previous study, we are using existing sensor from Toshiba. And with the new optics, which has 35% more viewing area, field of view, and with better image quality. So that should suffice for this. application, given that we already got a very good result in feasibility study using the lens with not as good quality as this new lens.

Okay, great. That's helpful. And then last one for me. In terms of the commercial organization and what does the headcount look like, especially as you're expanding with the rollout of CatsoCam Plus and then CatsoCam Colon on the horizon?

Yeah, that's a great question, Kevin. Right now, we are sustained with 26 territory managers, and we have seven directors, sales directors, and field sales trainers here in the U.S. market. We will maintain that count. We're looking at adding an additional two territories going into 2028. But, you know, we have a methodology about the expansion of these territories. The nice thing is it's the same call points that we're making with all of our products that we'll be adding to our bag in 2026 and then going into 2027. So we have the right team in place right now. We don't see a huge increase in headcount. However, you know, with colon, once it is – we gain additional – expansions and indications on what it can be used for, clearly we're going to need more feet on the street. But right now we're going to maintain with the sales team that we have in place both U.S. and internationally and looking at 2026 adding two additional territories in some of the larger populated states such as Florida and in the New York metro market.

Great. Thank you guys very much. That's all for me.

Of course. Thanks, Kevin.

Thank you. Again, if you'd like to ask a question, please press star and the number one on your telephone keypad. There are no further questions. That concludes our question and answer session. That also concludes the call for today. Thank you all for joining, and you may now disconnect.