Profound Medical Corp. Q2 FY2024 earnings call

• TULSA real world utilization trends show 73% of procedures for primary prostate cancer treatment, 15% hybrid, 8% salvage, 4% BPH only. Half of procedures were whole gland, 29% sub total, 21% hemiablations. Prostate volumes varied, with 51% under 40 CC, 30% 40-60 CC, 19% over 60 CC.
• Contouring Assistant, the second TULSA AI module, received FDA 510k clearance in May, improving treatment planning accuracy and reducing time.
• Proposed CMS rules for TULSA codes allow use in all locations of service, established as level six Urology APC with specific Medicare payments. CMS is accepting comments until September 9, final rule likely in November 2024, effective January 1, 2025.
• CAPTAIN trial is enrolling sites, including Stanford and Mayo Clinic, aiming to compare TULSA to robotic radical prostatectomy for efficacy and quality of life.
• Profound is innovating with TULSA BPH, the third AI module, with development ongoing.

For the three months ended June 30, 2024, Profound Medical recorded revenue of $2.23 million. Of this, $1.46 million was from recurring revenue and $773,000 from one-time sale of capital equipment. Second quarter 2024 revenue increased 39% from $1.6 million in the same period of 2023. Gross margin in Q2 2024 was 64% compared to 66% in Q2 2023. Total operating expenses in Q2 2024 were $9.3 million, an increase of 24% from $7.5 million in Q2 2023. R&D expenses increased 33% to $4.2 million, G&A expenses increased 1% to $2.1 million, and sales and distribution expenses increased 32% to $3 million. Net loss for Q2 2024 was $6.9 million or $0.28 cents per common share, down from $7.3 million or $0.35 cents per common share in Q2 2023. As of June 30, 2024, Profound had cash of $34.1 million.

• Anticipates 2024 revenue to be in the range of $11 million to $12 million.
• Expect gross margin to be around 60% or better in 2024.
• Reimbursement proposed by CMS for TULSA codes is expected to drive mainstream adoption of TULSA as a treatment modality starting in 2025.

• Uncertainties in the finalization of CMS reimbursement rules for TULSA could impact physician adoption.
• Market competition and the pace of adoption of new technologies like TULSA AI modules and interventional MRs pose risks.
• Fluctuations in capital equipment sales and reimbursement models could affect financial performance.

Q: What is the reaction from the physician community regarding the proposed CMS reimbursement rules for TULSA?

A: Physicians are appreciative of the flexibility of TULSA being able to be used in almost any setting. They are also grasping the economic benefits, with examples like private urology practices and OBL seeing potential high payments. Most are prepared to talk at the proposal level and the team is already in the market talking with physicians.

Q: How is Profound preparing for the improved reimbursement environment starting in 2025?

A: The team is visiting with physicians, reengaging with the pipeline, and starting to figure out how to add salespeople to prepare for the increased adoption once reimbursement is in place.

Q: What is the reaction of MRI companies to the proposed TULSA reimbursement?

A: MRI companies see the potential to justify an MR centric prostate care strategy as reimbursement for diagnosis, biopsy, and now TULSA procedure adds to the financial justification. They are working on interventional MR models and synergizing with TULSA's capabilities.

Q: How much time is Contouring Assistant saving in procedures?

A: Initial feedback is that it is saving time, with the goal of increasing procedures per day. For example, if a doctor is doing two cases in a day, they could do three, and so on, with the benefit seen in workflow efficiency and pocket book.