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spk03: Greetings. Welcome to the Perimeter Medical Q4 and full year 2021 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mark Kamenowski of Investor Relations. You may begin.
spk00: Good afternoon. Thank you for joining us on the call and webcast today to provide the fourth quarter and full year update for Perimeter Medical Imaging AI or Perimeter. On the call with me today is Jeremy Sabota, Perimeter's Chief Executive Officer, who will provide a financial summary and business update. Following Jeremy's prepared remarks, we will open up the call for your questions. Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the future financial position, business strategy and strategic goals, competitive conditions, research and development activities, projected costs and capital expenditures, research and clinical testing outcomes, the potential benefit of our products, including the Perimeter S Series OCT, Perimeter B Series OCT, and Perimeter Image Assist. The efficacy of our clinical trials design, the timing and anticipated enrollment in our clinical trials, and the timing of potential publications or presentations of future clinical data. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our CDAR filings. Our results may differ materially from those projected on today's call. We undertake no obligation to publicly update any forward-looking statement. For additional information about the risks facing our business, I encourage you to review our public filings and press releases, which are posted on CDAR at www.cdarsedar.com. Yesterday's press release summarizing the business update will be made available under the investor section of our website at www.perimetermed.com and filed with CDAR. Now I'd like to turn the call over to Jeremy. Jeremy.
spk01: Good afternoon and thank you everyone for joining us today. Yesterday we issued a press release containing our 2021 results delivering solid progress on a number of different initiatives across the organization. most notably on the commercialization efforts of our flagship perimeter S-series OCT and product development of our next-gen perimeter B-series OCT with ImageAssist AI. I will start today's call with a financial overview of both the fourth quarter and full year. After that, I'll move into a business overview and outlook for the coming year. And finally, I do look forward to taking your questions at the end of the call. Before I dive into the specifics, by way of background for those of you who are new to the Perimeter story, we are a commercial stage medical technology company driven to transform cancer surgery with ultra-high resolution and real-time advanced imaging tools addressing unmet needs. Currently, we're striving to address the key unmet need for intraoperative margin assessment by bringing ultra-high resolution imaging information right into the operating room. and putting it in the hands of surgeons to assist with their clinical decision-making with the hope of avoiding all of the costs and complications associated with repeat operations. With that, let me move into a financial overview, and unless otherwise noted, I'll state financial figures in Canadian dollars. Operating expenses for the three months ended December 31, 2021, were $5.5 million compared to $4.2 million during the same period in 2020. For the full year, operating expenses were $16.2 million in 2021 compared to $10.2 million in 2020, reflecting our expanded investment in both our commercialization and our product development initiative. The net loss for the three months ended December 31, 2021 was $5.5 million compared to the net loss of $2.3 million for the three months ended December 31, 2020. For the full year of 2021, our net loss was $16.7 million compared to $7.9 million in 2020 For the 12 months ended December 31, 2021, cash used in operating activities was $13.9 million. The cash used during the year was mainly driven by costs associated with expenditures, supporting our growing commercial operations, as well as research and development activities, including our clinical studies. After that use of cash, as of December 31, 2021, cash and cash equivalents were $4.7 million. However, subsequent to December 31, 2021, the company raised an additional capital through a private placement resulting in gross proceeds of approximately $48.7 million as announced on January 27, 2022. This private placement was led by a $43.4 million strategic investment from social capital and included insider participation from both the board and management. The significant interest from a major U.S. technology and healthcare investor, combined with the broad market support we received across the additional subscribers, is further validation of the company's technology and business at a time when we are embarking on transformational, commercial, and clinical initiatives for the organization. For me, having that strong balance sheet was essential for us during these early stages of commercialization as we remained agile in responding to the market's needs. However, beyond the strong balance sheet, we found a strategic partner at Social Capital that went well beyond my expectations. Not only have they provided us with the capital to move forward, but they also bring to us expertise and an ecosystem in artificial intelligence at a time when we are looking to build upon the strong foundation already developed with ImageAssist AI. Looking at the company from a macro perspective, our balance sheet is really part of the foundation from which we will build this business and support the commercial growth of our technologies. On our last call, I talked about the buildup of our commercial efforts, which will be one of our primary focus areas for the foreseeable future. Under the leadership of Steve Seppit, our Chief Commercial Officer, we are continuing to build out a highly skilled commercial team who have been actively executing on commercialization. However, like many parts of the economy and healthcare system, This team felt the headwinds of COVID during 2021. The impacts of procedure volumes, staffing shortages at our customers, restricted access to customer facilities were all felt across the team. None of these are conducive to launching a novel technology in any market, and particularly in healthcare. But I'm pleased with the way the team was able to persevere and continue to make progress while building brand equity during these difficult times. That said, the early part of 2022 has given us reason to believe that these effects are waning as infections in the U.S. decline and ICU capacity improves. Steve's team, which now includes eight market development managers and two area business directors covering regions across the U.S., and they continue to target surgeons who exemplify the early adopters of our imaging technologies. These are imaging-savvy surgeons who are excited to be in the early part of the adoption curve of this technology and who can become the thought leaders that help us execute on a train-the-trainer strategy as we continue to advance towards the implementation of the next-gen artificial intelligence-enabled technology that's currently in clinical development. These early users are seeing great results from the technology thus far, and we will look to continue to refine our new user onboarding experience to build on these early successes. Another major area of focus is to continue to support our multicenter randomized two-arm pivotal clinical trial on our FDA breakthrough designated device for our investigational perimeter B-series OCT combined with image assist artificial intelligence, what we are calling our Atlas AI project. As a note, this Atlas AI project is partially supported by an up to $7.4 million U.S. grant from the Cancer Prevention and Research Institute of Texas. and we continue to value the partnership and support from the entire CPIRT organization. The trial, when fully enrolled, will consist of over 300 patients undergoing breast conservation surgery across eight U.S. clinical sites with the aim of assessing unaddressed positive margin rates of surgeries utilizing perimeters technology compared to the standard of care. The principal investigator is Dr. Alistair Thompson, Professor and Section Chief of Breast Surgery from Baylor College of Medicine in Houston, Texas. And last November, Drs. Fine and Berry from the West Cancer Center, which is outside of Memphis, Tennessee, enrolled the first patients in the study. We have identified an exemplary list of remaining participating sites in the study, and we continue to work to onboard these surgeons and institutions with the expectation of having all sites active by mid-year. We believe that this further enhancement of our technology is going to empower surgeons with an incredible tool set to improve healthcare outcomes. and we look forward to updating you on progress of the study as it moves towards completion. With that, let's turn to our 2022 outlook. We are anticipating building on the strong momentum that we built up to close out 2021. As mentioned earlier, while some effects of the pandemic will linger, we see reasons to be optimistic that some of the aforementioned headwinds are slowing. Our outlook assumes that trend will continue, and our full-year estimate for new perimeter S-series OCT installations is 15 to 20 units. Similarly, on the clinical side, we assume continued progress towards normalcy in procedure volumes at our investigator sites, which should enable completion of patient enrollment by year-end. In closing, I'm extremely proud of what we accomplished in the past year. We've commercialized our technology, funded ourselves so that we can continue to roll it out and, as well, move our perimeter B-series OCT with image assist AI through its pivotal trial. While I'm extremely proud of the progress we made in 2021, there is still much work to be done, and the organization remains laser-focused on executing the commercial and clinical tasks at hand. The team here at Perimeter is committed to transforming cancer surgery with advanced imaging, artificial intelligence, and machine learning tools to improve patient outcomes and lower costs within the healthcare system. I want to close by thanking our employees and all of our stakeholders for their continued commitment and support. I'm excited for what we're building here, and I look forward to updating you on our progress on further calls. I'd now like to turn the call over to the operator and open the note for questions. Operator?
spk03: And at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And our first question comes from the line of Frank Tankinen with Lake Street Capital Markets. Please proceed with your question.
spk04: Hey, thanks. Congrats, Jeremy, on all the progress. pleasantly surprised to see the placement outlook of 15 to 20 for the year. So I was hoping you could take us just a little bit deeper on that. Maybe if you could speak to demos in the field or if there's been any demo to official placement transition subsequent year end, just trying to get a feel for the confidence around the 15 to 20 placements by the end of 2022.
spk01: Certainly, yeah. Thanks for the question, Frank. So to answer the second question first, we have not had any additional transitions from demo evaluation phase to commercial placements early in the year. I think some of what you heard in my prepared remarks around just kind of working through the transition into the new year and continuing to build out the sales force, we've really built out you know, a lot of momentum since the beginning of the year. So now, you know, Steve's team is fully staffed and we've had a significant amount of marketing activity, particularly late in Q1 that has really, I'd say, put some wind in the sails of the sales force. So, you know, after really battling to get into facilities and work through the COVID access restrictions and those things, being able to get to an industry conference like SSO, Society of Surgical Oncology, or American Society of Breast Surgeons, and really have a broad impact where surgeons are back in person, they're seeing new technologies, they're able to see the device in action, has really been a significant bolster to the team and gives us a lot of confidence in that number that we projected. So it'll certainly be a back half or a back-weighted installation progress as we you know have a lot of wrapped up a lot of foundational stuff early in the year but we're excited and you know Q2 is shaping up with a there's an awful lot of demo activity out there that continues to to ramp up really by the day and we're eager to to get into the second half of the year and start closing some of those.
spk04: Perfect that's helpful and maybe just shifting over to the utilization side of the equation I know you you've spoken about a 50 weeks in a year, three a week with your power users doing 150 plus procedures annually. Maybe talk about how you expect utilization to trend with the initial installs over the 12, 24, 36 month periods subsequent to install.
spk01: Yeah, I do think that's still a solid kind of grand mean number to be thinking about somewhere around 150 procedures a year. Obviously, there are sites doing up towards 2,000, and there are sites doing far fewer than that, but I do think that's still a good kind of number. One thing we do expect is there will be a bit of a ramp-up with new users as we go, so I wouldn't necessarily anticipate getting 150 procedures run rate right off the bat when we install, but as we You know, as we gain confidence with the surgeons and they continue to, you know, trust and rely on the technology more and more and see the results that it can deliver to them, similar to some of what we're seeing in these early commercial activities, you know, I don't see a reason why we wouldn't have 100% of the lumpectomy share. Now, one thing I would say is, you know, kind of a time-bound phenomenon that we're seeing a little bit today is, the mix with lumpectomies versus mastectomies is a little bit interesting in that we've had a couple of years of pandemic where patients weren't getting their mammography screenings as regularly. And anecdotally, we have heard some instances of surgeons saying that they're having patients present with more progressed disease. So, you know, patients that otherwise would have been, you know, a candidate for breast conserving surgery are kind of forced to go to a mastectomy, which is, you know, a little bit unfortunate for a number of different reasons. But, you know, that's obviously pandemic related and should return to normal. And, you know, we're I guess to answer your question, I think, so as we get through the ramp-up phase and then kind of the 12-month beyond, we should be at 100% of a surgeon's lumpectomy share from that perspective.
spk04: Okay, that's great. And then just the last one for me, maybe on the reimbursement side, my sense is the first installer has had some luck with getting some early reimbursement under temporary codes. Maybe just give us a little summary of what they're experiencing in the market and the how you expect reimbursement to trend with some of the early installs throughout the year?
spk01: Yeah, certainly. What you just described, I think, is kind of an exemplary case for what we'll be dealing with here during the temporary codes. So first commercial install is using the T codes that are out there available and is getting reimbursed. And now we're still... quite a ways away from having a national coverage determination from CMS or something like that. But this is a great indicator that payers are recognizing the value. And, you know, while it's case by case, you know, the fact that we're getting a positive response is really, really positive for us. And that should and will continue to encourage other users to continue to file the claims and build for the code so that we continue to track utilization and utility of the technology through these early users so that when we exit the B-Series Pivotal Study, we should have a solid body of evidence to really work towards moving that Category 3 code to a Category 1 code and work on the coverage and payment side of the reimbursement equation as well. You know, anecdotally, you know, one thing that came out of the American Society of Breast Surgeons conference that I thought was pretty interesting is, you know, Dr. Fine was moderating actually the perimeter talk, and there was a lot of dialogue around, you know, cost and reimbursement and the cost of re-excision. And, you know, he stated to the group that, you know, CMS is tracking the cost of partial mastectomy. So the code for a lumpectomy is called a partial mastectomy. And, you know, this is no longer bundled payments or some form of, you know, some form of value-based care around partial mastectomies is no longer just at some point in the future. You know, CMS has taken a hard look at it, tracking the costs, and it will be implementing something at some finite point in the future now. So a lot of momentum building on the, you know, the economic side of the equation for perimeter and And, you know, the fact that we're already seeing early wins is a great sign for us.
spk04: Great. I'll stop there. Thanks for taking my questions, and congrats again on all the progress.
spk03: Yep. Thanks, Frank. Our next question comes from the line of Rahul Saroges with Raymond James. Please proceed with your question.
spk02: Hi, Jeremy. Thanks so much for taking our questions. I'd like to focus a little bit on the pivotal trial. I believe we had estimated a final patient in early Q3 likely leading to FDA submission and 22, recognizing that there probably would have been some, you know, challenges which could have been due to COVID. So, and I know you talked a little bit about timelines, but could you just, you know, quite sort of clearly articulate the timeline that we'd expect between now and FDA submission as well as, you know, whether we could potentially expect any interim readouts?
spk01: Yep, definitely. Thanks, Rahul. So yeah, there, I'd say we're still in the startup phase. So, you know, getting a number of the sites enrolled, we were, you know, almost at completion on all sites being active. And, you know, with any clinical study, the startup phase is usually the bumpiest. So we're Getting all of the kinks worked out at each individual site and looking to really get to steady state to have a much clearer perspective on what timelines look like. All that said, we do expect to be through patient enrollment by the end of the year. you know, we've had a fair amount of kind of back and forth with the FDA on exactly what the, you know, what the protocol would look like. And we finalize that now. So now we're off and running. So, you know, patients enrolled by the end of the year, an FDA marketing application to follow shortly. And we're still targeting having the B series AI cleared and on the market, you know, kind of, late Q1, early Q2 in 2023. So that's still our goal from that perspective. And on the interim readout side of the equation, I think that's still TBD. You know, I think it remains to be seen just what the timing works out to be. So if we're, you know, enrolling patients at a rapid rate towards the back end of the study, and by the time we would take an interim read, get the analysis done, and release the results. If we're really close to having the final results, we'd probably pass on the interim read and just wait to have a full readout. So we'll keep an eye on that as things progress and as enrollment rates continue, and we'll keep everybody posted on that.
spk02: Perfect. Thanks, Jeremy. That's very helpful. And then so, you know, connecting the dots between completion of the Pivotal and hopefully Clearance and then beginning of marketing of the Clear device, what is it that Steve and his team are doing with the present version of the device that should hopefully lead through to, you know, sort of logically lead through to marketing of the AI-enabled device?
spk01: Yeah, I think there, you know, I really meant what I said in my prepared remarks. I'm pleasantly or quite pleased with the progress they've made throughout these challenging times to be launching a product. And I think just executing on the strategy that we have laid out, you know, I think you've probably heard me pretty consistently say that 2022 for us isn't really a revenue year. We're not, you know, out there. What we're doing is proving the commercial model and we're really getting the future evangelist of the technology. So, you know, picking our customers that can become efficient with the technology, become expert users, and will then become kind of the thought leaders when the AI is eventually cleared. So you've got, you know, execution on that continuing, then that's kind of a snowball effect as well. So now that we're fully staffed up from a sales perspective, That will continue to grow, and we continue to grow reference sites by the week, by the month at this point. Having that group of users, and we've also publicly said that we're targeting 20% to 30% of the surgeon base today. and those users that pick up the technology and adopt it today will become the train-the-trainers, like we've said. So they're training to be the trainers once the AI comes, and we've flipped from 20% to 30% to 100% of surgeons overnight.
spk02: Great. That's really helpful. Thanks for taking that question, Jeremy. That's all from me today.
spk01: Great.
spk02: Thanks for having me.
spk03: And just as a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the question and answer queue. Our next question comes from the line of Yu Ma with Research Capital. Please proceed with your question.
spk05: Hey, good afternoon, Jeremy. Thanks for taking my questions. I have a couple here. So first, we know those U.S. hospitals are facing budget cuts and financial constraints. Did you see this as a commercial headwind affecting the adoption of a perimeter OCP?
spk01: Thanks for the question, Toby. I would say no. To this point, we have not seen any really financial headwinds throughout these early commercialization efforts. I think what we've experienced is that the surgeons for sure and the hospital administration really recognizes the value prop from using this technology. So if you look at our investor presentation, we have the slide on hard clinical data on the cost of re-excisions to the system. And that's aside from all of the soft costs around the financial toxicity or other impacts to the patients. throughout this process. From that perspective, we're gaining more and more confidence that our pricing and our commercial model is sound and that folks are recognizing the value proposition that we're bringing. Some of the ancillary benefits to a hospital from using this technology are things that are really starting to materialize in some of our early users. you know, referrals from the primary care physician or the OBGYN network are going up. This is exciting technology that people want their patients to go to go see, you know, increased revenue or increased throughput for an OR. So, you know, instead of having your operating room tied up for a second lumpectomy on a patient, Instead, you can use it for a high-volume, high-revenue procedure like a spine or an ortho procedure, something like that. There's a lot of wins across the board that I think make this a sensible and strategic addition to the OPEX line for us.
spk05: Thanks for that, Carter. My second question is, In terms of the pricing, so for each procedure, the price is $1,000 based on the company's deck. So my question is, what would be a reasonable assumption of a gross margin from that $1,000 per procedure?
spk01: Yeah, so I think... You know, we're not really given margin or cost guidance at this point. You know, what we have set out there publicly is that, you know, once we're at a steady state, you should see kind of your classic razor, razor blade medical device margins. So, you know, high 70s, early 80s kind of gross margins from these procedures. And, you know, we haven't seen anything yet today that would question our pricing or our cost side that would challenge those assumptions.
spk05: Okay. Okay. Thank you. That's all from me.
spk03: And we have reached the end of the question and answer session. And I'll now turn the call back over to Jeremy Sabata for close remarks.
spk01: Thanks, Operator, and thank you, everybody, for your participation in our Q4 and full year conference call. I look forward to continuing to keep you updated and sharing progress as we move throughout the year. Thanks so much.
spk03: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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