Profound Medical Corp.

Thank you for standing by and welcome to the Profound Medical Q4 and Full Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll 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 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 within the meaning of applicable securities laws in the United States and Canada. All forward-looking statements are based on Profound's current beliefs, assumptions, and expectations, and relate to, among other things, expectations regarding the efficacy of the company's treatment technologies, results of future clinical trials, the ability to obtain coding and or reimbursement from third-party payers, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance, and future commitments. Such statements invoke known and unknown risks and uncertainties and other factors that may cause actual results, performance, or achievements to be materially different from those implied by such statements. No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. 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 also like to take a moment to summarize our business. Profound develops and markets customizable, incision-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. TELCEL Pro is CE-marked, Health Canada-approved, and 510K cleared by the FDA. In the U.S., we employ a pure recurring revenue model for TELCEL Pro. whereby we charge customers around $8,000 on a per-procedure basis for Tulsa Pro Consumables, lease of medical devices, and services associated with extended warranties. Outside of the United States, we also primarily deploy a pay-per-procedure model, but we also sell capital and consumables separately if the situation warrants that. We are also commercializing SaunaLeaf, an innovative therapeutic platform that is CE-marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Songleaf is also being approved by the China National Medical Products Administration for the non-invasive treatment of uterine fibroids, and has recently obtained FDA approval under a humanitarian device exemption for the treatment of osteoid osteoma. The business model for Songleaf Systems is currently a one-time sale of capital equipment. On the call today, representing the company, are Dr. Arun Manawat, Profound's Chief Executive Officer, and Rashed Duwan, the company's Chief Financial Officer. With that said, I'll now turn the call over to Rashed.

Good afternoon, everyone, and welcome to our fourth quarter and full year 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 Aru in a moment for an update on our commercial activities. However, before I do, I would like to provide a brief update on our fourth quarter 2021 financial results. To streamline things, all of the numbers we will refer to have been rounded, so they are approximate. For the three-month period ended December 31, 2021, the company recorded revenue of $1 million down from $2.9 million in the fourth quarter of 2020. Despite COVID headwinds, recurring revenue increased 67% from $600,000 in Q4 2020, reflecting the success of our ongoing rollout of Tulsa Pro in the United States. However, that's more than offset by the fact that there were no one-time capital equipment sales in Q4 2020. 2021 compared to 2.3 million recorded in Q4 2020. Total operating expenses in the 2021 fourth quarter, which consists of R&D, G&A, and selling and distribution expenses were $10.2 million, an increase of 69% compared with approximately 6.1 million in the fourth quarter of 2020, breaking that down further. The expenditure for R&D increased 87% on a year-over-year basis to $4.7 million. This was primarily driven by increased spending on R&D initiatives for new design, technology improvement, and different magnet compatibility options awarded to employees, additional headcount, and increased travel for off-site MRI testing. G&E expenses increased by 80% to $3.2 million due to options awarded to employees, increased insurance costs, increased legal and accounting fees, increased license costs for the enterprise resource planning and customer relationship management software, and an overall increase in general expenses as offices continue to reopen from COVID-19 restrictions. Finally, selling and distribution expenses increased by 32% to approximately $2.3 million. Overall, the company recorded a fourth quarter 2021 net loss of $10.2 million, or $0.49 per common share, compared with a net loss of $7.5 million, or $0.38 per common share, for the same three-month period in 2020. As of December 31, 2021, Profound had cash of $67.2 million. With that, I will now turn the call over to Uru.

Thank you, Rishad. Before getting started, I would like to take this opportunity to congratulate Rishad on his promotion to CFO. As referenced in today's press release, this formalizes the additional responsibilities that he took on when Aaron Davidson transitioned to SVP Corporate Development last spring. Speaking of Aaron, It is bittersweet for me to announce that he will finish his employment with Profound at the end of March, but will be available as needed on a consulting basis. I will miss his daily presence and wise counsel, but also wish him well as he begins his well-deserved retirement. With that, there's a lot to talk about today. We're all tired of talking about COVID, and no one is happier that its impact is finally subsiding than the profound team. As we analyze our data, our recurring revenues only grew by 37% year over year, and that was primarily through utilization at 14 sites that operated throughout the year. Even though we had contractual agreements to install over 30 systems last year, it was not until late in Q4 that we finally were able to begin new installs again in US. This finished the year with 17 sites in US and 21 worldwide. Our international business that primarily comprised of capital sales in Asia was effectively non-existent as our team was not even able to visit the country. That was 2021, but new installs are continuing in Q1 2022, and we fully expect to achieve an install base of 25 systems in the US by end of the current quarter bringing our worldwide install base to 29. Similarly, we're beginning to see more activity in the international market as a few of the capital projects have been revived. Both suggest a faster growth in recurring as well as total revenue in 2022. In spite of the macro environment in 2021, there were many positive accomplishments that also bode well for 22 and beyond. As you know, we're targeting three major types of end users. Early adopters, independent imaging center companies, and opinion-leading teaching hospitals. That strategy has essentially worked. Most notably, we are already in seven of the top 16 opinion-leading US hospitals, including the prestigious institution we announced earlier this week. In addition, I'm pleased to share that we now also expect to launch TELSA programs in less populated states, including the Southwestern states, and appropriately, a TELSA system is being installed in TELSA, Oklahoma. I'm particularly excited about this one as they will use the imaging center model of having multiple neurologists bring their patients to one site and drive utilization. Our clinicians continued to utilize the flexibility of TELSA Pro to treat an unrivaled variety of patients. In the fourth quarter of 2021, the majority of patients treated with TELSA, about 85% had treatment-naive localized prostate cancer, with another 12% receiving solvent TELSA after prior radiation failure or failure after other types of therapies, and 3% had BPH but no cancer. Of the patients with prostate cancer, approximately 75% had intermediate-risk localized prostate cancer, another 10% were high-risk, and 15% were low-risk. In terms of treatment plans, approximately 38% were customized whole-gland, where physicians targeted 95% of the gland, but precisely carved out margins at the sphincters to save continence, nerve bundles to save erectile function, or even the ejaculatory ducts, when possible, to save vital fluid. Another 36% had large subtotal ablations covering more than half their prostates, and 26% had more focal ablations, meaning heavy ablation, or breast cancer. This quarter, the largest prostate treated with Tulsa in the U.S. was 130 cc, whereas the smallest was only 15 cc. The simple fact is that no other established or emerging technology can safely and effectively treat as many different prostate disease patients as TELSA does. Based on this and prior data, we believe that TELSA has unique potential to capture a meaningful portion of the overall prostate disease market. In terms of that long-term potential, if one assumes an average price of $8,000 per procedure and 250,000 prostate cancer cases annually in the U.S., That translates to a total addressable US market of $2 billion. If one were to add a small subset of what we call the extreme BPH cases, patients with very large prostates who would otherwise need a simple prostatectomy, the market size effectively increases to over $5 billion. Of course, CELSA will not capture this entire market, but these numbers give us an idea of how significant the opportunity is based upon how the product is being used today. For us, 2021 was about establishing that beachhead, a foundation to ultimately capture a meaningful portion of that market opportunity. Although growth in the U.S. has been impeded due to the pandemic. Medical technology databases report that in 2021, the number of patients treated with each high school and cryoablation was similar to the number of patients treated with TELSA. Based on these data, we believe we have already achieved a treatment rate similar to that of other ablative technologies that have been used for more than a decade. Taken together, we believe that Tulsa not only has the potential to become the leading ablative therapy, but given that Tulsa has been used to treat patients with such wide variety of prostate diseases, we see Tulsa becoming a primary modality of choice in the future. And that provides a good segue to our sponsored CAPTN trial, which treated its first patient in January. We expect CAPTN, which stands for a comparison of Tulsa procedure versus radical prostatectomy, or RP for short, in participants with localized prostate cancer will be performed at eight or more sites in the United States and two sites in Canada. Today, six sites have been activated and are currently recruiting patients. Notably, this is the first level one study ever conducted comparing an emerging technology, Tulsa in this case, head-to-head with RP in men with prostate cancer. Captain will compare the safety and efficacy of the TULSA procedure with RP in men with organ-confined intermediate risk Gleason score 7 prostate cancer with the goal of demonstrating that the efficacy of the TULSA procedure is not inferior to RP. The trial also aims to demonstrate TELSA's superior quality of life outcomes. The post-market CAPTEN trial will enroll 201 patients with 134 patients randomized to receive one or two TELSA procedures and 67 patients randomized to receive RP. The trial's primary safety endpoint is the proportion of patients who preserve both erectile potency and urinary continence at one year after treatment. Captain's primary efficacy endpoint is the proportion of patients who are free from any additional treatment for prostate cancer by three years after treatment. Secondary endpoints include comparison of rate of complications, cost effectiveness, and timing of the return to baseline activity with long-term follow-up data gathered for up to 10 years after treatment. We are conducting the CAPTEN trial to increase awareness and adoption of TELSA Pro, and to support coverage by pairs. As I mentioned in our last call, we are awaiting full data in the FARP trial, a single-site Level 1 study conducted at Oslo University Hospital that compared whole-gland RP to focal therapy using either HIFU or TELSA. The robotic RP arm of this study is similar to that of our CAPTEN trial, and we are very encouraged by the initial results of that trial, as well as by the fact that Oslo University Hospital purchased the Tulsa system from us for commercial use, identifying it as the clear technology of choice. Should the RP outcomes in CAPTEN match what was seen in FARP? we believe there is potential to demonstrate clear superiority, even though the CAPTEN trial has been designed for a non-inferiority endpoint. Another feature of TELSA Pro that we believe will significantly increase its adoption is the system's compatibility with the US install base of MRI machines. To date, we have been working with two MRI manufacturer partners, Siemens and Philips, to commercialize Telsa Pro. Just this week, we were pleased to confirm Telsa Pro's compatibility with GE, the remaining of the big three medical technology companies in the global MRI space and the biggest of the big three in the United States. Together, Siemens, Philips and GE comprise more than 90% of the install base of MRIs in the US. This is an important achievement that has already yielded exciting results. Shortly after confirming Telsa Pro's compatibility with GE, we signed the first agreement for a Telsa Pro system interfaced with a GE scanner with Boston's renowned Brigham and Women's Hospital. The second agreement has been signed since then with an imaging center in Florida. I'll now turn to our ongoing reimbursement strategy, which is a critical priority for Profound. I'm very excited to share that our Tulsa systematic review paper has been published online by the Journal of Endourology It is available on our website or you can ask Steve Kilmer to send it to you after this call. Publication of this paper is a key milestone as it completes the clinical requirements to qualify to file a CPT-1 application. We have met with the relevant societies since the publication and we remain on track to be able to file our application this summer for consideration by the AMA during their fall 2022 meeting. Although there's no guarantee of approval, should the AMA approve our application at their fall meeting, this would be an incredible accomplishment as the CPT code would be effective by January 2024. Another reason this paper is one of Profound's most important publications to date is that it generates the highest level of evidence available in support of TELSA, in this case, level 2A. The paper itself systematically consolidates all of the available evidence on TELSA Pro into a single peer-reviewed manuscript and supports that TELSA is safe and effective for treating primary prostate cancer. The evidence also supports the use of TELSA to treat recurrent prostate cancer and locally advanced prostate cancer, as well as the system's ability to simultaneously treat prostate cancer and alleviate lower urinary tract symptoms normally caused by BPH. In addition, the paper confirms that TELSA is customizable, offering a treatment plan that can be tailored to match individual disease characteristics and patient preferences. Importantly, this represents a shift from the focal versus whole gland paradigm established by other ablative modalities. Finally, the paper concludes that TELSA is a single, flexible tool that can treat multiple indications, including those where minimally invasive alternatives are limited. In addition to its real-time MR visibility and thermometry, that differentiates TELSA from other ablated modalities, we believe the system's customizability will enable patients to achieve better outcomes in the real world. We're looking forward to using this paper as a tool to support system launches and utilization initiatives and to initiate and inform conversations with physicians and patients so they can decide on treatment options and plans. And last, but certainly not least, you know how proud I am of the Profound team. Abby and Hartman are leading sales, and Matthew and Goldie are leading product management. Mike has advanced reimbursement efforts significantly, and Jacques has developed the relationships with MR companies. All in all, this is a world-class team. And now, I'd like to extend a warm welcome to Ken Knudsen, our new Chief Commercial Officer, who will be leading initiatives for Profound's worldwide sales, marketing, and reimbursement activities for both Telsa and Sanovic. Kent's executive management career spans more than 25 years, during which he has accelerated growth for emerging startups and Fortune 500 companies alike. Kent joins us from Perimedialogic, a company pioneering a new and disruptive approach to prostate cancer biopsy, where he served as CEO He previously served as Executive Vice President of Global Sales and Marketing for Boston Scientific Corporation, where he helped drive annual sales of space ore hydrogel, a biodegradable material that is injected between the rectum and prostate to decrease patients' exposure to rectal radiation. has extensive and demonstrable record of accomplishments in helping to commercialize new medical technologies in urology and has an in-depth knowledge of the men's and women's health markets. Please join me in welcoming Ken to the team, where he will be invaluable as we continue to execute our commercial strategy. To summarize, although our growth was hampered by COVID, we believe we are at the verge of accelerated growth, with our install base expected to increase significantly by quarter's end. Not only does the Tulsa opportunity remain intact, but the substantive number of complex and unique cases builds our confidence in capturing a broad portion of the total prostate cancer cases, as well as a material segment of EPH cases. We are thrilled that TELSA is now compatible with all three major manufacturers of MRI scanners, GE, Siemens, and Philips, increasing the span of our market access, Our reimbursement strategy is working and we are excited about the expected filing of CPT-1 application in 2022. We are pleased to have initiated our sponsored captain clinical trial, which should produce initial readout in Q4, 2023. This ends our prepared remarks for today. With that, Richard, Aaron, and I happy to take any questions you might have. Operator.

Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Our first question comes from Frank Deneau with Jeffries. You may proceed with your question.

Hi, guys. Thank you for taking the question. I guess off the top, you touched on installs increasing significantly in the quarter. I was wondering if you could sort of unpack that a little bit. Was there sort of a speed up there in the conversion process? And then on the capital side, with capital being lower in the quarter, was that mostly due to COVID? I think it was. How is that currently trending? Are you seeing COVID headwinds? kind of increase or are they leveling off as we're now, I guess, several weeks into 2022? And I have a follow-up after that. And I apologize for asking about COVID.

No, no problem. I appreciate your questions. So I think to your first question, yes, we are seeing an accelerated installation rate. We did see it a little bit in Q4. but we are certainly seeing it in Q1. And I think that unless, you know, there's another resurgence of this pandemic, I think based upon our pipeline, I do think that we will continue to increase the install base this year, which, you know, by the way, gives us, you know, a lot more confidence of where we're going this year as compared to, the uncertainties that we faced last year. So, yeah, I think generally speaking, I think, you know, just again to be cautious, all the installed bases are not going to be meaningful in, you know, just that fast. They're all going to take their time growing and so on. But I do think things are happening at a much faster pace than they did in Q1. To your second question, in Q4, you know, there was zero capital revenue. absolutely nothing. And a good bit of it is that we have, we you know, we identified a certain set of countries in Asia, in particular, where we feel that we can build scalable models where we can, you know, create a profitable revenues, and really, you know, create long term growth. And among those countries, particularly where China, Japan, and we have not even been able to visit those countries. And so things have been delayed there. However, as I mentioned in the prepared remarks, we do see revival. I think it's going to be slow, but I think we will start to see capital revenues trickling in. But I do think in the second half of 2022, you will start to see some of the programs that were delayed in 2021 will come back, and we are certainly optimistic from that perspective that the top-line growth will also be there from capital revenue. So please feel free to ask the next question.

Thank you for that, Arun. I guess picking up on sort of the regional aspect there, you commented during call that you were spreading out regionally within the U.S. I was wondering if you could you could just unpack that a little bit. Are there regions that you're currently focusing a little bit more on right now? And how do you see that strategy evolving as you play forward, say, over the next year or two? And just quickly, just one data point. Just if you can, volumes during the quarter, I'm not sure if I heard it. If I missed it, if you could just touch on that, that would be helpful. Thank you so much.

Yeah, absolutely. So, First, with respect to the geography within the United States, there are two aspects. One is that, you know, we have an eye towards increasing, obviously, utilization because that's what translates into revenue for us. But we also have an eye towards, you know, really qualifying for CPT application. And one of the things that AMA looks for is how widely is the product being used and who is using it. So on one end of the spectrum, our product is being used by leading hospitals, and that is an important criteria. On the other end of the spectrum, they want to see that it is being used by mainstream, even in rural areas as well. And so part of our objective has been to satisfy those requirements also. But the interesting thing is that Abby and the team were able to partner with a new group called the Paragon Group in the southern Midwest. And it is turning out to be an amazing group. I'm really excited about them actually. So they are placing, they will be placing systems in Louisiana, Missouri, even certain rural parts of Texas, and then the one that I mentioned in Tulsa, Oklahoma. So, you know, we're now, we have presence now in, you know, Upper Northeast, Lower Northeast. We certainly, as you know, we have presence in Florida quite a bit. We have presence in Texas, growing presence in Arizona, California. But now we're adding presence in these lower Midwestern states. We do have in our pipeline, Upper Midwest also. So that's the plan. And I think it covers, it sort of is very methodically planned and it covers our ability to increase the utilization. It reduces the amount of travel our patients have to do. One of the things that we analyzed last year is really exactly where our patients are coming from. And I think that the installed base is beginning to reflect where the patient population resides because what we saw in 2020 and 2021 was that over 75% of our patients had to travel well over four hours to get to the Tulsa sites. So I think this will help reduce that burden for our patients. With respect to the... numbers in terms of the utilization. We're in that range where October and November were actually not bad months for us. They were mashing with what we saw in September timeframe. December was not a very good month at all. In fact, very, very quickly we saw significant delays and primarily driven by lack of anesthesia. So our numbers, you know, I think compared to Q3 are up because you can see Q3 to Q4 numbers are in terms of recurring revenues are up quite a bit. But overall, still, we're lower. I mean, I think 37% growth in our early stage is not enough. And we are certainly looking to do much better than that in 2022.

Great. Thank you so much. Take care, everyone. Thank you.

Thank you. Our next question comes from Raul Serragueiro with Raven James. You may proceed with your question.

Good afternoon, Arun, Steve, Rashed, and Rashed, congratulations on your appointment to CFO. My first question is just a little bit further on the deployments and utilization rates. So you talked about 25 at the end of this quarter, which I believe is quite well lined up with the pipeline you had talked about in previous quarterly calls. Can you give us a little bit more visibility into sort of how the pipeline is shaped up sort of beyond Q1 for deployments, and how should we also be looking at the annualized utilization rate, I believe it was around 60 procedures per year per installed device. Given that a Bose device is not coming online, how should we be thinking about that average rate?

Yeah. Raul, we do have a very good pipeline. We continue to have a good pipeline. And particularly now that we have GE compatibility established, I think that pipeline will, in fact, continue to grow. We have not specifically given a number, but it is far bigger than our install base. That might give you at least a general idea of how big it is. As you could tell from the significant amount of clinical information I provided, the fact that the existing sites are using this product for a variety of different types of patients, I think that message is coming through. And that is the key reason why, you know, pipeline is not a problem for us. Our surgeons really want to use this product. With respect to the utilization itself, I think that is a very important question. Because I think that the utilization at the sites that we had utilization in 2021 will continue. And if anything, you know, I think there will be certain increases. And, you know, I think as the quarters go by, I think we'll have a lot more visibility in terms of how much the increase will be. Because I can certainly tell you every site is looking to increase utilization. I just don't feel comfortable sharing just yet what is the rate going to be because they're just you know, impact of COVID is just as exciting. And hopefully, I can be more transparent in the second quarter on that particular point. But with respect to the new sites, which is, as you can see from the numbers, really half of the sites in Q2 will be new sites, effectively. And I think, you know, I do want to make sure that people recognize that it's not going to get to 60 sites, 60 utilization in one quarter. It's going to take their normal course, which last year, you know, took about six to nine months to really get the sites to utilize them and train them and have them use the different types of patients so that they could understand the full potential. So I think that, unfortunately, I mean, it's just a transitionary phase that average utilization per site overall will actually be lessened Q1, Q2 perhaps, but over the longer haul, it will be significantly higher, obviously. So, you know, and once the install base grows and the number of new installs, the ratio becomes much smaller than what it is today, then I think this phenomenon will go away, as you can imagine just pure math. So I hope that gives you some decent color into how we're seeing things.

Great. That's helpful and should hopefully help with our model. I want to switch a little bit to data. You already referred to data, and we have seen some recent data from Meridian and the data they presented, the phase two data they presented at ASCO. Do you have any thoughts on that? And obviously, because they're going after localized prostate cancer as well.

Yes. So, of course, we are... quite vigilant and we certainly read all of the clinical information out there. And it's interesting that you mentioned this one because I think there are some strategic aspects to this and then there are certainly comments on some of the data. One of the things that is going on on the radiation side is that there are a couple of companies that are now selling MRI, real-time MR imaging-guided radiation treatment or SBRT treatment. And that in itself in some ways is kinship because we are the company that's sort of on the other side saying real-time MRI is a good thing. And so when another study shows that, hey, using real-time MRI is better than using real-time CT or CT for radiation treatment, I think you can clearly see the benefit of the imaging modality that we are using. And that principle of using our MRI imaging modality I think translates to us also. Now, having said that, I think if you look at their data, you know, the publication, I'm just pulling it up as we speak here, What their data showed was that what they called GU toxicity, which is the main endpoint, is basically going from 47% down to 22% using MRIs. So it's about half of what it is with SBRT. But think about the numbers, 47% toxicity to 22% toxicity. If you look at the TACT data, you will see equivalent pair toxicity down to 6%. So as much as I think it's great to see using MRI, I think the TAC data and particularly this new study clearly shows, you know, another order of magnitude difference. When TALSA is used and there's no radiation, there's no impact of long-term impact of radiation because we use heat as our energy source. So I don't know if that helps, but that's sort of a quick summary of how we interpret that data.

That's really helpful. Thank you. Thank you. And if you would indulge us one more question, since we talked about radiation and we can switch a bit to comparison or to surgery, if you refer to the CAPTEN trial, we know that the HAARP trial should be really at some time this summer. So, just for us, you know, how should we be thinking about interim readouts? When should we be expecting data from these trials, particularly given sort of the interplay between FARP and CAPTEN?

Yeah. Yeah. So, I think, so first of all, the right part, we hope to see full data this summer. For CAPTEN, at this point, our expectation is that RSNA 2023, which is typically in November, is when we will have the first step of data. Because we're treating patients now. So the patients who are being treated this year, and by that time, by RSMA 2023, we should be able to complete full recruitment. So there should not be any biases and all that. That's all behind us. And we're just monitoring the patients. But by that time, we should be able to show six to 12 months data and you know, if the statistics hold similar to FARP, we should be able to start to see differences as early as that.

That's terrific. Thank you very much, and I'll get back to you in the queue.

Thank you, Robin.

Thank you. Our next question comes from Josh Jennings with Calend. You may proceed with your question.

Hi. Good afternoon. Thanks for taking the questions. Appreciate all your help over the years, Erin, and good luck in your next chapter. I want to shed congratulations on the official, getting to see you officially. Arun, I was hoping to just ask about, you mentioned CAPRA projects reviving internationally, I believe. I just wanted to get a sense of how we should be thinking about the international channel in 2022. I think for the details would be great.

Yeah. Yeah, Josh, I know that's a great question. And I think what I can, in terms of providing more detail, what I can tell you is projects were delayed and, you know, maybe except for one or two here and there, generally nothing was canceled. And even some of the installations, so some of the sites that are, you know, installing MRIs or upgrading their hospitals in Asia, they were all delayed. And verbally, what we are hearing is things should be in fairly good shape in the second half of 2022. So I think from that perspective, we are quite optimistic. And I think from the perspective that, you know, projects are not canceled, but just delayed is certainly the, you know, and I think the best I can share with you is second half of this year, we should see revival of the capital revenue. I guess the other little detail that I can share with you is that in the last three, four months, we have certainly seen that the sites in Asia that are running, like in China or South Korea, that they're recruiting. number of patients that they have treated during these last three or four months has certainly increased in double digits. So the fact that there is some revival in terms of the patients treated, it is starting to show that they are coming on stream. And I think China, as you know, is really now remaining one of the few countries and Japan, few countries where travel is still incredibly restricted. But we are very hopeful that that will open in the second quarter. And, you know, I personally plan to visit and really check this out so I can really, really provide much more concrete information. But I do think second half this year at the moment is a fair bet.

Great. Thank you. Thanks for that. And just sort of follow up on U.S. reimbursement landscape and just, I mean, are hospitals still having success submitting for payment for Tulsa cases using the pre-existing code or how is that fairing to becoming more widespread?

Yes. Josh, we have had at least 10 hospitals that have used the C code. Pretty much all of the key hospitals have used it. And pretty much everyone is getting paid. The average payment is approximately $12,500. And just as a comparison, the average payment for radical prostatectomy is just under $10,000 today. So the $12,500 that the hospitals are getting paid is in the right realm from what we can tell. We continue to charge just a little over $8,000 per patient And those monies are coming from that 12,500 that they are receiving. And given the fact that the treatment is done in an MR suite, which is a lot less expensive than the operating suite, we believe that the bottom line for the hospitals is positive. At least that's the feedback we're getting. So I think on that front, we're pretty pretty happy with what we're seeing and quite frankly on the other side where you see the concierge service where we have these early adopters you know people are paying the $30,000 and then they're flying as I mentioned earlier over 70% of the patients are literally flying to these sites to get treated actually this last question is on

Just thinking about the Tulsa Pro system in its current form and just what is your team working on or when would we hear anything about next generation system and what type of enhancements are you pursuing? Thanks for taking all the questions.

Sure, sure. That's a good question, Josh. So we have actually introduced new features in Europe already commercially. We have submitted some of these with the FDA. We think another three to six months we should be able to introduce these into the U.S. But there are a couple of features that are very interesting. One in particular that I want to mention is that at the moment, if you are thinking about radical prostatectomy or surgical prostatectomy, usually it is done on patients who have what we call organ-confined disease, which is what I mentioned in the prepared remarks. So as long as cancer has not gone out of the prostate, you can do radical prostatectomy. But in a number of cases, that cancer sort of rubs on the sides and there's maybe a millimeter or so involvement of the muscle tissue that is just outside of the prostate. And because we use the real-time MRI, you know, physicians know where the boundaries are and physicians have a pretty good idea that they actually want to go beyond that capsule or the prostate boundary. And so we introduced a concept that we call thermal boost, meaning that if there is a region where the physician wants to go a millimeter or two beyond the prostate, that they can activate that thermal boost and they can actually kill that side that that section where there is a slight involvement of the muscle tissue perhaps and number of cases have been done as i said in europe it is now commercially available it is very well received by the way and the benefit here is that again you can tell we're very clinical data focused and if you look at clinical data in radical prostatectomy over 20 percent of the patients in studies have it has been shown that they leave cancer behind in those edges and so this one particular feature gives us that potential obviously we need to get more data and and so on but it certainly gives us that potential that we could in fact at some point begin to treat patients who may have a little bit of that extra cancer that is there and that Again, we will need long-term data for this, but physicians think that this is a very interesting new development that we have. It is commercial in Europe. We're in FDA in U.S., and we hope to bring it out later this year in the U.S. So that's just one example, and I think you will see at least one more very interesting technology. I won't talk about it yet. We are discussing it with the FDA. But it is designed to make it more reproducible, and it is designed to reduce the treatment time, which already is pretty good. But it will, it's designed to reduce the treatment time in the future.

Great. Thanks, Arun.

Thanks, Josh.

Thank you. Our next question comes from Frank Kinnan with Lake Street Capital. He may proceed with your question.

Hey, thanks for taking my questions. Not sure if I missed it or not, but did you, by chance, share how many installs have occurred so far in the first quarter? Just trying to get a feel for the lift from that 17 at the end of the year to get to 25 by the end of the quarter. How many of those are left to be installed yet in the last four weeks of the quarter?

Yeah. Frank, we didn't provide that much granularity because it's sort of week to week. But what we feel pretty comfortable with is that we will be at 25 by end of this month basically so you know it's it's going to take time for these to start the utilization but i think that um you know once the installation is done i think we will start to uh you will start to see utilization you know slowly going starting in the in the second quarter and and some of it you will see in the first quarter also so you know so far you know certainly january was a better month than, you know, any month in Q4. And I think, you know, we do see increased usage in Q1. But again, let's see how the quarter ends. But certainly we're starting to see slow increases. And I think we're pretty confident about the 25. And we're pretty confident that from here forward, as long as there's nothing unusual that comes about, that we will continue to see increase in utilization as well as new installs.

Okay, that's helpful. And I was hoping you could provide a little update on Acumen. How are things going there? Do you have any installs mapped out for them in 2022 yet?

Yeah, that's a very good question. Frank, because Acumen actually is stalled at the moment. There have been a number of changes that have gone on at Acumen. And so the numbers when we have provided to you, we have actually not included that contract so far. But we have replaced those with other contracts. And as I mentioned, one of them is and multi-side agreement with a group called the Paragon Group that is installing their first system. In fact, it's actually being shipped now. And I think that agreement will get replaced by some of these other imaging companies. I do think that Long-term acumen is a very good potential, particularly because they now also own certain oncology hospitals where this technology would be a very good fit. But I want to make sure that they have the time that they need to do their integration, and we have plenty of work to do in the meantime.

Okay, that's helpful. I'll stop there. Thanks for taking my questions.

Thank you. Thank you, Frank.

Thank you. Our next question goes to Brian Gagnon with Gagnon Securities. He may proceed with your question.

Hi, guys. Can you hear me okay?

Yes, Brian. Good afternoon.

You talked about the pipeline. You talked about the backlog. But can you give us an idea of how many signed contracts you have that have yet to be installed?

Yeah, very good question. My best guess is that we have over 40 contracts at the moment. and we have a pretty good pipeline in addition to that.

And that doesn't include Acumen and RadNet?

It includes RedNet. I think you will see the other sites at RedNet will come on stream this summer, but it does not include Acumen.

Okay. You filed this shelf today. Any plans to use it, or is that just corporate housekeeping for replacing the shelf that you had from last year?

Brian, that's a very good question. We have over $67 million. Actually, let me turn that question over to Rishad to answer.

Thank you, Oren. Brian, thank you for the question. So as Oren said, we announced that we have over $67 million in the balance sheet as of end of the year. And this is just a pure housekeeping. Our previous shelf expired November 2021, so we decided to update the shelf this morning. We just believe it's a prudent thing to do for the company, and a lot of other companies maintain a base shelf.

Okay, got it. Reimbursement. And I think you said $8,000 per procedure. Wasn't that $7,400 last quarter? what changed and then I want to have a couple of questions about reimbursement. Sure.

So we, um, you know, as you know, when we started the program, we did, we also were learning how to price it properly. So in 2020 and 2021, there were certain agreements that were in that 7,000 to 7,500 range. But, uh, Every agreement has been updated, and every new agreement is over $8,000 per patient at this point.

Wow, that's great. Okay, so on reimbursement, congrats. It sounds like you're making very good progress with the CPT code. And are you getting good reimbursement from the ones that are in the hospital today? And then if you would, layer into that, any success you're having from commercial payers and or other government systems for reimbursement and what your thoughts are there.

Yeah, so Brian, with respect to using the C code, it is, has worked out. The strategies that we articulated early, you know, more than a year ago, I think in 2021 certainly worked. The average payment to the hospital. And first of all, there are at least 10 hospitals that have been doing it, so I think there is sufficient volume there. And the average payment is in the range of $12,500, which we think is the right place to be. So we're pretty happy with that. And with respect to other payers, actually there are two things. One is Certainly, there are a number of private payers, and many times the hospitals are looking for pre-authorization, and generally that strategy is working. But the one that actually I haven't mentioned is that in a number of cases, some of our hospitals have actually been authorized by the Veterans Administration also. and they are paying full amount. So, for example, one of the hospitals on the East Coast has been fully authorized by veterans already, which normally veterans sort of lags behind everything else. There is another hospital in the West Coast that is fully operational and treating veterans patients. We have, in fact, one of the veterans hospitals that is an opinion-leading veterans hospitals in Cincinnati. We have a contract with them. That system will be going in this summer in the hospital itself, and we are pleased that the veterans are getting served early since this is an older man disease. And we have a couple of other hospitals that have applied for their local authorization, and the fact that You know, we've already established a few hospitals that are getting it. We are pretty optimistic. So I think, you know, we have not talked about veterans before, but yet that is another one that we are pretty happy to see.

Arun, can you give us a sense as to what the VA will be paying per procedure at these hospitals? And is that an indication of what reimbursement could look like

the future from other government entities and or commercial yeah so I think at the moment from the best we can push people together it's well over $20,000 per patient that VA is paying I think to your other question Brian the The C code is probably a good parallel because usually C codes are developed based upon the relative value units when the CMS works on those and they sort of adjust those numbers annually based upon the costs that they see at hospitals. So I think if that, that probably is the best surrogate that we can see. And if they are paying the $12,500, that is not a bad place to be.

Okay. And last question for me. With over 40 contracts signed, do you have enough people and teams in place to do the installs and get through that group this year? And it's only early March, and you talked about a very strong pipeline. So does that mean that you're going to be trying to catch up with some of these installs and the the numbers that we see today for installed are just very low to where they'll be 12 months from now?

Yeah, we're working on that, Brian. We are adding sales team, you know, so far it has been sort of a senior team, you know, Abby and Matthew, and in some cases myself, where we sort of did the initial, evangelical sales, but now with Ken joining us, he's already helped put together a sales and marketing organization, adding professionals to be able to service the install base and to create a disciplined model for new sites. So we're adding people in the field. Same thing on the service side. And also, our manufacturing team has been evaluating all of the supply side. We had a very good conversation with our board about that today, this morning, that we are tracking and to make sure that we have all the supplies that we need to be able to supply the disposables in particular. And we feel so far... You know, we don't have a lot of cushion in our system at this point in the moment, but we do believe we will be able to service the agreements that we are signing.

Excellent. Thank you very much. Look forward to what comes next.

Thank you, Brian.

Thank you. Our next question comes from Ben Hayden with Alliance Global Partners. You may proceed with your questions. Good afternoon, guys.

I'll be quick, just a couple for me. You mentioned, Arun, the utilization of HIFU and cryoablation and how Tulsa, if I heard you correctly, has already kind of surpassed that. Do you have an idea of how many HIFU and cryoablation installs are out there at present?

Ben, what we are, you know, our future is really about the number of patients treated in the end and we will we have not made the specific number public but we will that's our plan to do that as the numbers get to the you know a predictable level that's the only thing that's preventing us i know that's not your question but i think that's an important thing to to mention is that it's just that with this code the unpredictability and has been the reason but as we get to these higher install base and the pandemic effect continues to subside and we get to the predictable level, we will make that public so that it's really easy to track our company's progress. Um, but what we did was we looked at the government databases and we think that those numbers are in the, you know, four or 500, a hundred patient range in fact. And so we, We think that for us to get into the range of that kind of run rate within the first two years, and the two years have been pandemic driven two years, we think that's, you know, pretty good, as much as I said, I'm not happy with the 37% year over year growth. But that's kind of where we're coming from. It's just to put a perspective in place. And I I think the more important point then is that it is because of that flexibility of the technology that it can be used in high-risk patients and lower-risk patients. And as I mentioned in the product development remark, that we will, once the thermal boost is cleared by the FDA, we will actually be able to treat patients where they may have a little bit of involvement beyond the prostate. I think that's, so I'm trying to triangulate and make sure that we don't miss anything as we drive, you know, adoption of our technology. And that's the reason why, you know, I kind of mentioned that those points that we, you know, from a benchmark perspective, we are doing pretty good. And I think this year we should be able to exceed all of those and thereby we can start to, you know, for the first time as you may have noticed I've mentioned that we are poised to become one of the mainstream. At least that's what we believe. And this is what the data is telling us. And the fact that reimbursement is coming along, the fact that the clinical data is there, the fact that we are on track with CPT, all of this is sort of telling us that, yeah, we've got hey, you need technology that can be mainstream.

Sounds very good. And also what I was partially getting at there is, you know, the number of HIFU and cryoablation installs that are out there, you know, presumably if there's, you know, X hundred centers that are, you know, doing these HIFU or cryoablation cases, they'd obviously be candidates for Tulsa Pro. Do you have an idea of how many... folks out there are doing those, right, in terms of center?

That's right. And I think there are, of the centers, and particularly as we go to these bigger numbers, I think you are, I can tell you we have had a couple of sites that were using FLA or laser fiber. They have switched to TELSA. I can tell you there are at least a couple of sites that were using HIFU that have switched to TELSA. So it's early stage, so I think we have to be real. But I do think that, and there is at least one site where they're using HIFU for that very localized, if there's a patient with one little cancer in one place, they are still using HIFU technology because that technology really does fit that type of patient. But for other type of patients, all the rest of them, it sort of has increased their practice because now they can treat a larger variety of patients. And so they're using both technologies.

Okay, that makes sense. And then just lastly for me, now that you guys have reached the big time with the Tulsa Pro and Tulsa, I mean, is there any differential that you expect in terms of utilization at these more rural centers with kind of a feeder model versus, you know, kind of the centers that you've been installed in far?

Right. No, as I mentioned, Ben, I'm pretty excited about that possibility. I think the Paragon group understands the model very well. I think that we have, you know, we haven't really seen the best implementation of that model yet. I know the site at RedNet, for example, is starting to do that and I think they are, you know, they're going to install the other systems later this year and I think they will get there. But I think this particular one, I think they are, looking for utilization on multiple days. So I want to be cautious and wait to see how it goes. But I think certainly that concept is intact and we just need to validate that with this site. And if it does, I think that will be a very big problem for us. Excellent.

Well, I mean, it sounds like you guys have made a lot of progress on the things that you can control, so congrats on that, and I'll leave it there, and thanks a lot for taking the questions, gentlemen.

Thank you so much, Brian. Thank you so much, Ben.

Thank you, and I'm not showing any further questions at this time. I would not like to turn the call back over to Dr. Minowat for any further remarks.

Thank you. I know Aaron is on the call. Aaron If you want to say something, please go ahead.

Erin?

Okay. So if there are no other questions, thank you so much for listening. Thank you for the questions. And I hope that we will be able to have a a pretty good Q1 and be able to report on that for you at the Q1 call. Thank you so much. Have a good evening.

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