EDAP TMS S.A.

Greetings and welcome to the EDAPTMS second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Glenn Garmont, Investor Relations. Please go ahead, sir.

Thank you, Hector. Good morning, and thank you for joining us for the EDAP TMS Second Quarter 2021 Financial and Operating Results Conference Call. On today's call, we'll hear from Mark Oksikowski, Chief Executive Officer and Chairman of the Board, and Francois Dietsch, Chief Financial Officer. Before we begin, I'd like to remind everyone that management's remarks today may contain forward-looking statements, which include statements regarding the company's growth and expansion plans. Such statements are based on management's current expectations and and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. 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. I'd now like to turn the call over to EDAP's chairman and CEO, Mark Oksakowski. Mark?

Thank you, Glenn, and good morning, everyone. I will start by providing a brief operational update and then turn the call over to Francois Ditch to review our financial performance. I will recap a few of the highlights that we covered in our pre-announcement press release of August 4. Total company revenue for the six months ending June 30 was 20.7 million euros or $24.8 million, representing growth of 22.5% over the first six months of 2020. And while our HIFU division continues to be negatively impacted by the ongoing effects of the COVID pandemic on hospital capex trends, we were very pleased to see U.S. treatment volumes increase a very healthy 79% over the second quarter of 2020. This is important for two reasons. First, the growth in U.S. treatment volumes is very noteworthy because it is a leading indicator of growing adoption by urologists of Cochlear & Haiku as a process cancer treatment alternative. Second, we believe this growth in U.S. treatment volumes reflects the positive impact of Haiku reimbursement rules that went into effect on January 1st of this year. Recall that CMS, in its Physician Fee Schedule final rule, established for the first time a payment to physicians performing a Haiku procedure in the U.S. Recapping the rule, TMS has set a total relative value unit, or RVUs, for physicians performing a HIFU procedure at 29.09. This translates to an average payment of $996 for a urologist performing a HIFU procedure on a Medicare patient in a facility setting. As a reference, a comparable established minimally invasive therapy for prostate cancer, cryotherapy, yields at 22.72 RVUs, which translates to $786 for the urologist under the same setting and patient conditions. So HIFU can significantly broaden the revenue base of urologists treating prostate cancer patients, and we believe this new rule could be a meaningful long-term catalyst to accelerating 401 adoption. And on the topic of reimbursements, I would like to share with you a recent update that could very positively impact reimbursement rates in 2022 and beyond. Earlier this week, we requested and were granted an opportunity to present at the summer meeting of the CMS Advisory Panel on Hospital Outpatient Payment, or HOP Panel. The HOP Panel is a mechanism whereby CMS brings together a group of subject matter experts to consider and discuss changes to current reimbursement rates for specific outpatient procedures or technologies. Recall that on the hospital payment side, HIFU is currently reimbursed as a Level 5 Urology Ambulatory Payment Certification or APC. This translates into a payment for a hospital performing a HIFU procedure on a Medicare patient of around $4,500 in 2021 as a national average adjusted locally based on the weight index. However, based on the analysis of the reimbursement paid for other prostate cancer ablation procedures, including cryo-surgical ablation, we believe there is a strong argument to be made for a level six APC reimbursement for 401 . For the sake of comparison, if HIFU were reimbursed at level six this year, the average reimbursement would increase from approximately $4,500 currently to approximately $8,500, a huge increase of nearly 88%. This is important because the low reimbursement for facilities limits how broadly focal therapy may be offered to the full range of Medicare patients. At the meeting which occurred this past Monday, the HOP panel voted unanimously in favor of the increase. And while the final 2022 rule will not be published until November or December of this year, it is worth noting that CMS has historically given the HOP panel's recommendations very strong consideration. If we are successful in moving our APC classification to level 6 from level 5 next year, we believe this will be a significant driver for many more hospitals to initiate a focal therapy program. financial analysis of acquiring a focal one machine and offering the critical benefits to a broader patient population becomes much stronger. We are very excited and hopeful that these potentials change and look forward to progress later this year. Notwithstanding the challenging CAPEX environment during the second quarter, we continue to add to our robust pipeline of focal one and ExideU pipeline sales opportunities during the quarter, and we believe Several will close this year. Over the past few months, we have added healthcare institutions who are growing focal one clients roster, including Cleveland Clinic and Mount Sinai in New York, among many others. These are notable leading institutions in the treatment of prostate cancer and are increasingly becoming reference centers with teaching, research, and case observations now available for pipeline accounts. We look forward to updating you on the growth and development of our Centers of Excellence for Formula One in the coming months. We believe that the eventual return of Hospital CapEx to a more normalized trend, coupled with continued growth in treatment volumes, bodes well for the future of our company, as well as the hundreds of thousands of men around the world who could potentially benefit from this treatment. Turning now to other highlights from the quarter. In June, we announced the hiring of Medtech industry veteran Ryan Rhodes to be chief executive officer of our U.S. subsidiary. Ryan brings a wealth of highly relevant experience, including 14 years at Intuitive Surgical, where he played a leading role in the global clinical extension of robotic surgery in multiple specialties, including urology. The addition of Ryan reflects the continued execution of our U.S. expansion plans. He will be instrumental in helping to drive continued growth and adoption of our technology. Ryan has already started assembling a world-class team around him by adding MedTech leaders that will be instrumental in building HICO adoption and utilization in the country. One of them is Mohan Nathan, who has an extensive background in the medical device industry, including many years in global clinical and marketing leadership roles at Intuitive Surgical and Transcentrics. Mohan will play a major role at EDAP, developing our clinical and marketing adoption programs. To fund our growth initiatives in the U.S. and elsewhere, in April, we completed a successful financing that raised gross proceeds of approximately $28 million. Together with Cash on Hand, we ended the second quarter with a cash of more than $53 million. As we discussed last quarter, this financing was strategically important for several reasons. First, it brought a number of new, high-quality institutional healthcare investors into the fold. These investments occur only after a significant amount of due diligence has been done, and the investors who participated in this offering did so because the share or belief in the potential of HIFU not just as part of the process cancer continuum, but potentially other indications as well. We believe this validates our mission and our technology. The funds that we raise will support our U.S. extension plan, specifically our efforts to expand market access and increase the IFO adoption and utilization. We previously announced that we are working with leading U.S. reimbursement consultancies, NTP, and Arkansas advisors to expand market access and coverage And this reflects our broader commitment to establish ourselves as the leader in the U.S. market, making focal technology as broadly available to patients as possible. We also have sufficient capital to build out our clinical marketing and sales organizations. I believe that these initiatives, together with the hospitals and KOLs, who are already champions of technology on the ground, represent a multi-pronged approach designed to maximize awareness and access to our HIFU technology. I will provide a brief update on our endometriosis program. As a reminder, this Phase II study will enroll a total of 38 women across five major hospitals in France who will be assessed over a six-month follow-up period. Investigators will evaluate the safety and efficacy of HIFU for this technology. Enrollment is tracking closely with our internal expectations, and we expect to treat the last patient by the end of this month, which is in two or three days. We also received authorization from the French Health Authority to continue enrolling patients after we achieve our initial enrollment target of 38 patients to further strengthen this Phase 2 study and collect more safety and efficacy data. We believe the treatment of endometriosis could be greatly improved with the application of lase-invasive procedures and the use of hypo-technology could offer an important minimally invasive treatment option for these patients. And now, our CFO, Francois Ditch, will provide some details of our financial results. Francois?