Profound Medical Corp. (PROF) Q4 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Profound Medical Fourth Quarter and Full Year 2022 Financial Results Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. 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 of 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 take a moment to summarize our business. Profound develops and markets customizable incision-free therapies for the ablation of diseased tissue. We are currently commercializing TULSA-PRO, a technology that combines real-time MRI robotically-driven transurethral ultrasound and closed-loop temperature feedback control. The technology is designed to provide customizable and predictable radiation-free ablation of a surgeon-defined prostate volume while actively protecting the urethra and rectum to help preserve the patient's natural functional abilities. 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 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 primarily deploy a capital and consumable sales and service models 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 FDA approval under Humanitarian Device Exemption for the treatment of osteoid osteoma. The business model for Sonalleve Systems is currently a one-time sale capital equipment. On the call today, representing the company are Dr. Arun Menawat, Profound's Chief Executive Officer and Chairman; 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 corner 2022 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 few moments for an update on our commercial activities. However, before I do, I would like to provide a brief update on our fourth quarter 2022 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 December 31, 2022, the company recorded revenue of $1.3 million with the full amount coming from recurring revenue. Fourth quarter 2022 revenue increased 26% from $1 million from the same period in 2021, which also did not include any capital revenue. That said, our capital project pipeline in markets outside U.S. is short and we do expect to have capital revenue in the future period. As previously stated, we only sell capital in the OUS market. Gross margin for the three months and year ended December 31, 2022 by 44% and 45% respectively compared to 50% and 43% for the same period of 2021. While our gross margin is good at this early stage, as the recurring revenue increases, we expect the margin will improve from the current level. Long-term, we expect our gross margin should be better than 75% as recurring revenue outpaces capital revenue. Total operating expenses in the 2022 fourth quarter, which consists of R&D, G&A and selling and distribution expenses were $9.4 million, a decrease of 8% compared with $10.2 million in the fourth quarter of 2021, primarily due to decreased non-cash share-based compensation expenses. We expect our net cash burn related to operation to be in the $5 million to $6 million range, same as financial year 2022. Breaking that down further, expenditures for R&D decreased 34% on a year-over-year basis to $3.1 million. G&A expenses decreased by 35% to $2.1 million. And selling and distribution expenses decreased by 27% to $1.7 million, partially offsetting the decreases in R&D, G&A, and selling and distribution expenses, we recognized a non-cash impairment of approximately $2.5 million in the fourth quarter of 2022, representing all the goodwill associated with the Sonalleve business, as the return to business in China continues to be delayed due to COVID-19. Net finance cost for the 2022 fourth quarter was half a million dollar consistent with the same three-month period of 2021. Overall, the company recorded a fourth quarter 2022 net loss of $9.5 million or $0.46 per common share, compared with the net loss of $10.2 million or $0.49 per common share for the same three-month period in 2021. As at December 31, 2022, Profound had cash of $46.5 million. Based on the company’s current burn rate, we believe that its current cash position is sufficient to fund its operation into Q1 2025. With that, I will now turn the call over to our Arun.

Thank you, Rashed. Beginning with our financial performance, our recurring revenue continues to meet expectations and was the sole driver of this quarter’s revenue increase compared to Q4 2021. We reported no capital equipment sales for the quarter largely due to continued COVID-19 related headwinds in select markets such as Japan and China. While we do not believe this is representative of the future, we cannot predict when international capital sales will resume at or above the rate we have reported in previous quarters. Regardless, our main task is about driving utilization of TULSA in the United States. As you know, it is a game changing technology and the hurdles that we have faced mostly relate to the changes required to instill the new practice of a substantive new technology. We believe that the flywheel of adoption of our technology is finally turning and it will gain speed in 2023. By the end of Q4 2022, the utilization of TULSA began to grow at the rate of about 5% per month. And now with the installed base of 35 systems, we believe that growth rate is sustainable and will likely increase as our urologists continue to gain more experience. Now, that we have done over 3,000 cases, we have also analyzed what type of cases are being done commercially, as that is a critical early indicator of the potential of the adoption of our technology. From the very beginning, we have indicated that our technology has the potential to treat a significant part of the prostate cancer patient population, and now our commercial patient treatment data is proving it. Over 50% of patients being treated with TULSA have prostates larger than 40 CC, and we have treated prostates as large as 250 CC in size covering the full range of the potential patient population. As for the stage of the disease treated, approximately half of the patients we have treated are those with mid-stage disease, but I’m particularly pleased to see that over 30% of patients being treated belong to higher risk categories from grade group 3 up to 5 or very high risk patients, and we have even treated many palliative patients. About 60% of our patients treated received whole gland ablation, about 35% received greater than 50% prostate ablation, but less than whole gland and about 15% received focal ablation, which is less than 50% of the prostate. All the data put together clearly indicates that TULSA can be used to treat a vast majority of the prostate cancer patient population. Bottom line, we believe that the precision of TULSA, which enables our clinicians to treat cases with confidence, the flexibility of TULSA, which allows them to use it for a variety of patient population and our compelling clinical data are all factors that continue to give us confidence in driving widespread adoption of TULSA. 2022 was also an unusual year in certain sense. Dr. Scionti, our first commercial user hardly did any cases in the year as he was busy switching from his own practice to becoming the Chief Urology Officer at HALO Dx. Now that he’s there, he’s looking to start using TULSA again for majority of his cases. He’s also training his colleague at four sites to make TULSA their first line treatment option for prostate cancer. In another situation, our RadNet site, which was slow to start finally finish their first 50 patients. Pleased with their outcomes, they have opened their second site in Arizona, which is off to a very good start. Similarly, a number of sites that were cautious when they started have now completed their first 30 to 50 cases and have confirmed that their clinical outcomes are as good as that in the tech trial or better as they have the flexibility to customize treatment in commercial settings. Generally speaking, these sites are now looking to increase utilization and are open to treating a wider variety of patients. Another growth driver that we are seeing is that the number of teaching sites continue to increase and the teaching sites that have done about 50 cases are adding at least one more urologist to use the technology, which has the potential to increase the overall site usage at that site. Summarizing on the usage of TULSA in the U.S., no doubt it has been tough. But as I mentioned before, the flywheel of adoption is turning in the right direction. As our physicians gain more experience and the number of sites continue to increase, we believe that the adoption rates will increase. The other key main driver of adoption, as you know, is reimbursement. At least 12 of the hospital systems began to use the temporary C-Code approximately in 2022. These sites are also getting payments in the range that they are satisfied with. Our goal is to continue to educate the sites on the proper use of the code, and we find that the sites that are using it has – have a backlog of patients in the approximate range of three to four months. As for the permanent code, the CPT Category 1 code, the next AMA CPT committee meeting is scheduled to be in Chicago from May 4 to May 6, and consideration of the unique TULSA code is on the agenda. According to this agenda, the summary of the results and actions of this meeting will be published on or before June 2. You might recall last year, we pulled back as the utilization data that was submitted reflected only 2021 data, but this year 2022 data is included and we believe that it is substantially higher and sufficient to get over the utilization threshold. Another difference this year is that the application is completely sponsored by the relevant societies, and Profound is not a co-sponsor, which may give more credence to the application and the process. We are now less than two months away from this milestone and a potential major inflection point, and we’re looking forward to discussing it further on the Q1 analyst call in early May. In addition to the progress we have made in driving utilization of TULSA in U.S., and on the revised filing of the CPT code application, we’ve also made progress on the clinical front. We expect at least three additional substantive publications this year in peer-reviewed journals, as well as at least eight podium presentations at relevant conferences, including the AUA. Four podium presentations regarding TULSA took place earlier this week at the Society of Interventional Radiology Annual Meeting. Our CAPTAIN trial recruitment continues and we remain confident that preliminary results from this prospective randomized comparative trial with radical prostatectomy can be announced in early 2025, which will coincide with the effectiveness of the permanent CPT code if approved. Increasing utilization of TULSA in U.S., achieving approval of the permanent CPT code and continued recruitment in CAPTAIN trial remain the main agenda of our company. I’m also pleased to tell you that we have submitted our first TULSA AI software to the FDA for clearance. I encourage you to visit our website that describes this product in our updated corporate presentation that was posted a few minutes ago. I know that AI has become a big buzzword in the recent past. Our program is more than two years old, and it is designed to have the specific purpose of improving TULSA treatment planning times, as well as making it a continuous learning system. As I mentioned before, we have a significant amount of image-based patient data. We have set over 54 million parameters from over 7,000 images into our AI engine, along with validated 1,300 treatment plans that were manually produced by our expert physicians to treat their patients. The TULSA AI is now an add-on software module that can be added to TULSA-PRO, and the module has the ability to produce suggested treatment design based upon its learning from the database. The suggested design is primarily about saving treatment planning time, but given that it is based upon prior successful treatments, it also gives our urologist additional confidence in the automated plan. We have reviewed the module with the FDA and have received clear guidelines as to what it will take to achieve clearance, which include testing for alignment of the suggested design with physician treatment plan on a prospective basis. We believe this is doable by summer this year, at which point we will submit the final data sets to the FDA for approval. We’re very excited about the first AI product as this internally developed capability will serve us to make TULSA a continuous learning system as we automate various aspects of the TULSA-PRO system as well as the patient care continuum. Summarizing, we believe that the flywheel of TULSA-PRO adoption is accelerating at the rate of 5% per month growth and we will [indiscernible] in the second half of the year. We also believe that achieving an install base of 55 [ph] systems in the United States by end of 2023 is very possible. We look forward to reporting on the progress of the application of the category one CPT code, which we believe will be a major inflection point for our company. We expect that the CAPTAIN trial, which is already recruiting at a pace faster than any other comparative trial in prostate cancer, will continue to recruit at a good pace to enable preliminary results in early 2025. And finally, we are excited about our TULSA AI initiative. If cleared by the FDA later this year, it has the potential to not only significantly reduce treatment planning time, but also give our clinicians substantial added confidence further driving adoption. This ends our prepared remarks for today. With that, Rashed and I are happy to take any questions you might have. Operator?

Thank you. [Operator Instructions] Our first question comes from Michael Sarcone with Jefferies. Your line is open.

Hey, good afternoon, and thanks for taking my questions.

Good afternoon, Michael.

First question. You had talked about exiting 2022 with utilization growth at about 5% per month. Can you just talk about how that’s been tracking through the first two months of the year and how you expect that to ramp over the course of the year?

Yes, Michael. That’s a simple question, a simple answer, and we are definitely tracking it that 5% per month right now.

Okay, thank you.

Yes.

I’m sorry. Do you have more?

No, I think that’s fairly straightforward. I think that…

Got it.

Some of the new install base as they begin to get more experience, I think they will continue to increase also, which is why I’m – we’re guesstimating right now, that second half we can do better, but 5% is definitely there.

Understood. Thank you. And then just one more. How do you think about the pace of system placements through the year in the U.S.?

Sure, Michael, our pipeline is definitely very strong and I think that, as I said in the prepared remarks, getting the 50 by end of this year is we think is very feasible. And I think continuing to increase that number substantially in 2024 in the range of maybe 75 is doable. So I think what our anticipation here is that the current sites will continue to increase utilization and the number of sites will also continue to increase.

Okay. Thank you.

Thank you.

One moment for our next question. Our next question comes from Rahul Sarugaser from Raymond James. Your line is open.

Good afternoon, Arun, Rashed. Thanks so much for taking the questions. So congratulations on having the CPT application included in the AMA May Meeting, recognizing that you opted last year to withdraw the application primarily based on number of patients you’ve now referred to no more than 3,000 patients. You’ve referred to several conference calls and publications over the last year. Maybe could you speak, give us a little bit more color in terms of how – if these were the key criteria in terms of derisking applications, then if there was anything else that was in the application that helped to de-risk it?

Sure. No, it’s a good question. I mean, that is one of the big milestones that we need to achieve this year. And I think some of the things I can fairly share the number of patients that were treated in 2022 are with TULSA is higher than the number of patients that were included in prior filings of other technologies in prostate cancer that were approved. So I think that on that basis, we have crossed the utilization hurdle, which was the main issue last time. But I do think that one of the things that we witnessed as we were communicating with the societies is that the enthusiasm of the societies also has continued to increase. And for that reason, the society basically said, we’ve got this, you don’t need to even, if you choose not to want to sponsor it, they will take it from here. And I think to be honest, that is a very good sign because majority of the applications that do get sponsored by the societies go through – get through. So, I know it’s not a guarantee in anything, but I do think that the clinical data is there. The society support is there – the utilization is there. We – I think that we are sort of in the mainstream. So I am most certainly much more enthusiastic and optimistic about it than I was last year. And there’s always a backup plan in our company. And if for some reason a new issue does come up. We do have September meeting this year. So if so – and so I think that there is no issue that I know of at the moment, but if a new issue does come up, I think we have the opportunity to go back in September and that will still keep the effectiveness date to January 25.

Great. That’s really helpful, thank you. Thanks, Arun. So my next question is on the CAPTAIN trial. You indicated that the – you’d looking at potential preliminary data in early 2025. And of course you’ve been balancing the resourcing of the trial and of course your commercial efforts. Can you give us a little bit more color in terms of how recruitment is going and sort of any other milestones that we might be able to count on or look to before early 2025?

Sure. As I said in the prepared remarks, we are recruiting at a pretty good pace. We’re told we’re about 25% done in the trial. And our number of sites have now increased to 13 as compared to eight about six months ago. I think there are probably another two or three sites that have expressed interest in participating. So probably we’ll go to maybe 15 or 16 within the next 90 days or so. We have a really good team that is following up on recruitment. And so the number of patients being recruited even in the first two months of 2023 is higher than what we were doing in 2022. So I do feel pretty optimistic that we will be able to complete recruitment sometime in the first half or 2024. And that means that we should be able to produce six to nine month data by Q1 2025. And if you look at the TACT trial data what we find is that once you cross the six-month mark, there is high level of predictability of where that patient is going in the future. And so that’s I think it will serve us well – that history will serve us well. To your other question, in terms of the other clinical publications, we do expect five-year data to be coming out this year, which is, the final data set that urology community looks for. I don’t anticipate any significant differences given the trend that we’ve seen in the first four years. But that will be certainly another data set that will come out. There is a European trial that will start – that was also a comparative trial, which we sort of patterned our CAPTAIN trial behind that trial. They will start announcing their numbers starting this upcoming AUA Meeting in May. So I think that will also start to serve some early indicators of the comparative study.

Great. That’s actually very helpful. Thank you very much. And if you’ll indulge one quick last question great to see that you are looking at AI enabling of the program. You talked about potential completion of the prospective patients by the summer. So would it be reasonable to assume that the 510(k) would go in by the fall and be looking at a response in the FDA sort of early 2024?

Yes, I think, well, that is the plan. Obviously, you have to show the FDA, but that is certainly the plan that we will be able to get this product in the market in early 2024. And I think the only other color I can give you is every urologist that we have presented this to has given amazingly positive feedback. So that is the word – I don't use the word excited very often, but this is something I'm very, very excited about. I think it is the first of a family that will be coming out. And I think the continuous learning process, the continuous learning of this technology, I believe has that potential to actually continue to improve clinical outcomes. And I think that's the part that is most exciting to me. This – there are some videos that are being placed on our website, including the TULSA-AI videos, and you'll actually be able to see it. So you'll be able to see, for example, there's a click, the automatic treatment plan shows up on the screen, and then you'll see the pen will show up and the urologist just makes the modifications where they see fit, and then they go to the next one. So you'll actually be able to see how well this technology works.

Great. Thanks again, Arun, and thanks for taking our questions. We'll get back in the queue.

Thank you, Rahul.

We have a question from Ben Haynor from Alliance. Your line is open.

Good afternoon, gentlemen. Thanks for taking the questions. First off for me on the CPT one code, it's nice that the societies are sponsoring it and you guys don't need to sponsor it yourselves as well, but I was curious if you guys or the societies or any consultants you deal with on that have any data dealing with the hit rate when it's sponsored by only the societies versus sponsored by the societies and the company and so on and so forth?

Yes, it's – statistically it's hard to find it. I think there are two things, Ben, that that we're sort of relying on a little bit. One is that when we submitted the application last year, really the only issue that had come up was the utilization rate of 2021 and now there is 2022 data. And as I said, we think that it's better than what the AMA approved for other products. So I think that probably is a good way to think about it. The other thing is that the societies certainly are saying that they generally get their approvals. So I think there certainly seem to be confident. I cannot tell you statistically I don't think I have any data like that, Ben.

Okay. I was just curious because I've never seen happen across…

Yes, I haven't. Yes.

Okay. That's fair enough. And then totally – it was pretty exciting. Obviously, you have the discussions with the FDA. Can you share how many cases that you expect to do to be able to submit the data that the FDA is looking for?

Yes, most certainly. So we've done 115 that we did share with the FDA. We think we will do another 20 to 30 additional ones. And there are actually three subsets that they have requested, three types of data that they've requested. None of them actually will require live patients anymore. These are more comparison simulations or a core lab where an urologist or a radiologist will draw there and they will look for comparison to the automated plan. So I think that where we have about 80% of what the FDA is looking for, we will get the rest of it done in the next couple of months. And we feel that given that what we've already done meets the criteria that we should be able to submit that and we should be in decent space there.

Okay, that's helpful. And then maybe you mentioned how the folks that you've presented it to so far have been universally positive. I mean, I'm looking at the presentation here and you've got the handful of modules that you're initially talking about. Is that all the contouring assistant, the thermal boost, the procedure optimization? Is that all going in with this FDA's commission? And then on top of that, what – I mean is there anything specifically that gets these folks more excited than on one feature or another within the AI?

So Ben, first of all, these are two separate applications. One of them is for the contouring assistant. The second one is for the boost. And I think to be honest, they – the feedback we're getting is very positive for both of them. The first one, I think, as I mentioned, the – there is a psychological shift that is taking place. As you know, this is sole game changing as a technology that when we first talked about that, hey, you need to use an MRI to do this, there is this little hesitation that first shows up though I've never used an MRI before. And that is now shifting to, hey, I am going to look at MRI images from the perspective of treating that patient, and I'm looking at the biopsy data and I'm looking at now how I'm going to design the treatment. And that is a very different perspective than the perspective of a radiologist, who is designing, who's actually diagnosing, and they're looking at the cellular structure from the MRI, and they're not thinking about designing a treatment plan. So these are two very different things that they have to do. And I think that the urologists are now – who have done this are getting to that stage saying, okay, I'm using these images for a different purpose. And so when we present it to them, the idea of automated treatment planning, using this knowledge, and then being able to simulate what that means to them in terms of not just time, but the confidence that the treatment design is based upon the knowledge of several patients, who have been treated successfully in the past. That's the key point. The feedback we're getting is to be honest unbelievable. So, as usual, I want to be cautious and make sure we deliver on this, but we feel this is a project we started over two years ago, and we have an amazing AI team in the company we built the capability and I think this is the beginning of putting AI into our product.

Okay. So then just – I'll point – okay, that's great. A point of clarification that, so the contouring assistant is what's going on in this initial FDA submission, and there is other things beyond that that will come behind this?

That's correct. The contouring will be the first one, and then we'll produce other things and we'll bring you up to speed as we do other things. But at the moment, there are two applications. One is the contouring assistant; the second one is the thermal boost that are in FDA considerations.

Okay. Got it. And then it sounds like you got a pretty busy year coming up here in terms of both clinical publications and podium presentations. If I recall correctly, the FARP study data, or at least some of it is likely to be presented at the European Association of Urologists coming up here in not too long.

Yes.

Yes. Do you get a sense that that they'll delineate between HIFU and TULSA when the data comes out? Or is that something that you just don't know or unclear at this point?

We're not in [indiscernible] touch in there obviously because the publication they're doing all of the analysis. So my information is not 100% accurate probably, but my best guess is because these are different technologies that they will have to delineate them.

Okay. Well, great. I'll be stay tune for that. And let's say – thank you for taking the question…

I think…

Oh, go ahead, sir.

The first publication that – the first podium presentation at the AUA I think will be interesting in May that they're going to do.

Okay.

Yes.

Well, we got that and the EAU and the CPT 1 code coming up in the next couple, few months here. So…

Yes, the next two months…

…lots going on.

Yes, next two months are very eventful months. You're right.

Good deal. Well, thanks for taking the questions and congrats on all the progress.

Thank you. Thank you so much, Ben.

Thank you. And our next question comes from Frank Takkinen with Lake Street. Your line is open.

Hi, thanks for taking my questions. I wanted to start with asking about you mentioned some of your latest new users starting to build a three to four month backlog. It's great to hear the patient funnel being built out on those. I was wondering if you could talk a little bit more about those and maybe talk to some of the bottlenecks they're facing to getting those patients through the funnel.

Sure. Frank, it's – I think it's just like any other thing. It's that the – it's an entirely new technology. Yes, we had tech clinical data that looked good, but all of that was initially sort of the market entry that this sort of said to them, this is a technology that we want to evaluate or try. And I think as you've seen many of these sites that started a couple of years ago have now done 50, 100 or maybe even 30 cases, and they have now done their evaluations. And based upon those evaluations, they're saying, this is a technology here to – is here for the future, and they want to start increasing its usage. And so to just provide a little bit more color in what you're asking is that as they increase, they're looking at what's my backlog? And how many of the physicians of my practice need to be TULSA users? How much MR time do I need to allocate for my pipeline of patients and so on. So I think what we are seeing is they get to a couple of two, three-month backlog, and then they’re saying, I got to increase my capacity. And in that capacity, it might be adding a urologist, adding some more MR time and/or training another technician and so on. That’s how they’re sort of slowly but surely getting to it. I hope I’ve answered your question, Frank.

No, that’s perfect. That’s helpful color. And then wanted to just ask one more on Dr. Scionti’s evaluation process. I understand he’s always been a early user of Profound’s technology, but when he switched over to HALO Dx run an extensive evaluation process to evaluate some of the other alternative prostate cancer treatment options, or was he pretty dead set on implementing TULSA across all the sites?

So, Frank, based on what he told us and this was sort of in last fall, late early wintertime, is that he and HALO, as he was joining, they evaluated multiple technologies. And one of the primary criteria that they used was they felt that TULSA was the most standardized way of treating the patient and was all of these alternative technologies that they looked at, it was the most scalable technology also. And so their goal is they did not want to standardize on something that could be very user urology skill based, but they wanted to have a technology that they could sort of grow over to many, many practices and that was a very large part of his criteria.

Okay. Great. I’ll stop there. Thanks for taking the questions.

Sounds great. Thanks, Frank.

[Operator Instructions] Our next question comes from Brian Gagnon from Gagnon Securities. Your line is open.

Hi guys, a couple of questions for you.

Sure.

First, congrats on the CPT, AMA meeting. That’s terrific. Is there any ability to use the C-Code in an outpatient setting in the interim, and what do you guys think about that?

So yes, that’s a good question. So the C-Code right now is not on the ASC [ph], which is the outpatient setting list. And as part of this as a separate conversation, we have actually made the request to the CMS directly that they should consider that. And it basically involves safety and it involves whether or not patients who are being treated today are daytime patients or not. And we do have really very strong data that our patients go home the same day. And with respect to safety, we don’t even create an incision. So I – it’s hard to say whether they will accept this criteria or not, but certainly that is a possibility, Brian.

Okay. That would be important to continue to drive adoption between now and when you get a full CPT code. Did I hear you? I don’t want to be short-sighted because that’s not the way I think. But can you give us an idea of how installs are going in this quarter and have you really got – and the bigger picture question is, have you gotten past the bottlenecks for installs that you’ve discussed in the past?

I think we are very data oriented company. We have data on – from the time we start, we get a contract to the time, we treat the first patient. And when I look at that information, certainly during the deep COVID period, I think those times were running as long as six months to eight months. And you saw that because the installed base sort of was delayed and it’s only the last three months, four months where we’re finally getting up the installed base curve. So if I look at the latest data, I think we have been able to cut it down to – from six to at least three months now. And I do think that as time goes and things in the hospitals begin to get to more normal, which we are certainly seeing that we will be able to cut it down to our target, which is about 60 days.

Okay. That would be much more manageable and give you a little more clarity.

Yes.

Another bigger picture question, are you seeing docs switching any of their days from prostatectomy to TULSA?

Well, that’s a very good question actually. It’s something that I actually watch very closely in terms of who is switching to TULSA in general. And generally to be honest, these are actually robotic surgeons who are switching to TULSA. And I mean to be honest, not only that I’m watching, we’re watching and we have many of them who are, I actually explicitly I kind of asked them, like, why are you doing TULSA and why did you search this case from a robotic prostatectomy to the TULSA. And I’m getting to be honest, really, really comments that that is why my confidence level is increasing. And I’m happy to share in fact some of these comments with you.

Sure, please.

I mean, one of the sites that had done 30 cases for example, they were like very slowly doing cases and then I actually talked with them and I said, well, you guys started by saying we’re going to do 30 to 40 per year, you have taken longer to get there. And they kind of confirmed that what they were really doing is they wanted to do at least 30 cases and see how their patients were doing before they really increased their usage. And so they basically said, look, we have done these cases. We have now confirmed that our own outcomes are similar to the TACT clinical trial outcomes. That is what they were looking for. And they said, now that we’ve confirmed the clinical trial outcomes, we think that TULSA is going to be in – to be honest, to give you his words, he said, this is going to be one of the big three, it’s going to be TULSA, it’s going to be robotic prostatectomy, it’s going to be radiation. I said, okay, at this early stage, I’ll take that over time, we’ll think about who is the number one in that space and I’ll – I’m happy to share like I’ll share one an anecdotal example with you, which is – which really had an impact on me actually. So I was – I attended a case with one of our urologists and for some reason robotic prostatectomy actually came up as a conversation and he said that he had was doing a robotic case a week prior to this and that he actually lost the robotic arm lost the needle. It took him about 30 minutes to find it and everything was good and no problem. But what he said was, he said while he was looking for that needle, he said, this would’ve never happened with TULSA. He said, you guys don’t realize how inherently safer this technology is. So – and it really had an impact on me is that we talk about safety, we talk about clinical outcomes, and these urologists are now seeing it in real world. So yes, it’s taking longer, but I’m finding that the reasons that they’re giving are really, really legitimate and quite frankly I’m happy about that. I want them to test our technology and see the [indiscernible]

Terrific. I’m going to ask a couple of more and then – because I think I’m at the end of your line.

Sure.

You talked about this 5% per month without Scionti. Can you talk about, I think you said HALO was going to be a multi-center group and he’s training additional urologists and he will actually come online I think this month. Where are these additional centers going to be and do you think you get into all the NFL cities throughout the balance of this year?

We – so first of all, you’re right. So Scionti, and I mean it’s also another interesting example of how it just takes longer to make delivery, [indiscernible] he was asking originally going to start by end of last year, but it – because of some approval that were needed in the state of Florida, we had nothing to do with MR or our technology. It was related to the site that it just took another 90 days to get going. So he’s definitely slated to start in the next couple of weeks. But to answer your question, so there are two of these sites are Florida sites. One is certainly his original site, which is Sarasota. And there’s another site which is Jacksonville, Florida, also and then there are two sites in California. So those are their first four sites, we have talked about adding sites there at a relatively good pace. But again, the same model is, let’s get these sites going, let’s get the – all of the different things that can cause delays or recruitment so on, that’s create an efficient process. And then most certainly, the idea is that we will grow and build additional sites.

Great. RadNet, they’ve got two open, they’ve got Dr. Hong running the one here in Arizona. Where are the additional sites going to be for them and do you think you can grow that into the 10 plus that you had hoped for when you originally signed the contract over time?

Yes, I think so. I think that, again, they did something similar. They did their first 50 cases, analyzed it and then decided, yes, they want to go. They have been very supportive of the CPT application. They have helped educate some of the society members there, because that is – their primary customer is reimbursed. They’re not a very big cash site. Now in Arizona, it’s actually all cash and they’re doing very well. But their message is they have identified the next two sites already. They are actually – they’ve purchased new MRIs for these sites and we think certainly later this year they’ll be operational. And I think once we have certainty on the CPT code and if we do get approval to be able to use the C-Code in these ASCs, then I think you will see faster adoption. But certainly those two things need to happen for them to go beyond the four that we are talking about.

Great. Two last questions. This one is easy. TACT 2, are you close to completion on that?

Yes. I think, we’re a couple of patients away and we’ll get to about the 140 or 155 patients, I think 150 and we’ll close it up. So – and it’ll have five-year data next year and then we’ll continue to add those newer patients and you’ll start to see the impact of that in the final outcomes.

Okay. Last question for me. Does this shift from ultrasound biopsy to MRI in-bore biopsy help with this shift to in-bore TULSA procedure?

Yes. So this is sort of a long-term dialogue, Brian, and I think over the next couple of years certainly we will be talking about it. Because I think right now we’re so focused on our short-term getting the sites going and getting the CPT code going. But you’re on – you’re thinking the way that we’re kind of thinking is that what TULSA does is that it for the first time enables a very MR centric strategy from screening the patient to diagnosing the patient to an MR centric biopsy to then TULSA treatment and then follow-up. And you – all of a sudden becomes a continuum of care from beginning to the end. And there is a lot of dialogue in the urology community about this. And I think that it has – to some extent, it is going from, okay, I have never used an MRI before, so now I can see TULSA and now as I said in a prepared remarks that I can think about MRI from the perspective of treatment design rather than diagnosis. Two, I probably should own my own MRI. And so I think that shift is, again, it’s not going to happen in one day, but I definitely can tell you that there are a number of urologists who are thinking that way already.

Terrific. I’ll get back in line. Thank you so much.

Thank you, Brian.

Thank you. [Operator Instructions] We have a question from Scott McAuley from Paradigm Capital. Your line is open.

Thanks, gentlemen. And I’ll keep it quick. Just wanted to follow-up on the AI software down the road. Is that something you see as being kind of default that’s packaged in with the kind of per procedure cost that’s kind of currently – you’re currently charging? Or is that something you see as a essential add-on or upgrade to that subscription that’s approved and commercialized?

Yes, Scott, good question. So the way we are structuring this is TULSA-PRO is one cost for a patient. And there is going to be a value proposition for each of the module that we provide to the hospital or the urology practice. And our plan is that there will be some kind of remuneration to our company for those modules. So it will – it is not a free add-on, it will have its own value proposition and it will either have a additional price associated with it or will have certain other commitments associated with it. But most certainly, it is an increase in the value proposition of our company.

Absolutely. Makes sense. And then I think I just missed it, but off the top, you’re saying there’s kind of $5 million to $6 million range that’s kind of expected for some of the expenses and I think I may have just missed what that was, if you can reiterate that and that’s it for me.

I think that’s a Rashed question. I think that’s the burn rate that used here. So Rashed, do you have anything to add to that or feel good?

No. So basically what we are says Scott is we are expecting to hold for on our burn rate in order to maximize our runway. And that’s how we are getting the confidence that the cash that we have on hand will give us the runway to go through all the way to Q1 2025. And we’ll make sure that we adjust the levers in between to make sure we invest in the right areas like the sales and marketing and we’ll adjust the cost in the other places to keep their burn rates stable.

Got it. Thank you gentlemen.

Thank you.

[Operator Instructions] We have a follow-up from Brian Gagnon from Gagnon Securities. Your line is open.

All right. So Rashed opened the door. Talk about the sales force growth if you would. I think you have four now. Where are you going to be investing in the sales force this year? Clinical reps, genius, feet on the street, hunter-farmer, what are you guys thinking about?

Yes. So, Brian, we are aggressively adding to our sales team right now given the pipeline and the larger install base. And in some reform the answer is all of the above. We are adding new hunters, because of the demand, the pipeline that is growing. We need to close those deals. We’re definitely hiring some really, really good farmers who can take the sites that are – that have already treated, for example, 50 cases and so on, that they are demand in terms of our presence is loss – lot less than what it would be for the newer sites. And then for the newer sites that we’re bringing on, we are adding junior services so that we can continue to support them like we did the earlier guys. So the answer to that is absolutely all three of them, we’re adding aggressively right now.

Great. Thank you.

Thank you. And I’m showing no other questions. I’d like to turn a call back to Dr. Menawat for closing remarks.

So thank you so much. I think there is definitely a lot going on. As someone said in the call, in the next couple of months we’ll be very interesting and I really appreciate the questions, because we are doing something that is very unique and there are so many dimensions to it that I’m happy to answer the questions and thank you for everything and I look forward very much to the Q1 call. Thank you, again.

This concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.