CapsoVision, Inc.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Capsule Vision fourth quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. I would now like to turn the conference over to Lei Salvo, Investor Relations. You may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for Capsovision's fourth quarter and full year 2025 earnings call. Joining me today are Johnny Wang, President and Chief Executive Officer, and David Garcia, Senior Vice President of Finance, as well as Doug Atkinson, Senior Vice President of Sales, who will be joining us for the Q&A session. 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 Form 10-K filed today 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 changing 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 Capco 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, Dave, and Doug to take your questions. With that, I'd like to turn the call over to Johnny.

Thank you, Lee, and good afternoon, everyone. Capsule vision's mission remains clear to make early, accurate, and accessible GI disease detection available to patients everywhere. Our long-term vision is to deliver an ingestible capsule capable of screening for multiple cancers, including esophageal, gastric, pancreatic, liver, and the colon rectal, in a single non-invasive procedure, powered by advanced imaging and AI. With that as our foundation, we closed 2025 with increased commercial momentum for Capsule Chem Plus, a small-ball capsule endoscopy solution. For the full year, we delivered the approximately 15% year-over-year revenue growth and 21% in new account generation, reflecting continued adoption of Capsule Chem Plus. Across both new and existing customers, as of December 31, 2025, more than 161,000 patients have been imaged with Capsule Chem Plus. We believe this growing installed base, combined with strong physician engagement, reinforces the value of our depreciated platforms. A wire-free capsule with unparalleled features, including 360-degree panoramic imaging on both storage and a fully cloud-based workflow that eliminates the need for external hardware worn on patients' body or on side computing infrastructures. Importantly, cloud-based architecture is not just a workflow advantage. It also serves as the foundation of our AI strategy. Our expanding image repository of the cloud storage continues to strengthen our ability to develop and deploy AI models that improve diagnostic accuracy, reducing reading time, and enhance clinical efficiency. On the pipeline development front, we have continued to make exciting advances that I'd like to share. Starting with Capsule Chem Plus, we are advancing our AI-enabled roadmap. At the end of last year, we submitted our 510K application for our AI-assisted reading module, which is designed to enhance lesion detection and streamline physician review. We believe this represents an important step in further differentiating our core platform and expanding its clinical and economic value. Building on that momentum, we continue to advance our Capsule Can Call-in program. Following constructive engagement with the FDA, we have refined our development strategy to prioritize our second-generation capsule. The Gen1s are medium, and subsequent FDA interactions provided valuable insights into both the regulatory pathway and evolving product expectations. Based on that feedback, we see a clear opportunity to advance directly to a more capable system that incorporates improved imaging performance, expanded field of view, and enhanced AI functionality. As a result, we are focusing on our resources and authorizing the development of CapsuleCAN-Gen2, which we believe will deliver a more competitive and clinically differentiated solution at launch. We view this as a disciplined and value-driven approach, enabling us to bring a stronger product to market from the outset, rather than iterating possible clearance. We have already enrolled over 500 patients in our pivotal study and are extending enrollment across the U.S. sites. We now expect to submit our 510K application for capsulcan colon Gen 2 and its AI module in the third quarter of 2026. Turning next to our capsulcan UGI program and the pancreatic cancer initiative, we continue to see significant long-term potential for a non-invasive screening approach in one of the most challenging areas in medicine. We believe we are pioneering a novel visual assessment method for the detection of pancreatic cancer, building our platform's ability to evaluate abnormalities of the duodenal wall and to clearly identify key anatomical landmarks, such as the papilla of water. This approach is grounded in both our prior clinical work and established scientific literature and represents a potential paradigm shift in how pancreatic disease could be detected at an earlier, more treatable stage. Following our initial breakthrough device designation submission, we engaged with the FDA and received constructive feedback which confirmed the system's ability to visualize the papilla and associated abnormalities. The feedback also outlined the need to further define diagnostic criteria, which we view as a natural next step in developing a first-of-its-kind screening modality. To address this, we are initiating a clinical study expected to begin in the second quarter of 2026. This study will enroll approximately 619 patients, and it's designed to establish diagnostic criteria for malignancy using the Capsulcan UGI system. We are conducting this work in collaboration with clinical experts, key opinion leaders, including leadership of the top professional societies in the pancreatobiliary fields. We believe this study will be an important step in generating the data needed to support both regulatory advancement and future breakthrough designation resubmission, while continuing to build the clinical foundation for a non-invasive approach to early pancreatic cancer detection. Importantly, our regulatory pathway for Capital 10 UGI is independent of the breakthrough program and will remain on track in advancing this initiative. Finally, and supporting all these efforts, we recently strengthened our balance sheet with the completion of a $14 million private placement with participation from both new and existing inventors. We believe this reflects continued confidence in our strategy and provides additional flexibility to invest in product innovation, clinical development, and commercial expansion. Overall, we believe we are well positioned heading into 2026 with a growing commercial base, a differentiated AI-enabled platform, and a disciplined approach to advancing our pipeline. We remain focused on executing our strategy and delivering long-term value for patients, physicians, and shareholders. I will now turn the call to Dave to cover current commercial and operational highlights, as well as our financial results for the fourth quarter. Dave?

Thank you, Johnny. Turning to our commercial performance, as Johnny highlighted earlier, Adoption of Capsocam Plus continues to expand across both U.S. and international markets. As of December 31, 2025, more than 161,000 patients have been imaged using our system for small bowel screening. In the fourth quarter alone, approximately 9,400 patients utilized Capsocam Plus compared to approximately 8,374 in the prior year period. representing year-over-year growth of 12%. This continued growth reflects increasing physician awareness, strong clinical utility, and the ease of integration into existing practice workflows. Our platform is supported by a robust intellectual property portfolio currently with 83 issued U.S. patents, reinforcing our position as a leader in capsule endoscopy innovation. In addition, reimbursement continues to support adoption across a broad range of care settings, including both private practices and hospital systems. From a commercial strategy perspective, one of our key advantages is the ability to leverage our existing sales infrastructure as we expand into new indications. We expect that same physician call point driving adoption of Tapsicam Plus today will serve as a natural entry point for Capsicum colon when it is FDA approved, creating a meaningful cross-selling opportunity without the need for significant incremental investment. As of year end, our U.S. direct sales organization consisted of 26 representatives supported by seven regional sales managers and trainers. Internationally, we are continuing to build momentum including a dedicated team of four representatives in Germany, while also expanding our global footprint through distributor partnerships and high-potential markets. New account growth remained solid in the fourth quarter, increasing 16% year-over-year, reflecting continued physician adoption of Capsocam Plus for a small bowel screening. This momentum has been further supported by recent approvals, including use in pediatric patients over the age of two and the ability for remote capsule ingestion, both of which expand access and align well with the growing adoption of telemedicine. We are also encouraged by continued expansion within larger gastroenterology networks. During the quarter, we saw increased penetration in GI clinics and mega-GI groups. compared to the prior year period. In addition, while our historical focus has been on private gastroenterology practices, we are now seeing meaningful traction within hospital systems and group purchasing organizations. As existing contracts come up for renewal, we are increasingly being evaluated alongside incumbent solutions, and in many cases, selected as a preferred alternative. This is reflected in our hospital channel performance, where the number of hospital system customers increased 87% in the fourth quarter compared to the same period last year. Turning to our financial performance, for the fourth quarter of 2025, total revenue was 3.9 million, reflecting 13% growth compared to the fourth quarter of 2024. This was driven by an increase in the number of capsule cam plus capsules sold. Gross profit was $2 million, an increase of $200,000, or 13%, compared to the fourth quarter of 2024. Gross margin was 50% for the quarter, consistent with our expectations as we scale. Operating expenses were $9.4 million, a $3.1 million increase from the fourth quarter of 2024, driven primarily by an increase in expenses associated with the development of the new CMOS image sensors under the agreement with Canon, continued investment in the colon clinical study, and an increase in public company expenses as we now operate as a public company. We ended the year with $10.1 million in cash and equivalents, Subsequent to year-end, we strengthened our balance sheet with the closing of a $14 million private placement of equity with participation from both new and existing investors. The financing was completed at a price of $4.88 per share, which represents a 5% discount to our March 16th closing price as per the terms of the agreement. This equity investment reflects continued investor confidence in our strategy and long-term growth opportunity. We intend to use the net proceeds to support our key priorities across the business, including commercial expansion, continued investment in R&D, and the advancement of our pipeline programs, particularly CapsuleCam Colon and our AI-enabled platform. Now, I'd like to turn the call back to Johnny for some closing remarks.

Thanks, David. As we look ahead, we believe we are entering a highly competing phase of execution for Capsule Region. We are building from a position of strength with continued commercial momentum in Capsule Chem Plus, expanding adoption across both existing and new customer segments, and increasing traction in larger GI networks and hospital systems. At the same time, we are advancing a focused and disciplined pipeline strategy. Our recent 510K submission for the AI-assisted rating module represents an important step in enhancing the clinical and economic value of our core platform. In parallel, we are progressing capsule can colon with a clear path toward the next generation product designed to meet the physician expectations at the launch. And in our pancreatic cancer initiative, we are continuing to advance what we believe could become the first of its kind. non-invasive screening approach, supported by a growing body of clinical work and ongoing engagement with the FDA. Underlying all of this is our differentiated platform, combined wire-free capsule technology, a scalable cloud-based infrastructure, and in-house AI capabilities, which we believe positions us uniquely to expand across the GI tract and address some of the most significant unmet needs in gastrointestinal care. Finally, with the additional capital raised during the quarter, we are well positioned to continue investing in innovation while maintaining a disciplined approach to execution. Taken together, we believe Capital Region is well positioned to thrive sustained growth, deliver meaningful innovation, and create long-term value for patients, physicians, and shareholders. 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, Doug, and I would be happy to take your questions. Operator, can you please open the line?

Yes, thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your headset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up question. Our first question comes from Kyle Bowser from Roth Capital Partners.

Please go ahead.

Great, thanks. Thank you, Johnny and David, for the prepared remarks and taking my questions here. Maybe I'll just ask some follow-ups on the Gen 2 capsulcan colon efforts. Any sort of feedback you've received to date? I know you've already enrolled, I think you said, over 500 patients of the up to 800. So any feedback there? And... Would we anticipate seeing results of this study later this year as well, in conjunction with the submissions, or would we see those later?

Yes, thanks, Kyle. So our colon Gen 2 have higher resolution, higher image quality, and a larger field of view for better detection. We also have better software and working with our AI module. And so far the enrollment goes well, so far so good. Our clinical director, Kerry Jorgensen, is a very capable person and a good manager. All this clinical study enrollment is in good hands. So, we still on track to file the submission to FDA for Gen 2 by the end of Q3. So, there's no delays so far.

Thank you. I appreciate that. And then my follow-up. So, regarding the breakthrough designation application for pancreatic cancer detection Good to know that you're kind of working with the societies and KOLs. And I believe you want to kind of understand the ideal diagnostic criteria. What sort of criteria are you contemplating? And would this 90-patient study, would the results, would you be able to use those results for the actual FDA application?

In terms of this score, score system is required for diagnostic purpose because it tells you yes or no. So the score system, we read several important features we think are meaningful to the pancreatic cancer. including the papilla abnormality and due to some lesion, some tumor growth in the pancreas head. So they will compress the neighboring anatomy or even invade the neighboring anatomy. So you can see that on the duodenal wall. next to the papilla. So for each of these abnormalities, the doctor grading is yes or no. And if yes, the severity is mild or severe. Then they give a grading score for that feature. Then the entire score is composed of all these abnormalities or the disease probability-related variable, like gender, like age. So then we build the score system based on the study results, based on the multiple-variate analysis. So that's how things will be implemented and So such a system is based on a methodical mathematical model. So we expect that this one will be a very important step in the developing of this non-invasive diagnostic system. So in terms of FDA, I think that this one will be very important for FDA to apply, for us to apply for the breakthrough designation. The purpose of breakthrough designation is to establish a priority in FDA's work, because FDA has a lot of cases and this one gives us priority over other cases. And it can also invoke the attention of the top FDA officials to make a direct decision. So for clearance, it's possible, after establishing the scoring system, they need some validation. Because the population you used for validation, for establishing the model, establishing the model cannot be used for validation. It has to be another population. So then there might be a study following this to prove it can be used in the external population outside of this study population. But at that point, we already have built a great milestone. This is not evolution. This is revolution. Thank you.

Okay, excellent. That makes sense. Sounds great. Well, congrats on all the progress, and thanks for taking my questions. I'll jump back in queue. Thank you.

Our next question comes from Bruce Jackson from the Benchmark Company.

Please go ahead.

Hi, good afternoon, and thanks for taking my questions. So the small bowel business looks like it's tracking very nicely. I think the thing I'd like to get a better handle on is the colon cam development. timeline. So I apologize in advance for asking fairly detailed questions here, but how many patients were you, had you recruited at January 1? It's how many sites and where are we today at how many sites? And then give us a sense of like how the patient accrual is going to go from here and how many sites you have to add in order to like get to the target by a certain, certain date.

Yeah, for Gen 1, we enrolled more than 1,000 subjects. And in Gen 2, we target to enroll 800 patients. But we will have more ratings so that to create more statistical power for the calculation of sensitivity, accuracy, and specificity. And so far, in this Gen 2, we are 11 sites across covering the entire U.S. So far, we are close to 600, okay? Over 500, but close to 600. So the enrollment is going well. So far, we have a capable clinical director with a very good team, effective team. So far, it's going so well. But I have to be honest, during summertime, doctor might take a vacation. So doctor's time, we have no control. So that is a factor, X factor. But in general, we are in good hands. So far, everything goes according to the plan. Thank you. Okay.

And then my follow-up would be, once we get this 510K submitted, what do you anticipate that the review time would be like? And then can you perhaps give us a rough indication of when the Gen 2 colon cam capsule might be commercially available?

Yes. So in this one, we... We expect the FDA, it takes FDA six months to clear the device. So from end of Q3, we expect Q1, 2027, we got the clearance and starting launching it in the marketplace the beginning of second half, 2027.

OK. Okay, great. Thank you very much. Thank you. Again, if you would like to ask a question, please press star 1 on your telephone keypad. There are no further questions at this time, and that concludes the question and answer session, and this concludes today's conference call.

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