EDAP TMS S.A. (NASDAQ:EDAP) Q1 2024 Earnings Call Transcript

EDAP TMS S.A. (NASDAQ:EDAP) Q1 2024 Earnings Call Transcript May 16, 2024

EDAP TMS S.A. misses on earnings expectations. Reported EPS is $-0.12 EPS, expectations were $-0.1.

Operator: Greetings and welcome to the EDAP TMS First Quarter 2024 Earnings Conference Call. At this time. all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Fraunces. Thank you. You may begin.

John Fraunces: Good morning. Thank you for joining us for the EDAP TMS first quarter 2024 financial and operating results conference call. Joining me on today’s call are Ryan Rhodes, Chief Executive Officer; Ken Mobeck, Chief Financial Officer; and Francois Dietsch, Chief Accounting Officer. Before we begin, I would like to remind everyone that management’s remarks today may contain forward-looking statements, which include statements regarding the company’s growth and expansion plans. Such statements are based on management’s current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the company’s filings with the Securities and Exchange Commission. I would now like to turn the call over to EDAP’s Chief Executive Officer, Ryan Rhodes. Ryan?

Ryan Rhodes: Thank you, John, and good morning, everyone. Following our strong fourth quarter, I’m pleased to report that we continue to maintain our positive momentum through the first quarter of 2024, driven by additional Focal One system placements and robust year-over-year procedure growth, which clearly indicates that adoption of robotic HIFUsion for the management of prostate cancer continues on its growth path. In the first quarter, we reported total revenue in U.S. dollars of $16.1 million. HIFU grew over 10% year-over-year in Q1 to $6.3 million, which reflects continued procedure growth, as well as the placement of new systems. In the quarter, we placed seven Focal One systems which included five capital sales. Similar to the prior quarter, demand for Focal One is growing across multiple geographies and amongst both academic and community urology practices.

We placed a Focal One system with the Thomas Jefferson Hospital in Philadelphia, Pennsylvania. The Jefferson Health Network is comprised of 18 hospitals and physician practices and is the largest health system in the Philadelphia region by total licensed beds. In addition, the Mount Sinai Hospital system acquired a second Focal One, which further expands our relationship with one of the most widely recognized cancer research and treatment institutes in the world. Mount Sinai’s Tisch Cancer Center is a well-known center of excellence for prostate cancer under the direction of Dr. Ashutosh Tewari, System Chair for the Department of Urology at Mount Sinai Health System. As a reminder, during the third quarter of 2023, we entered into a clinical research collaboration with the prestigious Icahn School of Medicine at Mount Sinai Department of Urology to explore the role of immunotherapy used in conjunction with HIFU therapy in patients with prostate cancer.

And Dr. Tewari will be supervising this exciting and innovative research. We also placed a Focal One system at the Kuakini Medical Center, our first system placement in the state of Hawaii. Kuakini Health System is a member of Premier Incorporated, a large leading healthcare alliance in the United States that brings together approximately 3,000 hospitals and 110,000 healthcare providers for group purchasing benefits, networking, consulting services, and benchmarking. Our international Focal One business also remains strong. During the quarter, we placed multiple Focal One systems, including one system in Spain and a second system in Taiwan. As noted on our previous earnings call, the Taiwan Health Authorities approved Focal One for the treatment of prostate cancer in December of 2023.

Taiwan and its surrounding region represent an attractive market for additional Focal One sales that will contribute to the ongoing growth of our international business. US Focal One HIFU procedure growth remains strong. For the seventh consecutive quarter, we experienced positive quarter-over-quarter procedure growth. On a year-over-year basis, the number of US Focal One procedures grew by 92%. Considering that we are now comparing year-over-year procedure growth against much larger volumes versus prior years, we remain encouraged by these continued strong trends in utilization. Multiple factors are contributing to increased demand for Focal One, including the investments we continue to make in our capital sales and regional clinical teams, as well as increased reimbursement.

We believe that demand for Focal One is also being increasingly driven by a growing body of robust clinical data which provides clear and compelling evidence for why robotic HIFU is becoming an important mainstream treatment modality for the management of prostate cancer. To underscore this point, we note that the final results from the HIFI study were just presented at both the 39th Annual European Urology Association meeting and the 119th American Urology Association Annual Meeting. The HIFI study is the largest clinical trial ever conducted comparing the treatment outcomes for patients receiving robotic HIFU versus patients undergoing the surgical procedure radical prostatectomy. The final results from the HIFI study clearly demonstrate how the application of Focal One robotic HIFU delivers effective oncologic control as compared to surgery, but with the added potential benefit for improved functional outcomes with respect to maintaining both the rectal function and urinary continence.

In a few moments, I’ll describe the significance of this groundbreaking study in more detail. I will now briefly touch on some regulatory and clinical pipeline achievements during the first quarter. There is growing excitement and interest in applying our Focal One robotic HIFU technology for the treatment of deep infiltrating endometriosis, which represents a significant unmet medical need in women’s healthcare. As previously announced in the first quarter, the FDA granted the Focal One robotic HIFU system a breakthrough device designation for the treatment of deep infiltrating endometriosis. This not only underscores this unmet need, but also reflects the urgency to develop viable and safer treatment alternatives for the thousands of women who suffer from this painful and debilitating condition.

As a reminder, the current Phase 3 trial evaluating Focal One and the treatment of deep infiltrating endometriosis has been designed as a comparative, randomized, double-blind clinical trial with the primary objective of evaluating acute pelvic pain levels in 60 patients. In January, we completed patient enrollment, and we expect results from this study in the second half of 2024. I would now like to discuss EDAP’s recent participation in two prominent urology scientific meetings. The European Association of Urology meeting, which took place from April 5th to April 8th in Paris, France, and the American Urological Association meeting, which took place from May 3rd to May 6th in San Antonio, Texas. Each of these global urology-focused conferences attract thousands of physicians, hospital and industry executives, and other stakeholders each year, all of whom share a common purpose of advancing the science, technology, and clinical outcomes in the field of urology for millions of patients.

There were several clinical studies related to Focal One robotic HIFU technology at this year’s AUA and EAU meetings, which reflects growing interest among urologists in embracing robotic HIFU as part of a comprehensive prostate cancer program. Most prominent among these were the groundbreaking HIFI study. As previously noted, finals results from both at the EAU and AUA meetings, which speaks not only to the importance of this groundbreaking study, but also to the potential practice changing implications that may result from its outcomes. As a reminder, the HIFI study is the first investigator-sponsored, prospective, multi-center trial comparing robotic HIFU to radical prostatectomy in the management of prostate cancer. The study compared Focal One HIFU versus radical prostatectomy as a first line treatment for patients with low or intermediate risk prostate cancer.

A total of 3,328 patients from 46 treatment centers were included in this study. 1,967 consecutive patients were treated exclusively with EDAP’s robotic HIFU technologies and 1,361 patients underwent radical surgery. All patients were followed for 30 months. At this year’s EAU meeting, [Guillaume Fusard] (ph) and Professor [Patrick Colaby] (ph) each made podium presentations at the abstract session, titled, Has Focal Therapy for Prostate Cancer Come of Age? Both presentations highlighted the final results from the study, which focused on oncologic and functional outcomes. I would now like to point out the key findings from the study. At 30 months, salvage treatment-free survival was significantly higher in the HIFU arm at 89.6% compared with the surgery arm of 86.2%.

Since this was conducted as a non-inferiority study, these results clearly demonstrate that robotic HIFU therapy appears to be at least as effective in terms of oncologic control when compared to radical prostatectomy. The HIFI study also assessed patient safety and quality of life, including the effect on patient erectile function and urinary continence. With respect to impact on continence, the International Continence Society score, a measure of urinary continence, was significantly lower after HIFU versus radical prostatectomy. And the urinary symptom profile showed a significantly lower stress incontinence score for patients after HIFU than radical prostatectomy. With respect to impact on patient erectile function, the International Index of Erectile Function 5, a well-validated measurement of erectile function, decreased significantly from pretreatment baseline less after HIFU than after radical prostatectomy.

Important post-procedural benefits of HIFU on both erectile function and urinary continents were demonstrated despite patients in the HIFU-treated group being an average of 9.6 years older. To further underscore the importance of the HIFI study, Professor [Pascal Richman] (ph) of the University Hospital in Toulouse, France, an leading guest investigator of the HIFI study was invited to give an oral presentation highlighting the study’s results at the AUA’s major plenary session on day one entitled, Paradigm-Shifting Practice-Changing Clinical Trials in Urology. Securing an oral presentation during a plenary session at the AUA provides an extraordinary level of visibility across the entire urology community and speaks to the growing recognition of Focal One robotic HIFU in the management of localized prostate cancer.

Professor Richmond’s presentation was very well attended and drew significant attention to the robotic — Focal One robotic HIFU platform. During AUA we had significant attendance at our Focal One exhibition which we have the opportunity to interact with hundreds of urologists, hospital and industry executives, as well as investors with whom we conducted dozens of Focal One treatment simulations. Our booth program was active throughout the meeting, led by a record number of urology presentations, highlighting the benefits on the use of Focal One robotic HIFU. This was our largest exhibiting presence ever at AUA, leading to more urologists inquiring about starting Focal One programs. As patient demand for new, effective, and non-invasive procedures redefined the treatment landscape within prostate cancer, we believe that results from the HIFI study are likely to accelerate the adoption among urologists for robotic HIFU as a more attractive treatment option compared to radical surgery.

In addition to the HIFI study, the AUA featured multiple podium presentations which support the use of Focal One robotic HIFU technology in providing appropriate cancer control with the added benefit of excellent functional outcomes. The studies presented by Dr. Yamini Nagaraj from the Martini Clinic in Germany and Dr. Edward Baco from Oslo University Hospital in Norway both confirm and reinforce the clinical evidence provided by the HIFI study. First, Dr. Nagaraj presented the results of her clinical experience on 160 patients treated with Focal One at the Martini Clinic in Hamburg, Germany. Of note, the Martini Clinic is arguably the largest and busiest dedicated prostate cancer center in the world, where more than 2,500 radical prostatectomies are still performed every year.

After more than seven years of follow-up, the oncologic outcomes after Focal One ablation with optimized protocols led to only 6.3% of the patients needing radical treatment for infill recurrence. All patients treated with Focal One were able to maintain their urinary continence with minimal impact on erectile function. Turning to Dr. Baco’s podium presentation, updated results in two-year interim analysis of this first randomized controlled trial were presented that provide a direct comparison between focal ablation and radical prostatectomy for intermediate risk prostate cancer. The vast majority of the patients in the focal ablation group were treated with Focal One. This important new analysis based on the intention to treat principles confirmed the results from previous scientific communications and concluded that after a two-year follow-up, the rate of treatment failure in the focal ablation group was found to be non-inferior to that of the radical prostatectomy group.

The results even show a 1% difference in favor of focal ablation with only 6.5% treatment failure as compared to 7.5% for the robotic prostatectomy arm of the study. As mentioned previously, the high level of evidence provided by the randomization of this clinical trial provides an additional robust layer of clinical evidence that supports the role of Focal One robotic HIFU in the management of prostate cancer. It’s also important to note that the first quarter of 2024, the American Urological Association finalized new guidelines specific to salvage therapy for prostate cancer. These new guidelines were presented in detail in an instructional course at the AUA and published in the Journal of Urology, the official journal of the AUA. These new guidelines now importantly include HIFU among the recommended options for patients with a local recurrence post-radiation failure.

Based on these new guideline updates, HIFU is now listed at the same level as a salvage option alongside the standard of care radical prostatectomy. As noted, this represents a clear validation of the growing acceptance of HIFU amongst urologists and the critical role that Focal One will play for this growing subset of prostate cancer patients. I will now turn the call over to Ken to review our financial results for the first quarter.

Ken Mobeck: Thanks, Ryan, and good morning, everyone. Please note that all figures except for percentages are in euros. For conversion purposes, our average euro-dollar exchange rate was $1.08 for the first quarter of 2024. Total revenue for the first quarter of 2024 was EUR14.9 million, an increase of 0.8% as compared to total revenue of EUR14.8 million for the same period in 2023. The increase in revenue was driven to an increased number of HIFU treatments as well as increased ExactVu unit sales versus the prior period. Looking at revenue by division, total revenue in the HIFU business for the first quarter of 2024 was EUR5.8 million, as compared to EUR5.3 million for the first quarter of 2023. We sold five Focal One systems in the first quarter and we experienced 55.7% year-over-year growth in worldwide disposable based revenues, reflecting strong procedure growth during the quarter.

Total revenue in the distribution business for the first quarter of 2024 was EUR6.9 million as compared to EUR6.8 million for the first quarter of 2023. The increase in distribution revenue was driven primarily by 11 ExactVu units sold during the first quarter as compared to eight units sold during the first quarter of 2023. Total revenue in the LITHO business for the first quarter of 2024 was EUR2.3 million as compared to EUR2.8 million for the same period in 2023. The decrease in LITHO revenue was driven by two units sold in the first quarter as compared to four units sold in the first quarter of 2023. Gross profit for the first quarter of 2024 was EUR6.4 million compared to EUR6 million for the year ago period. Gross profit margin on net sales was 42.8% in the first quarter compared to 40.8% in the year ago period.

The increase in gross profit margin year-over-year was primarily due to the high level of Focal One treatment driven revenues, which generates higher gross margin. Operating expenses were EUR11.2 million for the first quarter, compared to EUR12.6 million for the same period in 2023. The decrease in operating expenses was due to the recording in Q1 2023 of a one-time non-recurring employee compensation expense. The impact from this one-time expense in Q1 2023 was offset by the continued investment in the company’s U.S. commercial operations. Operating loss for the first quarter of 2024 was EUR4.8 million compared to an operating loss of EUR6.6 million in the first quarter of 2023. Excluding the impact of non-cash shared base compensation, operating loss for the first quarter would have been EUR4.1 million compared to an operating loss of EUR3.9 million in Q1 2023.

Net loss for the first quarter of 2024 was EUR4.5 million or EUR0.12 per diluted share, as compared to net loss of EUR7.5 million or EUR0.20 per diluted share in the year ago period. Our manufacturing, service and functional teams are busy implementing new defined programs and activities to drive operational efficiencies to improve overall profit margins. Turning to the balance sheet, ending inventory was EUR17.5 million in the first quarter of 2024 as compared to EUR15.1 million at the end of the first quarter of 2023. Most of the growth in inventory was due to material increases and anticipation of future system sales. Total cash and cash equivalents at the end of the first quarter was EUR38.4 million or $41.5 million in US dollars as compared to EUR43.5 million at the end of the fourth quarter in 2023.

The EUR5 million decrease in cash and cash equivalents was driven primarily by the cash used in operating activities and capital expenditures. As always, we continue to monitor our capital resources as we invest and grow our business. Those are our key financial highlights for the first quarter of 2024. And with that, I would like to turn the call back to Ryan.

Ryan Rhodes: Thanks Ken. In summary, we have entered 2024 with solid momentum. Our Focal One business continues to expand both with respect to new placements and procedure growth and our pipeline remains strong and we now have the most robust externally validated body of clinical evidence that supports robotic HIFU therapy becoming an essential treatment modality in the management of prostate cancer. And EDAP is exceptionally well positioned to take advantage of this ongoing paradigm shift towards robotic HIFU therapy. With that, I will now turn the call back over to the operator for questions. Operator?

Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question we have is from Michael Sarcone of Jefferies. Please go ahead.

Michael Sarcone: Hey, good morning and thanks for taking my questions. So, just to start, thanks for all that data around the clinical data releases and the color you provided. I guess, just on the HIFI study, do you think you can talk about or elaborate more on the physician feedback you’ve received since publication? And then how you think this data is going to impact your conversations with potential customers and Focal One update.

Ryan Rhodes: Yes. Thanks, Michael. The feedback has been very, very positive. Again, as noted — you look at trifecta outcomes for treating prostate cancer, it always starts with cancer control, followed by the functional outcomes of preserving sexual function and urinary control. And what’s exciting about this study, again, it’s a non-inferiority study, but we meet a standard, an acceptable standard of oncologic control. And that’s been always the question that many urologists have had out there. Can HIFU used appropriately in the right subset of men provide adequate cancer control? So we’ve received anecdotally a lot of really positive feedback from the urology community. And I think as we look outward, we know patients are seeking a highly efficacious treatments that are either minimally invasive or in our case non-invasive and we feel that Focal One has the ability to lead in this category of focal therapy.

So the positive feedback, again, we are capital sales teams and clinical teams as well as our commercial teams are all excited to charter the message forward and we’ve been received favorably amongst customers, both new customers and then active customers who are in our sales pipeline.

Michael Sarcone: Got it, thanks Ryan. And in the past there’s been a lot of focus on system placements and you’ve talked about — we need to cross the chasm here. I guess, does this data enhance — now help you accelerate the timeline for which you can cross that chasm? And with this data, when do you think we could see the inflection and system placements?

Ryan Rhodes: Yes. So the data is something we’ve waited for. This study took over seven years to complete. And again, we have other studies actively referenced, as I discussed on this call. We have the Baco study, which also is a randomized control trial. But in the interim, we believe this evidence with a large end of patients, over 3,000 patients, provides real potential momentum for the company. And importantly, when we get out into the clinical community, as I mentioned earlier, being able to have a proper discussion around the efficacy of use of HIFU for the treatment and management of prostate cancer. So I believe that this absolutely will help us in our narrative. We’re early. The study has just come out recently and will be published in the near future in a peer-reviewed journal.

So again, we are sharing the information with customers. The response has been highly favorable. If you look at the adoption and sale of systems, we believe this should play favorably in our conversations with physicians, both in the community setting and certainly as well as the academic setting. So we’re really excited to have this information and data to get in front of customers who are interested to know about — more about the use of HIFU as noted for the treatment and management of prostate cancer.

Michael Sarcone: Great. Thanks, Ryan.

Ryan Rhodes: Thank you.

Operator: The next question we have is from Frank Takkinen of Lake Street Capital. Please go ahead.

Frank Takkinen: Great. Thanks for taking the questions. Maybe I’ll stick with something around the new data as well. I think in previous guidelines, something along the lines of HIFU has been advocated for, but still awaiting adequate long-term data. Does this study satisfy that, and how should we think about maybe HIFU moving into potentially a first-line treatment option in the guidelines?

Ryan Rhodes: Yes. Hi Frank. This should certainly help support emerging guidelines. Again, we’re written currently into the NCCN guidelines and now the AUA guidelines for use of HIFU in failed radiotherapy, so salvage radiotherapy. That is very positive, but as noted, I think we’re seeing more evidence coming out from these studies, as noted, that are just going to make it more compelling for updates on guidelines, right? And we know guidelines take a while to update and they tend to lag. The market moves and then guidelines kind of in retrospect are updated. So we believe that this is going to help. We are sharing this information not only to customers, but also out into the payer community and we think this is really important.

And I think we’re really at the beginning of seeing more and more compelling data coming out supporting the use of robotic HIFU in the treatment of a subset of men who have been diagnosed with prostate cancer. And I’d say from the patient perspective, patients are looking for a highly efficacious treatment that allows them adequate cancer control, but maintains the functional outcomes, the very important functional outcomes of preserving sexual function and urinary control. And so, we now have something with data that we can offer patients that is non-invasive. And we’re just really excited to charter the message forward. And as mentioned, we are sharing this actively with customers on a daily basis.

Frank Takkinen: Perfect. And then maybe just changing or switching gears to thinking about 2024 expectations and placement expectations. I think last year the cadence was something along the lines of seven placements in Q1, and four in Q2, two in Q3, 10 in Q4, 12 total placements, 10 sales in Q4. Is that the right cadence to be kind of thinking about for this year with some growth, or how should we think about placements, seasonality, and recognition of revenues throughout 2024?

Ryan Rhodes: Yes. Well, we continue to see a growing pipeline. Our active pipeline grows amongst our sales teams. And again, I think looking out where we again continue to see growth and higher interest in the technology. We haven’t given guidance, but it would be important to note that we see a growing interest pipeline as noted are growing amongst our capital sales team. And I think the numbers you socialized feel correct in some manner. We may hit seasonality sometimes in the third quarter. We tend to have a stronger back half of the year, as noted. And I think we’ll see a similar pattern this year. But we’re excited. I mean, we’re now into Q2, but I think there’s good momentum as we look through the rest of 2024.

Frank Takkinen: Perfect. Thanks for taking the questions.

Ryan Rhodes: Thank you.

Operator: The next question we have is from Jason Bednar of Piper Sandler. Please go ahead.

Jason Bednar: Hey, good morning. Thanks for taking the questions. Nice start to the year here, guys. Ryan, would love to start with you, just probably another question here, just following up on AUA. A lot of good data, HIFI looks like it should be pretty impactful. Two questions, maybe just to start from me. I know you referenced the meeting being a record on a number of fronts, big presence that you had at the meeting. For prospective Focal One users, wondering if you can put the interest in context of past AUA meetings or relative to your own internal expectations? And then the second question is maybe somewhat related to what Frank was just asking. But anything you can draw from past AUA meetings regarding how you can use interest from the meeting as a guide or indicator of future demand.

Really trying to get a sense of how you see AUA influence and growth of Focal One units this year after you got off to a real nice start with placements and sales in the first quarter.

Ryan Rhodes: Yes. Jason, thank you. So first as noted AUA was a resounding success for the company. And I say that from the perspective that we had a very large showing, our largest showing ever. We were highly visible throughout the meeting. As noted, we had numerous presentations given in our booth. As mentioned also, the HIFI study data was presented. The other studies I referenced in the narrative on this call. So I would say, for those who have not had belief in use of HIFU, I think we see a bit of a turning point that, wow, focal therapy is in play, we understand the role and value of focal therapy, then the next question is, how do we best deliver focal therapy? And I think we point back to the fact that we offer a robotic platform that delivers a precise hypoablation to targeted structures and anatomy.

And part of the gem of AUA is you get the intimacy with customers, but you also get the ability to show them what a treatment looks like. And throughout the AUA meeting, we were doing simulations. Those are where we sit down with doctors and we set up a treatment plan and show them how straightforward it is to use the imaging capabilities within the Focal One system and all the other interactive benefits the machine and technology offers them. So I think looking at this AUA, we were the busiest we’ve ever been and I can tell you — I mean we’ve been the last three years that I’ve attended AUA for EDAP we’ve gotten bigger every year and I would say the buzz was very high this year at AUA and many had heard about the HIFI study, we were presenting study data in our booth and I think if you look outward, again, it’d be fair to say there is demand growing and more awareness.

It starts with awareness first. You need to create awareness in order to create demand. But I think the HIFI study at the AUA and also presented at the EAU meeting in Paris, the second largest urology meeting in the world. If you think about it, these two major meetings showed a very high impactful study using exclusively RDAP’s HIFU technology. And again, we’re going to be speaking more and more as we look out to more interested customers and we follow up on leads from the meeting.

Jason Bednar: All right, helpful. Maybe shifting bigger picture, hospital CapEx environment in the US, it’s a bit unique right now. Procedure and volumes are pretty darn strong. That’s usually a positive read for spending on high ticket capital, but the counter is that, interest rates and financing maybe aren’t as accommodating. So are you seeing the impact of the latter there, this higher for longer rate environment? Is that shifting sales discussions at all, leading to any kind of deferrals or changes in moving forward? Or are your capital sales and the commercial discussions really operating independent of financing considerations? A – Ryan Rhodes That’s a great question. It would be fair to say that, again, hospitals today are making still notable investments both in operational, capital and strategic capital.

What’s important for people to understand is that, we really fall into that strategic capital bucket. And what I mean is, we’re selling a clinically necessary strategic revenue enhancing service line. We have a CPT code, we have proper reimbursement, both for the facility and for the physician. So on the economics, it’s very valuable, and it’s for a very valuable patient. We’re talking about a prostate cancer patient, which is core to men’s health. So when we think of hospitals and we engage with some will take longer in their buying cycles. As you know, value analysis committees and whatnot, they have a mechanism to look at capital in the right way, capital investments, and be able to think of which ones they want to prioritize. I think if you look at our story, it’s very strong in the sense that it’s tied to a major cancer that affects men all over the world.

And now we have a solution with data that supports it. I think when we come to the financing discussion, I would say today you have to be prepared for anything in those conversations. And what I mean is, there’s various forms of leases, subscription models, bridge to buy, these kinds of things. We have a full offering that we propose in front of our customers. Typically, they may ask for something, and we will provide them guidance using one of these financing tools. And that allows us to be flexible with them. I think that the takeaway message today in capital equipment, especially premium price capital equipment, is you need to be flexible. And I believe we’re well armed with the right flexible financing tools to be able to answer to that.

And you know — but with that said, some of the cycle times for purchasing capital equipment can take longer. We’ve seen that process being longer than shorter in many cases. But the interest is there on the hospital to make the investment and we answer as noted.

Ken Mobeck : And Jason, just to follow up on that, when we look at our active pipeline today and where we drop those in our forecast, what we’re seeing is, it’s just taking the hospital more time to go through all the buying mechanics to actually purchase the system. We’re not losing deals in our pipeline. They’re just taking longer to revenue.

Jason Bednar: Thanks, Ken. Just, if I could squeeze one more in there. Any sense of what that lengthening is, and whether you can quantify, like on average, it’s being delayed by — or it’s longer by three months or six months, or just what that looks like?

Ryan Rhodes: I mean, it really — Jason, it really varies. I mean, we’ve seen some sales can take many months to get done. Others can come quickly. I think behaviors are different. The community hospitals tend to move a bit faster in many cases. When you have the right story and they are leaning in and listening and understanding the value and utility of what we can bring to the hospital, they’re sitting down with us and we’re working through the process shoulder to shoulder. So we — as Ken mentioned, deals can vary in cycle times. Some hospitals we notice can move quickly. Some can take longer. It’s hard to put a real number on it. I think you’ll see variability. I think the best thing from our perspective is we — as I mentioned, we’re offering something that is clinically necessary and strategic that brings them immediate economic reward.

And so we don’t have those headwinds. And so typically when we sit down with them, if they do a pro-form analysis, we work very closely with them. And if they need some flexible options in financing, we’re able to provide those options.

Jason Bednar: Okay. Got it. Thank you.

Ryan Rhodes: Thank you.

Operator: Thank you. The last question we have is from Swayampakula of H.C. Wainwright. Please go ahead.

Swayampakula Ramakanth: Thank you. Good morning, Ryan.

Ryan Rhodes: Good morning.

Swayampakula Ramakanth: So, when I look at your numbers, it looks like some of the procedure volume continues to increase. And coming out of the AUA conference and the HIFI presentation, do you get a feeling for how entrenched the HIFU system is in the centers that you already placed. I’m just trying to get a feel for, like, do you foresee any increase in procedure volume based on the presentations and also your feedback that you’re getting from the docs who attended the conference?

Ryan Rhodes: Yes, [RJ] (ph), we’ve gotten really good feedback. I think what we see is that, when we approach a hospital, we talk about building a program. So a program is not unique to necessarily one urologist. I think today we do a much better job of socializing what the value of adding a Focal One robotic HIFU program can mean to a hospital. So with that said, I think we have more interest in neurologists being trained in use of that technology. So in our existing install base, once the system is placed, we launch our program and we may train other urologists and we’re ready to do that. Usually there’s a plan, a step-up plan. And so, I would say that we’re active supporting our hospitals amongst our clinical team to execute on that plan.

I think as I mentioned, if you think of HIFU, it used in primary treatment, which is a large audience of patients. There’s a lot of opportunity out there. So I think we’re very early in this adoption curve, that is even with hospitals that provide HIFU today. So the hospitals that have had their system for a while tend to get busier in most cases, as you would expect. They use the machine more frequently. Or in the case of expanded indications, like I had mentioned, the new guideline change for salvage use of a HIFU, for salvage failed radiotherapy, That can be a new market segment for hospitals to consider. As we know, there’s radiation failures out there and patients need to have all options presented to them. So, I think we’re just in the beginning of seeing trends and being able to see growth as more hospitals use the technology, maybe use it on a more frequent basis as noted, or even train new urologists who have strong interest of learning use of Focal One HIFU.

So again, I think we have a lot more to do in terms of growth and we’re very early in the adoption of this market.

Swayampakula Ramakanth: Very good. And then on the endometriosis front, you expect data to be released from the Phase 3 study in the second half. I’m just trying to understand what’s the game plan beyond it? And what should we actually expect in that initial release of data in the coming months?

Ryan Rhodes: Yes, so again, a couple of things. We’ve shared the Phase 2 study has been committed for a publication so that’s something exciting that is out there. The Phase 3 study results should be available sometime the second half of the year. But I think the most important thing here is, we are taking advantage of the breakthrough designation given to us by the FDA for use of Focal One and deep infiltrating endometriosis, meaning that we are now actively in a plan with the FDA to work through the necessary process to receive clearance at some future date. So we have data now that we can use from these studies, and that was part of this breakthrough designation application. We can use this data effectively, and we are now in that process of interacting with the FDA to move forward to receive clearance at some future date.

We are working through that and our teams are exceptional working on this project. I think that’s the more exciting news there is that, we’re embarking on that process. We are also at the same time working through MDR and CE Mark through those markets in Europe. And so, we run these in parallel paths. So I’m very excited as we look outward and we’ll have more data to share here in the near future.

Swayampakula Ramakanth: If I can squeeze in a quick question on the international market, you gave some metrics in terms of the placements in ex-US. How do you see that ex-US market growth from here onwards? I know there’s a lot of focus in the US, but the ex-US market could easily become as interesting down the line.

Ryan Rhodes: Yes, great question. We saw a lot of interest from people who attended both the EAU meeting in Europe, quite a bit of interest. We were very busy in Paris at that recent meeting, as well as international attendees who came to AUA. So the interest is very high. I’d say a couple things. We see more centers outside the US. As mentioned, we have sold our second system into Taiwan. But — and you think of Europe, we last year received reimbursement in Switzerland in July. So there’s a market opportunity. We have the economics, we have clinical value, we have the right product, there’s an opportunity there. Also we socialized openly that the French high authority which was part of the endorsement of creating and supporting the HIFI study, The HIFI study was done with the intention of receiving near future reimbursement in France.

So, again, we’re working through that process or waiting for that process. It’s outside the company, but we believe that there will be a reimbursement opportunity at some future date in France. And so these are just some small sound bites that play into the narrative. I think we’re seeing more interest from international physicians. They look at what’s going on in the US and they tend to look over their shoulder and see that HIFU is being adopted and results are excellent. And so, with that said, we’ll see probably more activity over time here growing as well in the outside US markets.

Swayampakula Ramakanth: Perfect. Thank you very much for taking all my questions.

Ryan Rhodes: Thank you.

Operator: That concludes the Q&A session. And I would like to turn the floor back over to Ryan Rhodes for closing comments.

Ryan Rhodes: I want to again thank everyone for joining us on today’s call and we look forward to seeing you at the upcoming Jeffreys Healthcare Conference in New York City from June 5th to June 6th. Thank you.

Operator: Ladies and gentlemen, that concludes today’s conference. Thank you for joining us. You may now disconnect your lines.