Profound Medical Corp.

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 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 involve 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 statements, 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 disease tissue. We are currently commercializing TulsaPro, 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. In the U.S., we employ a pure recurring revenue model for Tulsa Pro, whereby we charge customers on a per-procedure basis for Tulsa Pro consumables, Lisa medical devices, and services associated with expensive warranties. Outside of the United States, we primarily deploy a capital and consumable sales and service model separately as the situation warrants that. We're also commercializing Sonolise, an innovative therapeutic platform that is being marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonolise 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 a humanitarian device exemption for the treatment of osteoid osteoma. The business model for Saad Ali's system is currently a one-time sale of the capital equipment. On the call today, representing the company are Dr. Arun Menawat, Kaplan's Chief Executive Officer, and Rashed Dhawan, the Chief Saad National Officer. With that said, I'll now turn the call over to Rashed.

Good afternoon, everyone, and welcome to our second quarter 2020 free 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 would like to provide a brief update on our second quarter 2023 financial results. To streamline things, All of the numbers we'll refer to have been rounded, so they are approximate. For the three-month period ended June 30, 2023, the company recorded revenue of $1.6 million, with the full amount coming from recurring revenue representing an increase of 38% from $1.2 million in the same period of 2022. Total revenue in the last year's second quarter was $2 million, with $864,000 of that coming from one-time sale of capital equipment in international markets. Total operating expenses in the 2023 second quarter, which consists of R&D, G&A, and selling and distribution expenses, were $7.5 million, a decrease of 14% compared with $8.7 million in the second quarter of 2022. Breaking that down further, expenditures for R&D were $3.2 million, a decrease of 14% compared to the second quarter of 2022. G&E expenses decreased by 21% to $2.1 million and selling and distribution expenses decreased by 6% to $2.3 million. Net finance cost for the 2023 second quarter were $884,000 compared with net finance income of $1.9 million in the same three-month period of 2022. Overall, the company recorded a second quarter 2023 net loss of $7.4 million or $0.35 per common share compared with net loss of $5.9 million or $0.28 per common share for the same three-month period in 2022. As at June 30, 2023, Profound had cash of $39.3 million. With that, I will now turn the call over to Ruth.

Thank you, Rashed, and good afternoon, everyone. At the beginning of the year, we identified certain goals that we want to achieve this year to achieve our main objective of driving adoption of the TELSA procedure for patients with prostate disease in the United States. At this mid-year point, I would like to start by discussing where we are against these goals. First and foremost, we indicated that we anticipated that the growth of the TELSAT procedures in the United States would kick up to about 5% per month in 2023. By framing it as a monthly basis, part of our intention was to highlight the predictability of our recurring revenue business model. As compared to Q1 2023, the US recurring revenue grew by 21% in Q2 2023. Comparing the first half of 2022 versus the first half of 2023, the US recurring revenue grew by 63%. Based upon these results, we remain comfortable that our U.S. business will continue to grow at a similar or better pace in the second half of this year, delivering U.S. revenue growth of about 70% over last year. We realize that these numbers have a small base, but our benchmarks indicate that acceleration of the growth rate in the upper double digits is the right expectation at this stage of the company where the primary mode of payment remains cash pay. 70% of our patients today remain cash pay patients and are typically paying over $30,000 per procedure. The second expectation was that we would apply and receive approval of category one CPT codes specifically for the TELSA procedure. And as you already know, that goal was achieved in June. With sponsorship, and support from multiple physician specialty societies, the ANA established three new Category 1 codes for TELSON, which will be effective on January 1, 2025. The first code is for procedure performed by specialists, such as a urologist, without assistance from another specialist. The other two codes are for a procedure performed by two physicians, such as a urologist and a radiologist. We believe having multiple codes gives our physician users the flexibility to either do the whole procedure or collaborate and get reimbursed for their part of the service. The next step of the CPT application process involves the Relative Value Scale Updates Committee, or RUC, sending questionnaires to TELSA users to determine the physician's work-related value units, or RVUs, associated with the TELSA procedure. Both the SIR and the AUA will be very involved in this process, which along with reviewers by the Center of Medicare and Medicaid Services, or CMS, will ultimately determine the PELSA procedure payment amount. For reference, the U.S. hospitals performing the PELSA procedure on Medicare patients are currently utilizing HCPCS code C9734 established by the US Centers for Hospital Outpatient Prospective Payment System and reimbursement to a hospital billing under this code is $13,048. The proposed recommendations are expected to be published in the Federal Register in August 2024, finalized in October 2024, and come into effect as of January 2025. The third goal was about increasing the size of the install base given that our U.S. business model is about getting paid on a per-patient basis a larger install date in preparation of January 25, when the Category 1 CPP code will become effective, will be important to drive faster growth in the future. Today, we have an install date of 38 systems, and additional seven contracts to be installed and a pipeline in the final stages of 15 additional installations. All together, this gives us confidence that we will meet the expected install base of 50 systems by end of this year. Indeed, none of the U.S. business objectives or deliverables for the remainder of 2022, have changed. The non-US business, however, is all about capital revenue, which is always unpredictable in the early stages and is even more so in our case since we have chosen to increase our sales and marketing investments in the US and not in the international market. Having said that, we do expect that our install base in certain countries, including the important market of Japan, will increase in the second half of 2023. Turning to our utilization metrics, over the last two quarters, I have talked about the variety of patients that are being treated using Tulsa technology. we continue to see that more and more sites are increasing the variety of Tulsa patients they are treating. With respect to indication, approximately 66% were treated for prostate cancer, 25% were hybrid patients suffering from both cancer and BPH, 7% were salvaged and 2% were men with BPH only. TALSA is increasingly being used in patients who are on active surveillance or diagnosed with low-grade cancer but also have symptoms of BPH. We continue to see TALSA as the only minimally invasive option for such patients. For cancer grade, approximately 14% were grade group 1, 60% were grade group 2, 17% were grade group 3, and 9% were grade group 4 and grade group 5. In terms of ablation, around 60% were whole gland, 24% were greater than 50%, but less than 100%, and 16% were focal therapies. For prostate size, approximately 4% were less than 20 cc, 34% were between 20 to 40 cc, 37% were between 40 to 60 cc, 20% were between 60 to 100 cc, and 5% were over 100 cc. Based upon these results, clearly, TELSA continues to be used in a wide variety of patients with prostate disease, and we continue to believe that the total addressable market for Chelsea is about 600,000 patients, which is larger than that of any other technology that can be used to treat patients with prostate cancer. Finally, I would like to provide an update on the TACT pivotal study, which has reached the end of five-year follow-up duration, and the results demonstrate the predictability and durability of the TELSA procedure. By five years, median prostate-specific antigen, or PSA, was 0.63 nanograms per milliliter, and only 21% of patients received additional treatment for prostate cancer without unexpected complications. The latter outcome is especially compelling as it falls in line with the one-year biopsy data and compares well with similar rates reported after radical prostatectomy in intermediate risk men in several publications, including the PIVOT randomized controlled trial and the CAPTURE registry, one of the largest databases of prostate cancers in the United States. Although, this outcome was achieved despite the fact that a second TELSA ablation was not permitted by protocol. Since the early days of TACT, physician experience and protocols for patient selection and treatment have been refined and on review, the risk of failure is mitigated by modern management approaches. Additionally, we have been able to demonstrate that data from intra-procedural thermo MRI imaging and early clinical follow-up can indeed predict the risk of solid therapy by five years. The five-year outcomes in the TAC study also establish the durability of the favorable safety and functional outcomes that were achieved by one year. For urinary incontinence, 92% of patients who were tag-free before Tulsa remained so at five years, stable from one year. This is consistent with natural decline in function typically observed in men of this age over this time period as reported, for example, in the observation arm of the pivot randomized controlled trial. For erection function, zero men experienced grade three severe erectile dysfunction, where medication is not helpful. And 87% of men preserved baseline erections sufficient for penetration by the five-year visit. there were no attributable, gravely severe or serious adverse events reported from two to five years. To summarize, most of the boxes for increased adoption of TELSA Pro have now been checked. While reporting of preliminary five-year results from the TAC trial comes within the context of increased awareness of the high incontinence and erectile dysfunction side effect rates with radical prostatectomy and radiation treatment. The preliminary five-year TAC data demonstrates that one-year safety, efficacy, functionality, and salvage therapy risk outcomes are predictive of the same outcomes at five years. This is encouraging, as we expect in Q1 2025 initial data from our ongoing Level 1 Captain Clinical Trial. TELSA continues to be unrivaled in the types and numbers of prostate disease patients that urologists are using to treat prostate disease safely and effectively. With 38 TELSA pro sites comprised of top tier hospitals, independent corporate centers, and opinion leading practices, we now have a large number of experienced physicians, especially neurologists, who are ready to lead adoption of TulsaPro. We remain on track to grow our install base to 50 TulsaPro sites by the end of 2023, and at least 75 by the end of 2024. L-Cepro offers a price point of over $8,000 per patient. Our recurring revenue has grown for five consecutive quarters, and we expect that to continue going forward. Our recurring revenue model already yields high gross margins of around 65%, and we think they will potentially exceed 75% in future with increased volume. We are delighted with the AMAs establishment of three new CPT Category 1 codes for Tulsa, which will be effective on January 1, 2025, and look forward to the next stage of the CPT process. Finally, we continue to believe that the establishment of the permanent reimbursement codes combined with initial data from the CAPTCAN clinical trial will serve as a significant catalyst for TELSA adoption in the U.S. beginning in the first quarter of 2025. This ends our prepared remarks for today. With that, Racheb and I are happy to take any questions you might have.