Profound Medical Corp. (PROF) Q4 2021 Earnings Report, Transcript and Summary

Hello. Thank you for standing by. 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. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] 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 involve known and unknown risks, 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 also take a moment to summarize our business. Profound develops and markets customizable, incision-free therapies for the ablation of diseased tissue. We are currently commercialized TULSA-PRO, a technology that combines real-time MRI, robotically-driven transurethral ultrasound and closed-loop temperature feedback control. The technology is designed to provide customizable and predictable radiation-free ablation of a surgeon-defined prostate volume, while actively protecting the urethra and rectum to help preserve the patient’s natural functional abilities. TULSA-PRO is CE-marked, Health Canada approved and 510(k) cleared by the FDA. In the U.S. we employ a pure recurring revenue model for TULSA-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 procedure model, but we also sell capital and consumable separately if the situation warrants that. We’re also commercializing Sonalleve, an innovative therapeutic platform that is CE marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonalleve has also been approved by the China National Medical Products Administration for the non-invasive treatment of uterine fibroids and has recently obtained the FDA approval under Humanitarian Device Exemption for the treatment of osteoid osteoma. The business model for Sonalleve systems is currently a 1-time sale capital equipment. On the call today representing the Company are; Dr. Arun Menawat, Profound’s Chief Executive Officer; and Rashed Dewan, 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 Arun in a moment for an update on our commercial activity. 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 headwind, 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 they were no one time capital equipment sales in Q4 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. Expenditures 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 designs, technology improvements, and different magnet compatibility, options awarded to employees, additional headcount and increased travel for offsite MRI testing. G&A 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 continuing to reopen from COVID-19 restrictions. Finally, selling and distribution expensive increase 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 months period in 2020. As at December 31, 2021, Profound had cash of $67.2 million. With that, I will now turn the call over to Arun.

Thank you, Rashed. Before getting started, I would like to take this opportunity to congratulate Rashed 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 a 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 finally were able put in new installs again in U.S. This finished the year with 17 sites in U.S. 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 installed base of 25 systems in the U.S. by end of the current quarter, bringing our worldwide installed 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 are targeting three major types of end users, early adopters, independent imaging center company, and opinion leading teaching hospitals. That strategy has essentially worked. Most notably, we are already in 7 of the top 16 opinion leading U.S. hospitals, including the prestigious institution we announced earlier this week. In addition, I’m pleased to share that we now also expect to launch TULSA program in less populated states, including the southwestern states and appropriately a TULSA system is being installed in Tulsa, Oklahoma. I’m particularly excited about this one, as they will use the imaging center model of having multiple audits, bring their patients to one site and drive utilization. Our clinicians continued to utilize the flexibility of TULSA-PRO to treat an unrivaled variety of patients. In the fourth quarter of 2021, the majority of patients treated with TULSA, about 85% had treatment naïve, localized prostate cancer with another 12% receiving [Technical Difficulty] TULSA 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 customize whole gland where physicians targeted 95% of the gland but precisely carved out margin at the splinters to save continence, nerve bundles to save the erectile function, or even the ejaculatory duct when possible to save vital fluid. Another 36% had large subtotal ablations covering more than half their prostate, and 26% had more focal ablations, meaning [Technical Difficulty]. 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 TULSA does. Based on this and prior data, we believe that TULSA 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 U.S. 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, TULSA 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 HIFU and cryoablation was similar to the number of patients treated with TULSA. 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 CAPTAIN trial, which treated its first patient in January. We expect, CAPTAIN, 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. To date, six sites have been activated and are currently recruiting patients. Notably, this is the first Level 1 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 procedures is not inferior to RP. The trial also aims to demonstrate TULSA’s superior quality of life outcomes. The post-market CAPTAIN trial will enroll 201 patients with 134 patients randomized to receive one or two TULSA 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 a proportion of patients who are free from any additional treatment for prostate cancer by three years after treatment. Secondary endpoint 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 CAPTAIN trial to increase awareness and adoption of TULSA-PRO and to support coverage by payers. As I mentioned in our last call, we are evading 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 TULSA. The robotic RP arm of this study is similar to that of our CAPTAIN 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 CAPTAIN match what was seen in FARP, we believe there is potential to demonstrate clear superiority even though the CAPTAIN trial has been designed for a non-inferiority endpoint. Another feature of TULSA-PRO that we believe will significantly increase with adoption is a system’s compatibility with the U.S. installed base of MRI machines. To-date, we have been working with two MRI manufacturer partners, Siemens, and Philips to commercialize TULSA-PRO. Just this week, we were pleased to confirm TULSA-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 installed base of MRIs in the U.S. This is an important achievement that has already yielded exciting results. Shortly, after confirming TULSA-PRO’s compatibility with GE, we signed the first agreement for a TULSA-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 TULSA, in this case Level 2A. The paper itself systematically consolidates all of the available evidence on TULSA-PRO into a single peer reviewed manuscript and supports that TULSA is safe and effective for treating primary prostate cancer. The evidence also supports the use of TULSA 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 TULSA 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 TULSA is a single flexible tool that can treat multiple indications, including those where minimally invasive alternatives are limited. In addition to its real time MRI visibility and thermometry that differentiates TULSA from other ablative 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’m of the profound team. Abbey and Hartmut are leading sales, and Mathieu and Golddy 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 Knudson, our new Chief Commercial Officer who will be leading initiatives for Profound’s worldwide sales, marketing, and reimbursement activities for both TULSA and Sonalleve. Ken’s executive management career spans more than 25 years, during which he has accelerated growth for emerging startups and Fortune 500 companies alike. Ken joins us from Perineologic, 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 SpaceOAR Hydrogel, a biodegradable material that is injected between the rectum and prostate to decrease patient’s exposure to rectal radiation. Ken has extensive and demonstrateable 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 installed base expected to increase significantly by quarter’s end. Not only does the TULSA opportunity remains intact, but the substantive number of complex and unique cases build our confidence in capturing a broad portion of the total prostate cancer cases as well as a material segment of BPH cases. We are thrilled that TULSA 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, Rashed, Aaron and I happy to take any question you might have. Operator?

[Operator Instructions] Our first question comes from Brent Thill [ph] with Jefferies.

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’s 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 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 there’s another resurgence of this pandemic, I think based upon our pipeline, I do think that we will continue to increase the installed base this year, which by the way, gives us a lot more confidence of where we’re going this year as compared to the uncertainty that we faced last year. So, yes, I think, generally speaking, I think, -- just again, to be cautious, all the installed bases are going to be meaningful in just that task, they’re all going to take their time growing and so on, but I do think things are happening at much faster pace than they did in Q1. To your second question, in Q4, there were zero capital revenue, absolutely nothing. And a good bit of it is that we have -- we identified a certain set of countries in Asia in particular, where we feel that we can build scalable models where we can create a profitable revenue, and really create long term growth. And among those countries, particularly were 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 you will -- we will start to see capital revenues trickling in. But I do think in the second half of 2022, we will -- 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 the -- on sort of the regional aspect there, you commented during call that you were spreading out regionally within the U.S. So, I was wondering if you could just unpack that a little bit. Are the 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.

Yes, absolutely. So, first, with respect to the geography within the United States, there are two aspects. One is that we have an eye towards increasing obviously utilization because that’s what translates into revenue for us, but we also have eye towards 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 Abbey 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, we’re now -- we have presence now in 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 are 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 the -- 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 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 are in that range where September -- sorry, October, Novembers were actually not bad months for us. They were matching with what we saw in September timeframe. December was not a very good month at all. In fact, very quickly we saw significant delays and primarily driven by lack of anesthesia. So, our numbers, I think, compared to Q3 are up because you can see, Q3 and Q4 numbers are -- in terms of recurring revenues are up quite a bit, but overall still were lower. I think, 37% growth in early stage is not enough. And we are certainly looking to do much better than that in ‘22.

Thank you. Our next question comes from Rahul Sarugaser with Raymond James. You may proceed with your question.

Good afternoon, Arun, Steve, Rashed. And Rashed, congratulations on your appointment as CFO. Arun, my first question is just a little bit further on the deployment 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 call. Can you give us a little bit more visibility into sort of how the pipeline is shaped up sort of beyond Q1 for deployment? 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 bulk of devices now [ph] coming on line, how should we be thinking about that average rate?

Yes. Rahul, 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 installed 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 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 utilizations in 2021 will continue. And if anything, I think there will be certain increases. And 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 just impact of COVID is just siding. And hopefully, I can be more transparent in the second quarter on that particular point. But, with respect to 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, I do want to make sure that people recognize that it’s not going to get to 60 utilization in one quarter, it’s going to take their normal course, which last year 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 as visualization per site overall will actually be less in Q1, Q2 perhaps, but over the longer haul, it will be significantly higher, obviously. And once the installed 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 this format. 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 models. I want to switch a little bit -- switch gear a little bit to data. You already spoke to data, and we have seen some recent data from Meridian and there -- the data that presented -- the Phase 2 data they presented at ASCO. Do you have any thoughts on that, and obviously, because they’re going out to 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 it -- I think, there are some strategic aspects to this and then there are certainly -- I’ll comment 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 imaging guided radiation treatment or SBRT treatment. And that in itself in some ways is kinship because we are the company that’s on the 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, the publication, I’m just pulling it up as we speak here. What their data showed was that their what they called GU toxicity, which is the main endpoint is basically going from 47% down to 22% using MRI. 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 their toxicity down to 6%. So, as much as I think it’s great to see using MRI, I think the TACT data and particularly this new study clearly shows another order of magnitude difference, when TACT -- when TULSA 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, Arun. And if you would indulge just one more question, since we talked about radiation and we can switch it, but to comparison to surge rate, [ph] that you’ve referred to the CAPTAIN trial, we know that the FARP trial should be reading out sometime 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 CAPTAIN?

Yes. So I think, so first of all, you’re right. FARP, we hope to see full data this summer. For CAPTAIN, at this point our expectation is that our RSNA 2023, which is typically in November, is when we will have the first set of data cause we’re treating patients now. So, the patients who are being treated this year and by time, by RSNA 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 patient. But by that time, we should be able to show 6 to 12 months data. And, 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 in the queue.

Thank you, Rahul.

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

Arun, I was hoping to just ask about -- you mentioned capital projects reviving internationally. I just wanted to get a sense of how we should be thinking about the international channel in 2022? Any further details would be great.

Yes. 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 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 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 projects are not canceled, but just delayed is certainly the positive. 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 detail, 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, they are running like in China or South Korea, that the number of patients that they have treated during these last three, four months has certainly increased in double digits. So, the fact that they are -- there is some revival in terms of the patients treated. It is starting to show that they’re coming on stream. And I think China, is really now remaining one of the few countries and Japan, few countries that -- where travel is still incredibly restricted, but we are very hopeful that that will open in the second quarter. And 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 bit.

Great. Thanks for that. And just as a follow-up on U.S. reimbursement landscape, and just -- I mean, hospitals are still having success submitting for payment for total cases, using the preexisting code, or how is that fairing, is it 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 $12,000 -- $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 that fund -- that those moneys 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 strength, we’re 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, 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.

Just last question, just thinking about the TULSA-PRO system in its current form and just -- what is your team working on there? When will we hear anything about next generation system and what type of enhancements are you pursuing? Thanks for taking all the questions.

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 remark. So, as long as cancer has not gone out of the prostate, you can do radical prostatectomy. But, in number of cases, that cancer sort of rubs on the sides and there is 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, 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 the concept that we call thermal boost, meaning that in -- 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 section where there’s 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% of the patients in studies -- 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 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 are -- that we have, it is commercial in Europe. We’re at 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’s designed to reduce the treatment time in the future.

Our next question comes from Frank Takkinen with Lake Street Capital.

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?

Yes. Frank, we have -- we didn’t provide that much granularity because it’s sort of week t week. But, what we feel pretty comfortable with that is that we will be at 25 by end of this month, basically. So, it’s going to take time for these to start the utilization, but I think that once the installation is done, I think we will start to -- you will start to see utilization, slowly going -- starting in the second quarter. And some of it you’ll see in the first quarter also. So, so far, certainly January was a better month than any month in Q4. And I think 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 -- you will continue to see increase in utilization as well as new installs.

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

Yes. That’s a very good question, Frank, because Akumin actually is stalled at the moment. There have been a number of changes that have gone on at Akumin. And so, we have -- 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 an multisite agreement with the group called the Paragon Group that is installing their first system. In fact, in the next -- it’s actually being shipped now. And I think that Akumin will -- that will get replaced by some of these other imaging companies. I do think that long term, Akumin 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 comes from Brian Gagnon with Gagnon Securities. You 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 are yet to be installed?

Yes. 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 Akumin and RadNet.

It includes RadNet. I think, you will see the other sites at RadNet will come on stream this summer. But, it does not include Akumin.

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

Brian, that’s a very good question. We have over $67 million -- actually let me turn that question over to Rashed to answer.

Thank you, Arun. Brain, thank you for the question. So, as Arun 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 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’ll have a couple of questions about reimbursement.

Sure. So, 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, every agreement has been updated and every new agreement is over $8,000 per patient at this point.

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?

Yes. So, Brian with respect to using the C-code, it is has worked out. The strategies that we articulated early more than a year ago, I think in 2021 certainly worked. The average payment to the hospital -- and first of all, there are 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 preauthorization and generally that strategy is working. But the one that actually I haven’t mentioned is that in number of cases in certain number -- in 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 veterans -- one of the veterans hospital that is an opinion -- leading veterans hospitals in Cincinnati. We have a contract with them, and 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 a older men disease. And we have a couple of other hospitals that have applied for their local authorization and the fact that we’ve already established a few hospitals that are getting it. We are pretty optimistic. So, I think, we have not talked about veterans before. But yes, 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 in the future from other government entities and/or commercial?

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 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 numbers that we see today for installed, or just very low to where they’ll be 12 months from now?

Yes. We’re working on that. Brian, we are adding sales team. So, far it has been sort of senior team Abbey and Mathieu, 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 installed 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 -- we don’t have a lot of question in our system at the point at this moment, but we do believe we will be able to service the agreements that we are signing.

Our next question comes from Ben Haynor with Alliance Global Partners.

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 -- 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 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 mention is that it’s just that with this COVID, the unpredictability has been the reason. But, as we get to these higher installed 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. But what we did was we looked at the government databases. And so, we think that those numbers are in the 400, 500-patient range, in fact. And so, 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 pretty good, as much as it is. 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 think, the more important point, Ben, 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 adoption of our technology. And that’s the reason why I kind of mentioned that those points that we -- 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 -- for the first time, as you may have noticed I’d mention 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 can find we are on track with CPT, all of this is sort of telling us that, yes, we’ve got a unique technology that can be mainstream.

And also what I was partially getting at there is, the number of HIFU and cryoablation installs that are out there, presumably if there’s X hundred centers that are 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 in terms of center…

Definitely. And I think there are also centers and particularly, as we go to these bigger numbers, I think you will -- you are -- I can tell you we have had a couple of sites that were using FLA or laser fiber that switched to TULSA. I can tell you, there are at least couple of sites that were using HIFU that have switched to TULSA. 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 is a patient with one 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’s 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 of the TULSA-PRO and TULSA, is there any differential that you expect in terms of utilization as more rural centers, what kind of a feeder model versus kind of the centers that you’ve been installed in bar?

Right. No. As I mentioned, Ben, I’m pretty excited about that possibility. I think, that Paragon Group understands the model that we have. I think that we have -- we haven’t really seen the best implementation of that model yet. I know a site at RadNet for example is starting to do that. And I think they are 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’re 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 positive for us.

Excellent. Well, I mean, it sounds like you guys have made a lot of progress on the things you can control. So, really 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. And I’m not showing any further questions at this time. I would now like to turn the call back over to Dr. Menawat for any furthers remarks.

Thank you. I know Aaron is on the call. Aaron, if you wanted to say something, please go ahead. Aaron? Okay. So, if there no other questions, thank you so much for listening. Thank you for the questions. And I hope that we’ll be able to have 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.