Profound Medical Corp.

Good day and thank you for standing by. Welcome to the Profound Medical Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. 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 regarding Profound and its business, which may include, but is not limited to, expectations regarding the efficacy of Profound's technology in the treatment of prostate cancer and BPH, uterine fibroids, palliative pain, and osteoid osteoma. Often, but not always, forward-looking statements can be identified by the use of words such as plans, is expected, expects, scheduled, intends, contemplates, anticipates, believes, proposes, or variations, including negative variations of such words and phrases, or state that certain actions, events, or results may, could, would, might, or will be taken, occur, or be achieved. Such statements are based on the current expectations of management. The forward-looking events and circumstances discussed in this conference call may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company, including risks regarding the medical device industry, economic factors, the equity markets generally, and risks associated with growth and competition. Although profound is attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events, or results to differ from those anticipated, estimated, or intended. No forward-looking statement can be guaranteed, except as required by applicable securities laws. Forward-looking statements speak only as of the date on which they are made, and profound 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 like to take a moment to summarize our business. Profound develops and markets customizable and fission-free therapies for the ablation of diseased tissue. We are currently commercializing Tulsa Pro, a technology that combines real-time MRI, robotically-driven transurethral ultrasound, and closed-loop temperature feedback control. The technology is designed to provide customizable and predictable radiation-free ablation of a surgeon-defined prostate volume while actively protecting the urethra and rectum to help preserve the patient's natural functional abilities. Tulsa Pro is CE-marked, Health Canada approved, and 510K cleared by the FDA. We are also commercialized in Sonolive, an innovative therapeutic platform that is CE-marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonolith has also been approved by the China National Medical Products Administration for the non-invasive treatment of uterine fibroids and has recently obtained FDA approval under our humanitarian device exemption for the treatment of osteoid osteoma. While we do not expect this FDA HDE approval to have a material impact on revenues in the near term, it is a significant milestone for our company, and we are making preparations for its U.S. commercial launch later in 2021.

On the call today, representing the company, are Dr. Arun Menawat, Profound's Chief Executive Officer, and Aaron Davidson, the company's Senior Vice President of Corporate Development. With that said, I'll now turn the call over to Aaron.

Good afternoon, everyone, and welcome to our second quarter 2021 conference call. On behalf of the management team and everyone at Profound, I would 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 moment for an update on our commercial activities. However, before I do, I'd like to provide a brief update on our second quarter 2021 financial results. As a reminder, we have changed our presentation currency from the Canadian to the US dollar. To streamline things, all of the numbers we refer to have been rounded, so are approximate. For the three-month period ended June 30th, 2021, the company recorded revenue of $2.6 million, up 156% from $1 million in the second quarter of 2020. As we mentioned in today's press release, the U.S. Tulsa Pro business rebound that started in March continued through the second quarter, driving 145% sequential increase in recurring revenue. Total operating expenses in the 2021 second quarter which consists of R&D, G&A, and selling and distribution expenses, were $7.6 million, an increase of 74% compared with approximately $4.4 million in the second quarter of 2020. Breaking that down further, expenditures for R&D increased 99% on a year-over-year basis to $3.4 million. This was primarily driven by increased new and existing clinical trials, increased spending for R&D initiatives and projects, travel restrictions being removed, options awarded to employees, additional headcount, and overall increases to general expenses, partially offset by decreased consulting fees. G&A expenses increased by 49% to $2.5 million due to additional headcount, increased salaries and director's fees, higher NASDAQ and TSX listings fees, increased legal and accounting fees, and options awarded to employees. Finally, selling and distribution expenses increased by 74% to approximately $1.7 million. Overall, the company recorded a second quarter 2021 net loss of $7 million, or $0.35 per common share. compared with a net loss of $5.3 million, or 33 cents per common share, for the same three-month period in 2020. As at June 30, 2021, Profound had cash of $73.8 million. With that, I'll now turn the call over to Arun.

Thanks, Aaron. As many of you know, COVID-19's negative impact in the beginning of 2021 was severe, not only for Profound, but across the U.S. MedTech space. That was followed by a late March rebound, which, as Aaron mentioned, continued through the second quarter. On our last call, I focused my remarks on explaining why the disruption in Q1 had not translated into our being any less bullish on our business. On this call, I would like to reiterate that. In fact, in a few minutes, I will share with you some real world utilization data that I believe really serves to underscore the tremendous opportunity that TELSA represents. But first, let me update you on our continuing progress in laying the groundwork to drive adoption of TELSA Pro in the United States. The first pillar of that is building a high quality US install base targeting three major types of end users. Early adopters, independent imaging center companies, and opinion leading teaching hospitals. Each of these are expected to play different roles in supporting both short term and long term adoption. Our early adopter Tulsa Pro sites have continued to treat a growing number and an increasing variety of patients. With respect to the imaging center companies, RedNet's Liberty Pacific West Hill Center in Los Angeles is treating patients using Tulsa after initially experiencing delays related to COVID-19. Midway through Q2, we also announced a U.S. multi-center TELSA Pro agreement with Acumen, which currently has 79 operating clinics in Florida and a total of 134 sites across its network in seven states. We expect to install TELSA Pro systems at up to 10 Acumen men's health centers across Florida, Texas, and Pennsylvania over the next year or so, with the first site anticipated to be operational in the fourth quarter of 2021. Based upon the success of the first 10 installations, we hope to expand our relationship in the future to include additional acumen centers. Moving to the third type of end user, as I highlighted in our last call, we now have agreements with renowned institutions like UCLA, Stanford, Johns Hopkins, Yale Cancer Center, WellSpan Advanced Prostate Cancer Center, Mayo-Jacksonville and Mayo-Rochester, NGH Cancer Center, UT Southwestern, Memorial Hermann, and Methodist South Antonio. That list continues to grow nicely. In fact, I'm pleased to report that in Q2, our team signed six additional new agreements with hospitals for installations later this year. The price point of all agreements remains the same at $7,710 or higher per patient. To summarize the install-based status of Tulsa in the United States, today we have about 14 installs and 10 of those sites were treating patients in Q2 Plus, we have enough contracts on hand for over 20 new installs over the next 12 months. Based upon that, we continue to anticipate approximately 25 installed TELSA Pro systems in the United States by the end of this year. As we saw previously during initial limited commercial launch of TELSA in Europe, as U.S. physicians are becoming more confident with and accustomed to the technology, they are using it in a wide range of patients. We believe this confirms Tulsa Pro's flexibility and suggests that the available market is as large, if not larger, than what we first envisioned. Based on a utilization analysis, Our confidence is growing that Tulsa will be adopted as a mainstream technology rather than a highly specialized tool that can only be used in a small subset of patients. Let me share some of the raw patient characteristic data with you. All of this comes from the US. Tulsa sites composed of all three end user types that actively treated patients in the first half of 2021. 86% of patients received ablations of greater than 50% of the prostate. 63% received whole gland, 28% partial gland, 6% BPH only, and 1% salvage. As an aside, and as some of you know, I personally make up part of that BPH group having successfully undergone TALSA a few weeks ago. Of the prostate cancer patients treated, 11% were grade group 1 or low risk, 53% were grade group 2 or low intermediate risk, 28% were grade group 3 or high intermediate risk, and 8% were grade group four to five, which is considered high or very high risk. With respect to the size of prostates treated, 75% were greater than or equal to 33 cc, and many were greater than 100 cc. To put that in perspective, especially with respect to Tulsa's relative ability to become a mainstream treatment, the vast majority of prostate cancer patients. And pretty much all prostates of BPH patients are greater than 30 cc. Summarizing, the analysis shows that Tulsa was used in all grades of cancer, ranging from low risk to the highest risk patients. And the percentages of patients treated in those risk categories roughly corresponded with that what we see in the real world with respect to patient population distribution. In addition, recent publications on critical outcomes of patients who have been treated in real-world settings continue to show that TELSA patients experienced minimal side effects such as urinary incontinence or severe erectile dysfunction. Coupling the two, we have increasing confidence that of all the emerging technologies for prostate disease, TELSA is the most flexible. It can be used in the widest variety of prostate disease for customized whole or partial gland treatment with demonstrated superior outcomes. In order to maximize the opportunity that we see in Ayurveda, there is no question that the successful execution of our reimbursement strategy will be key. To that end, as I mentioned in our last call, we have initiated dialogue with relevant societies, including the American Urological Society and the American College of Radiology to get initial feedback on the requirements to qualify for our CPT-1 application. Based upon their feedback, we continue to believe that the clinical publications on the TELSA procedure and the publications that we anticipate later this year will likely be sufficient to meet the requirements for the application by the end of this year. If the adoption of TELSA usage continues to increase as we anticipate, we may get the support that we need to file in 2022. Our strategy is to not only continue to pursue the CPT-1 application with the combination of clinical data that already exists and that will likely be published by end of this year, but also support a planned Level 1 study called CAPTM that will run in parallel with the filing of the CPT-1 application. While the CAPTM study is not a requirement to obtain the code, it may further support coverage by insurance payers and will also provide additional clinical data to support significant adoption. The planned captain trial will enroll 201 prostate cancer patients across approximately 10 to 12 sites. Patients will be randomized two to one to receive the TELSA procedure or a radical prostatectomy. The primary endpoints will include safety and efficacy, including measurements of side effects and non-inferior, progression-free survival over time. This trial will primarily be run in the United States, and we continue to anticipate patient recruitment to begin before the end of this year. In the meantime, TACC 2.0 continues to progress well, and we anticipate that patient recruitment will be completed by the end of this year. We also anticipate that three-year data from the initial TAC trial will be published later this year. In addition, we are aware of one additional Level 2A study and two additional Level 2B studies that will be submitted for publication later this year. So, to summarize, Our team has been executing well. We have been signing additional Tulsa Pro site agreements at an increased pace over 2020. We expect to install new Tulsa Pro systems at a rate of approximately four to six per quarter going into 2022. With that accelerating, once COVID is fully behind us, we're continuing to see broader Tulsa adoption both in terms of procedure volume and types of patients treated. Utilization data points to Tulsa becoming a mainstream treatment in the U.S., providing us with a large market opportunity and we're progressing Tulsa Pro's reimbursement strategy by conducting additional studies to apply for a specific CPT code and ultimately a reimbursement determination. At this end, our prepared remarks for today. With that, we're happy to take any questions you might have. Operator.

Thank you. As a reminder, if you would like to ask a question at this time, please press star then 1 on your touchtone telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Raul Fagradres. With Raymond James, your line is open. Please go ahead.

Thank you very much, Operator. Arun and Aaron, thanks so much for taking my questions. Congratulations on strong results today. Thank you. I guess my first question is just sort of, you know, the details, a little more detail in terms of the new sites that you were talking about. So you mentioned 14 installed, 10 treating. You know, we recognize that there are about nine sites listed on the TELSA Pro website. You know, how should we be thinking about visibility on TELSA? the sites that are being installed as well as the ones that are coming online and then also with the total 25 that you expect to come online to install through the remainder of the year.

Yes, so I think that what we put on the TELSA Pro procedure website are really those sites where we have permission from the hospital or the imaging center to be able to provide the name in public domain. And so there are certain sites which we do not have permission yet. In some cases, it can be a leading indicator because some sites would like to put their name out so they can start recruiting prior to even installation. And to be honest, in some sites, they have a pretty good start and they tend to sort of want to wait until they've treated a few patients before they go there. I would suggest that we not look at that site as only as a leading indicator, but as a site where full commercial activity is taking place at this point. I did mention a couple of new names when I listed the number of leading hospitals that are either signed up or are using the technology. And I, to be honest, I think that it's very impressive. Look at this early stage of our company. And I think what I can tell you is in the second half of this year, you will continue to see and we will, you know, be announcing as these hospitals come on stream, other big name hospitals, big name cancer centers. So as you know, We sort of talked about those three channels. It's important for us to not just have only the leading hospitals, but these imaging center channels where we get off to a good start with the two companies that we've signed up with and with early adopters. And you will see additional early adopters also, and you will see more sites coming on stream with the imaging center companies. So I'm, to be honest, fairly... You know, I hate to use the word excited all the time or anything. I almost never use it. But I'm pretty excited about the fact that we are really marching to the strategy that we put together. And I think you will continue to see, you know, four to six new sites every quarter and that they will be, you know, representing the full range of the three channels that we talk about.

Terrific. Thanks, Arun. That's great clarity. I guess my next question is, you know, this is the first time you've really been talking about really broad utility of the device you initially talked about. Of course, the prostate cancer and then BPH and then salvage patients, but you really are talking about a much, you know, broader workhorse type scenario here. So with those numbers that you talked about, 60% whole, 28% partial, et cetera, et cetera, when should we expect to see some of the data coming out of this to illustrate everything that you were just talking about?

Yes. Okay. So as you know, we analyze everything to confirm that, hey, whatever we are doing is actually producing the kinds of results that we anticipated. And if they're not, to be able to adjust ourselves to fit, you know, provide better execution. So to answer your first question directly, You will see additional publications that will be coming out within the next six months, which will include this broader variety of patient usage. You will also see that in addition to the CAPTEN trial, we will announce additional smaller trials that will start focusing on these subset of patients, because the data that we see, we're quite pleased to see that we are not only treating the full variety of the patients, but the other part that we are seeing is that, you know, our patient population tends to be more on the larger prostate side, which are the more difficult patients to treat. So, you know, if we can treat the more difficult patients, certainly we'll be able to treat the average, you know, diseased patient. And so I think not only that when we sort of analyze this data of the last 18 months, we're feeling very confident comfortable that we can treat the full range of the cancer population and a pretty large subset of the BPH population. But we're also finding comfort in the sense that patients who tend to be more complicated, you know, the larger the prostate, the larger, the more complicated the procedure is. And in fact, if you do an analysis on larger prostates, you will find that the side effects become even more critical in those larger prostates. where we're delivering, in fact, quite phenomenal results with almost no side effects in larger prostates. That's really where the confidence is coming from, and you will absolutely see this in publications. And as we begin to unravel more and more of this data, we will, in fact, support additional specific trials to make sure that our community, urology community, has everything that they need to drive adoptions.

Great, thanks. And if you wouldn't indulge just one last question. So given the broad utility and now that you have essentially 10 treating sites and also the additional four that have installed will be coming out very soon, can you maybe speak to utilization rates that you're seeing specifically, you know, given the breadth of applications?

Of the applications, yes. So, yeah, good question because I didn't have that in the prepared remarks. But number one, certainly in the early adopters, we're seeing that the run rate, we've talked historically about 60. We originally thought it would be 40. But in reality, it was pretty good. I can tell you that that number of 60 is increasing in those sites. So I think six months from now, I anticipate that I'll be able to give you a number that will be higher run rate than 60 in those sites. In the teaching hospitals, You know, one of the things I've talked about is they, in the guidelines that they provide that are sort of agreed upon in the urology department, and they typically will not deviate from those guidelines. And so for the TELSEP installs, they have sort of developed an initial criteria of what type of patients they will be treating in the beginning. But I can already tell you that they are starting to broaden those, in fact. And so I think that the rate with which, as we've talked about before, in the teaching hospitals, we thought the first year will be sort of in the range of 30-ish, and maybe it'll go to 40, 50 in the second year. At this point, I would anticipate that we will grow at a little bit better, faster pace, even in the teaching hospitals. And a couple of the teaching hospitals, as an example, are already doing three procedures in one day. And as you know, longer term, our goal is to be at four procedures per day. But within the first six months, we're starting to see that at least a couple of the teaching hospitals are already at three procedures per day also. So generally... I think that, again, we want to be cautious. We don't want to overshoot or anything. But I would say, generally speaking, the utilization story is certainly continuing to be better or at least as good as we anticipated. And I think it is reflecting in the fact that between Q1 and Q2, you saw a pretty good increase in the recurring revenue dollars.

Great. Thank you so much, and congratulations on the quarter. I'll get back in the queue.

Thank you. Thank you. Thank you so much.

Thank you. And our next question comes from the line of Josh Jennings with Cowan. Your line is open. Please go ahead.

Sorry about that. I was on mute. This is actually Neil on for Josh. Thanks for taking the questions.

Good afternoon, Neil.

How are you? And congratulations on the quarter. You talked a little bit about the CPT reimbursement path. Can you maybe just provide a little more detail in terms of what the process looks like with those societies you're talking about?

Absolutely, absolutely. Part of the reason that it's an important topic is that one of the things that we want to convey is that we are off to a pretty good start from our perspective with the current situation that we have, but getting that CPT-1 remains a key, key priority for us. So with the way the process has been working, that we've had multiple meetings with both the American Urological Association and with the RSNA, which is the radiology association that is a sister organization. And we're meeting with The American Neurological Meeting is coming up. The annual meeting is coming up in September in Las Vegas this year. We have another meeting planned with them. And so what we're doing is we're keeping them fully abreast of the progress that we're making, the clinical data that is coming out. And we're finding that both of these societies are generally quite positive in the way we are presenting the information, the clinical data publications, what they look like. And so at least our interpretation is that both of these societies are likely to be supportive as we prepare the applications in the first half of 2022. And that is in terms of the process. a really important goal because once the societies support the adoption of a new technology, ultimately the decision comes from the AMA, the American Medical Association, and they look for the support from these societies. So obviously I cannot guarantee that we have it, but certainly based upon our current dialogue, it looks positive. But the process would be that we would then work with the societies. They will either provide a support letter or they may, in fact, co-sponsor. We'll see how that goes. Typically, societies provide support letters. And with that, we would be in a position to file for the June meeting of AMA. If that decision then will come in the fourth quarter of 2022. And once we know what that decision is, if it is positive, then it's sent over to the REC committees to determine the RVUs and so on. And that process typically takes about a year. And so the effective codes, if they are assigned, will become effective for treatment by January 2024. So 2023, well, they'll do the analysis. So from today, it's about a two and a half year process.

Great, great. Thanks for that detail. Just one follow up, just in terms of the, you know, your visibility into the into the sales funnel for the, you know, the imaging center side, any updates there in terms of your partnerships with acumen? Yeah.

You know, um, I think I've said in the last quarter, You know, overall, our pipeline continues to be strong. And the fact that some of the leading hospitals are now treating and giving us good feedback, you know, I think that, as you know, you know, urologists would like to talk to their, you know, colleague. And I think that dialogue is beginning to sort of take place, even though our install base, as you know, is still relatively small. But that dialogue is starting to take place. And we're starting to see more and more urologists wanting to become what we call authorized users, meaning they want to get trained and be able to start using the technology in existing sites whenever it's possible, even if they have to travel a little bit in the early days, so that they can get firsthand experience and then be able to then work with their own hospital system to be able to adopt the technology. So overall, I would say certainly the pipeline is better our sales methodology is stronger today than it was six months ago even. And I think that you will see that in the imaging center channel that more than one urologist will start using it so that the original concept that we will over the long term be able to drive, you know, adoption without necessarily increasing the number of sites, I think that you will start to see in the next six months will start to become reality. And I also think that a number of early adopters who have been using other specialized technologies you will begin to see that they will start to gravitate more towards using Tulsa as compared to, you know, other specialized technologies. So I know I'm sorry I'm giving you a bit of a more general response here, but that's sort of how we look at the landscape.

That's helpful. I'll jump back in the queue. Thank you.

Thank you. Thank you, Alex. Thank you. And our next question comes from the line of Anthony Patron with Jefferies. Your line is open. Please go ahead.

Oh, great. Thanks. And Arun, glad to hear that everything is going well with your health and good luck and glad to hear it all went well with the procedure a few weeks ago.

Thank you. Thank you.

The question on our end would just be when you look at a total of 14 Tulsa's installed, a little bit at the midpoint of the year, 11 more to go in the back end. How should we think about installations between 3Q and 4Q? I would assume there would be more heavy-weighted toward 4Q. And as you sort of look at the funnel, eight to nine contracts you mentioned last quarter, that could represent sort of even a multiple of units over a multi-year period. How should we think about how that funnel will evolve into the second half of the year? And then I'll have one follow-up.

Sure. Anthony, these are very good questions. I think in terms of, you know, one of the goals we've talked about is can we get to the 25, and, you know, our team has pretty detailed plans in place to achieve that goal, and it certainly is not limited by the contracts that we need to do. We have enough on hand to be able to achieve that goal, and we have six more months to go. But I think there's one point that I would like to make because it's an important point. We see a big impact of COVID is behind us in terms of driving utilization of sites that are operational. But we do see still a little bit of an impact of COVID in driving the new install base. And to give you just a specific example, you know, One of our MR vendors has his backorder on some of the routers, and we need the router to be able to install the site with Tulsa. And so it has caused about a six-week delay for us before we can actually install the site. And so we are seeing a little bit of that change. supply-related delays, and even in hospitals, a little bit of slowness or sluggishness in getting the labor content in place to be able to do the appropriate modifications. And so that is one of the reasons why I think 25 is still the right reasonable goal to be, even though in terms of the contract, I think we will have many more than that by end of this year. To answer your question in terms of capability, so the way we're looking at it is that for the next two quarters at least, I think four to six installs per quarter is still a reasonable place to be. But then I think in 2022... we are looking to add into our resources to be able to increase that capacity perhaps to, you know, seven or eight per quarter, and then ultimately, you know, maybe in the range of 10 per quarter. And I apologize, I cannot give you specific timings just yet, but that's the plan is that we do think that there is demand. We are seeing that even with the current pandemic, you know, C code and patient pay, there is a robust, you know, patient population who is interested in the procedure. So that I do think that we will be increasing that capacity in 2022.

That's helpful. And then two quick follow-ups, and I may have missed this out in between calls, but the TAC2 extension study enrollment, it looks like you may have completed enrollment. Just wondering if if we should still expect a publication by year end. And then anything of note on the GE collaboration, you know, how should we expect that collaboration to sort of play out over the next couple of years? Thanks again.

Yeah, yeah, great questions, Anthony. So the TAC-2 trial has been recruiting really well. The only reason we have not closed it is because there are a couple of sites like Yale that we felt would be good to include them into the TAC-2. So they are now recruiting as well. And so this is why we're saying we'll more than likely close the recruitment in Q4. As compared to originally, we thought we would be able to do it a little bit earlier than that. But to your question with respect to the publication, a key publication will be coming out at the AUA in September, where the independent investigators will be presenting three-year data for TACT. that, you know, three year is considered another milestone. And, you know, again, the focus will be on, on, you know, those side effects and progression free survival. And so those are the three things that we were looking for in the, in the three year data that will be coming up. And then the captain trial which is sort of the level one trial, is actually also moving very well. Most of the sites are already identified. The IRBs are all generally in good place. And so we feel pretty confident we will be recruiting in Q4 for the CAPTEN trial as well.

Thanks again.

Thank you. And our next question comes from the line of Frank Tarkin. with Lake Street Cap Markets. Your line is open. Please go ahead.

Thank you, Operator. Arun, Erin, congrats on the progress in the quarter. A couple from me. I'll start with first thinking about the mix of procedures in the quarter. Do you, by chance on hand, have the mix of patients that were purely cash pay versus those who had utilized the C code successfully and whether or not those were partial reimbursement cases or full reimbursement cases? Just trying to get a feel for the procedures that happen in the quarter?

Absolutely. It's a great question. To be honest, we are trying to figure out what that ratio is also. As you can imagine, it's a very difficult ratio to get a handle on because for HIPAA reasons, we don't have access in every case. Having said that, I would say as a as our kind of an educated guess, is it's probably in the range of 60% to 65% cash pay and 30% to 40% perhaps, or the rest of it, perhaps in the C code category. What is interesting is we do continue to see patients are willing to travel We do continue to see that the number of sites that are saying, look, we have enough for a population of cash pay. We don't need to bother with C code, which we are trying to change, in fact, a little bit. And we are also seeing, so we do see the aggregate data, and we are seeing that when they do apply for the C code or even private insurance where they might use unlisted codes, that generally everybody is getting paid. So one of our plans, in fact, is to really double up on our strategy to really educate particularly the hospital systems on the C code and really encourage them to use it more often, in fact. But at the moment, you know, that doesn't seem to be the bottleneck here.

Got it. Okay, that makes sense. Thinking about the mix of low to more severe grade prostate cancer, understanding that this is a lot in the early days, but I was hoping you could just kind of talk to trends, use case pattern trends you are seeing from when they start to once they're a little bit more established. Are you seeing them start in the lower grade and then move into some of the higher grade cases, or is it vice versa? Just how is that trending in the limited data you have to date?

Yeah, yeah. No, very good question. So we sort of encourage them to start with their sweet spot. And, you know, for example, Valspan started with nothing but salvage cases because that was their biggest unmet need. And now they're moving on to sort of intermediate risk. And so I think every site, we sort of customize the plan based upon their patient population and what they see as the most compelling unmet need. University of Texas, as an example, started with they wanted to do more focal therapy cases. What we are seeing from this data analysis that we did in this quarter is that they start wherever they start, but they're starting to gravitate more towards whole-gland therapy, which we're really pleased to see, and that they're starting to recognize that they can literally dive in. I call it diving because I see it happen pixel by pixel to amazing accuracy of 1 to 1.5 millimeters per where they can literally dial in what to ablate and what not to ablate. And so when, you know, just to answer your question regarding, for example, the higher risk, which, you know, we were not necessarily anticipating that we'll go there this early, is when we've seen cases where there is, you know, external involvement. So there might be some involvement beyond the capsule of the prostate and they're able to sort of incorporate that into the boundaries and be able to ablate. And that ability to be able to really define that boundary is why, at least we believe, is why we're starting to see that in certain cases they are going after some of the higher-risk patients. And I think that the patient demand, even in those cases, really is, hey, gee, can you save my nerve bundle? So, you know, we've seen examples where on one side, the nerve bundles are involved in the cancer and they are going to ablate it. The other side of the prostate, they will save the nerve bundle to make sure that the patient can still have erectile function. And so that flexibility, I believe, is what's driving this change. And we've seen quite a few cases now where they can really, really customize that treatment to be able to make sure that that the clinical procedure from the cancer outcome perspective is completely intact, but at the same time, they're able to save these vital functions by dialing it in the right places. So again, I agree with you that it is a little bit early But we're certainly encouraged, and as I said before, I think you will start to see some more attention that we would pay in towards that, you know, over the next 12 months.

Got it. Okay. I'll cut it off there. Thanks for answering my questions.

Thank you.

Thank you. And our next question comes from the line of Ben Hainor with Alliance Global Partners. Your line is open. Please go ahead.

Good afternoon, gentlemen. Thanks for taking the questions. First off, I guess more of a kind of housekeeping one. On the capital revenue, you know, what was that comprised of? I mean, is that Tulsa Pros in Europe? Is that Sonolive? And then, you know, just from thinking about the capital pipeline, what does that look like the remainder of the year?

Yeah. Aaron, you're on the call. Did you want to take this one?

Sure. So, Ben, we don't provide guidance by policy at this point because our revenue is not predictable enough. And as such, we don't provide the outlook for the remainder of the year on capital sales anywhere. And to date, we have not provided a breakdown of Sonali versus Tulsa. Again, when it gets predictable, we'll do that. At this point, the numbers are too small to be predictable, so we don't want to get people chasing down rabbit holes, so we haven't been doing that, and we're not ready to start.

Okay. I understand. And then the progress that you've made, and obviously there's publications out there, there's data out there, and more to come, but what have you seen from some of the treatment modalities that are out there? I mean, what's been the reaction from, you know, the folks that are doing cryo ablations or, you know, other types of HIFU or things like that to Tulsa Pro? Sure.

Yeah. So I think, well, let's start with cryo. Cryo typically is used in salvage patients, and we have seen that those who have actually used Tulsa for salvage patients are generally quite pleased with that. And so, you know, I think we're certainly encouraged that I think that it's a very niche field. area, you know, relatively small volumes, but I do think that urologists are gravitating towards the Tulsa procedure for salvage. And the big difference, I think, here is the control, right? You can literally design the whole... Those prostates tend to be very... irregular in shape and quite unique for each patient because they've been radiated and they behave uniquely for each patient. So the fact that we can draw pretty intricate boundaries and still maintain that precision is one of the things that's driving them. And I think that to... I guess to go to the next one, the HIFU... We are seeing more dialogue going on with HIFU. I understand the companies that are providing HIFU have been marketing quite aggressively. I think in terms of hardware technology versus any other technology, and I think To me, cryo, HIFU, and these technologies have been out there for, you know, seven to ten years, in fact. And what, at least historically, what we've seen is, you know, the types of prostates that they're treating are in the range of maybe 30 cc or less. And the clinical data has to be generally in that smaller prostate space because for larger prostates, because of that distance from the transvector distance you have to travel, you have certain limitations and that you tend to, you may need a turf prior to that, which sort of defeats the purpose a little bit. Now, the other difference is that, you know, the speed with which we can do whole-gland is, you know, about three to four times faster because we're right in the center of the prostate. We blast the ultrasound, and we can, you know, rotate that catheter, you know, pretty quickly. So I think when you're talking about whole-gland ultrasound, when you're talking about larger prostates, I think that TELSA is inherently, you know, a technology that I think is superior to a number of these niche technologies. Now, you know, I think it's a marketplace. I think that technology has evolved, and we'll see how it goes. But at least historically, I would say, you know, the ability to treat whole-gland large prostates single procedure, high speed, gentle heating in the sense that we're not boiling or charring the tissue, which means basically virtually no pain and literally be able to work the same afternoon if you're having the procedure in the morning. I think there are several functional benefits and clinical benefits to TELSA and the fact that you can treat the full range. I just think that the urologist would like to have a technology that has the versatility to be able to, you know, treat more of those patients because they don't want to learn a tool that they will use, you know, once a month or twice a month. They want to have a tool that they can use routinely.

That makes a lot of sense. Thanks for the call there. And then, you know, just kind of thinking about it from the imaging center standpoint, you know, a lot of these guys are used to doing, you know, just a ton of imaging studies at, you know, relatively low margins, you know, do they tend to grasp the economics fairly well? Tulsa Pro procedures and, you know, how does that look? I mean, do you need to kind of lead the horse to water, or is that something that they get immediately?

Ben, that's a great question, actually, because You're right. It is a paradigm shift for the imaging center companies. But their mindset historically has been, you know, volume, right? They have substantial investment in the ground. These MRIs cost, you know, millions of dollars and so on. And so volume is really, really important to them. And so, you know, their margins are thin and volumes is how they make their money historically. And so when we, you know, we talk about this kind of explicitly now is that if you are doing a diagnostic MR, typically it will take about 30 to 40 minutes to do it. And typical reimbursement nationally is under $500 now for the diagnostic MR. So if you do 10 patients, you make $5,000 in 10 patients. If two of those patients tend to also get a TELSA treatment where they can charge, you know, $25,000 per patient, now you're going from 10 patients, $5,000 to 10 patients, $60,000. Think about that. It is an amazing paradigm shift, right? Amazing revenue story. Now, they have to, you know, invest in putting anesthesia. They have to really change their mindset from, you know, high volume to high quality and specialize and really working with urologists for, you know, treatment application. And then they can bring that patient back for long-term follow-up. So they sort of start to really connect with that patient and So I think the long term proposition for imaging center is quite amazing. And yes, the I mean, that's one of the reasons why the top two imaging center companies are working with us. And I believe they understand that proposition. You know, they also we also think it's not going to happen in one day. But yes, I think that from a financial point of view is a very strong proposition.

So it kind of chooses everything from a you know, kind of a transactional mindset to more of a relationship mindset.

Absolutely. That's exactly right. Exactly right.

And then, you know, just lastly for me, you know, you mentioned that you recently underwent a procedure, and, you know, obviously not to get too personal, but, you know, what was your experience as a patient of Tulsa Pro?

So, Ben, I'm happy to talk about it, and I can get pretty emotional about it too. But there are a couple of things I would say that are really interesting that I went through in my mind. So, you know, first of all, I really, really had heard about this, that patients were saying there's no pain and so on, and that they would go home the next day and have dinner or work in the afternoon. I mean, it literally happened that way. When I woke up, there really was no pain. And really woke up within five minutes after I woke up from anesthesia, I was in the car. Ten minutes later, we were in the car. in the hotel room. And it really was amazing. And I did have a UTI, which happens to less than 10% of the patients. But it really didn't bother me, to be honest. It really has not bothered me at all. Because the mindset that I went through is really what has really given me a lot more conviction about Tulsa. And the mindset really is, you know, today the paradigm is, you know, delay the procedure because the side effects are going to really get you and you don't want those side effects. But, you know, there's another side of that story. And that is, if you can avoid those side effects, you almost want to get it done sooner than later. Because what was going through my mind was if I wait another five years, well, I'm going to be aging, unfortunately, just like everybody else. And based upon history, I could be in some morbidity condition, maybe have some heart condition, maybe diabetes. These are progressive conditions that people, when they age, that happen. So to me, one of the things that really resonated was, my God, I know that I would not have those side effects. Why would I wait? So that paradigm shift from waiting until I absolutely need it to, oh, my God, let me just get it done sooner than later, that's the paradigm shift that I'm really excited about.

And there's probably a benefit there. Overall, just younger patients, better outcomes, that will show up in studies. It will be good for you guys.

Exactly.

Well, great. That's all I have. Thanks for the color, both business and personal-wise.

Thank you. Thank you.

Thank you. And our next question comes from the line of John Hickey, private investor. Your line is open. Please go ahead.

Hi. Thanks. I viewed your video the other week. It's fantastic. I'm a physician, and I was an early investor, so I'm well aware of how the system works. I've been corresponding with some of my colleagues down in South Texas, and they are going nuts, calling each other's hospitals, looking for ICU beds. And I reflect that with an aging population, ICU beds were already getting premium before COVID hit. So rather than ask about the system and the installation, I want to ask about the complication rate because that's going to be another big selling point to any hospital administrator. So we know that radical prostatectomy and robotic prostatectomy are highly operator dependent and the larger the center, they're performed at, the lower the complication rate. I wonder if you know ICU admission rate and number of admission days that occur when there is a complication with your system as opposed to the other systems, or is that something Captain hopes to look at in more depth?

Sure. John, thank you. Also, thank you for the color. I can tell you that the ICU days post-TELSA are incredibly minor, if any, particularly in the commercial settings. We have just not heard that. We have heard of, you know, The range of patients who end up with a UTI is somewhere between 4% to maximum of 10%. And those patients do not need to be admitted. It's basically identifying which bacteria has infected the patient and really customizing which antibiotic would work And typically they go away within, you know, five to ten days. So we've not seen, you know, patients needing to go back to the hospital. During the TAC trial, which was the original trial, we did have, I would say, 4% of the patients where we needed some care. post-treatment, but in commercial setting, we're just not seeing that. So I think, and I think your other point is really also quite important to recognize that this, you know, as you said, the procedures that are prevalent today are dependent, are quite dependent on the physician, and there is sufficient data even in robotics that physicians who have done more than 1,000 cases tend to have better outcomes than those who have done less. Versus here, you know, the surgical planning is really the key part. Once the surgical planning is done, it is an autonomous robot. And you're actually watching it perform during the ablation process. And one of the things that a technology that we introduced about a year ago, a little over a year ago, is the ability to change the boundaries, the design of the treatment on the fly. So when there's edema or some swelling of the prostate because of the heat coming in, they are able to literally erase the boundaries and on the fly change. So that allows them to really have that precision and reduce the impact of, you know, newness in this case. And those who know me well enough know that we will continue to come out with innovations, and I think part of our goal is to continue to make it so that variability from physician to physician will reduce, if any, over time. So I really appreciate your question, but I think that To your point, you know, I think the ICU, you're absolutely right, they are premium. And I think we will have an impact on that. And I also think that over the long haul, we will continue to be a much more reproducible and predictable treatment.

Okay, thanks.

Thank you, John.

Thank you. And our next question comes from the line of Scott McNaughey with Paradigm Capital. Your line is open. Please go ahead.

Hi, Ruan and Aaron. Thanks again for taking the call, and congrats on the quarter. I just wanted to quickly touch on the process from kind of signing an agreement to installation to operation and kind of how you're seeing that. kind of the timing between those processes, you know, change and evolve as you, you know, get more of these contracts signed and get more of these installations in. And hopefully as the COVID impact is kind of, you know, potentially lessening or going away and how you see that moving forward.

Yeah. Scott, very good question. And we think about that every day. So when we started, you know, you know, in fact, I remember talking about it in Q1 last year of 2020. You know, our anticipation has been that from the time we have the contract to the first patient treated, our expectation was about 90 days. And that our plan, based upon our programs that we were running, that we felt that we could reduce that to about 60 days. At the moment, it is actually running closer to four months. And it is related to various factors, and they're all very minor things. And some of them, if not all of them, are that transitory things that are sort of pop up because of, you know, COVID. There's some bottleneck that shows up that normally you would not even think about. So at the moment, it is running a little bit higher than what we anticipated. And we will overcome that, and our team is getting pretty adept at doing that. But I think over the long haul, I think the original expectation that we will be able to reduce it to somewhere between 60 to 90 days, perhaps in 2022, is still a very reasonable expectation.

Definitely. No, that's great. And then just to kind of clarify with the mentioning 25 by the end of the year, do you see that as 25 installations or 25 operational installations, like operational sites?

You know, I think that I framed it as installation, but to be honest, once we are installed, the time from the installation to treating the first patient is really limited. you know, almost never more than a couple of weeks. So we're probably within the range of the margin of error here on that point.

Got it. Got it. So most of that four months is the process from contract to installation. Once installation's in, it's a quick turnaround to first patient.

Got it. Yeah. I mean, usually the physicians seem to be, you know, they typically are pretty interested because obviously they've invested the time. And so they typically, once they know all the dates and so on, and they're firm on when the system would be ready, you know, About three weeks prior to that, they're already sort of starting to screen the patient and usually assign a date of the first patient treated. And that date actually works really well because it focuses the hospital and focuses our team to say that's the date the first patient is going to be treated. And we really went backwards from that date at that point.

Perfect. No, that's wonderful. And then quickly, I mean, maybe looking a bit into crystal ball, but in terms of kind of the rise of the Delta variant and especially kind of in the South, Texas and Florida, are you seeing that impact any procedure, kind of the current procedure volumes like July, August, or are things kind of tugging along as they were in Q2 when the numbers were relatively low?

Yeah, you're right, Scott. It's a bit of a crystal ball. And Florida, Texas, certainly, you know, I read this morning in the journal that Florida has more patients at the moment and and hospitals than ever, even from the beginning of the epidemic. So far, we have not seen any major impact, but it's certainly one of the reasons why we are continuing to be cautious, because it is unpredictable. We do see a number of patients who are willing to travel, so hopefully the impact will not be big, even if it is patients coming to Florida. you know, we're opening sites in, you know, other parts of the country. So if we do see one region being, you know, down the curve, that I think there will be some ability to, you know, transfer the patients to other areas as well. So we are certainly very diligent in this. Our sales team is really, really pretty. It's starting to become really good at managing that situation, actually.

And we have a couple factors working in our benefit is the demographics so far have shown that men of the age of prostate disease tend to be vaccinated and that, uh, the States where we operate, uh, the most like Texas and Florida, uh, do not seem like they have governments intended on shutting down the States again for good or bad.

Yeah, definitely. No, that's all for me. Thank you again, guys, and congrats.

Thank you.

Thank you. Thank you. And I'm showing no further questions at this time, and I would like to turn the conference back over to Dr. Minowat for any further remarks.

Thank you so much. Thank you for the questions. You know, our company continues to evolve, and we are continuing to gain strength from what we see. And I look forward to really, you know, presenting to you in Q3. Thank you. Have a great evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.