Artrya Limited (AYA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Artrya Investor Call for the June 2026 quarterly results and the outlook. My name is David Allen from Hawkesbury Partners. I'll be hosting your call today. And joining us from Artrya is John Konstantopoulos, CEO and Co-Founder. Also with him in Perth, we have Richard Jarvis, acting CFO; and Bernard Ridgeway, Executive Chairman. I'd like to add that this call is being recorded. [Operator Instructions] We will be also putting a recording of the call on the Artrya website shortly after this call. I'm now going to hand over to John Konstantopoulos, CEO of Artrya, to start today's call.

Thanks, David, and it's great to have everybody on this call again on what's been a really busy quarter for us, both commercially and clinically, and it's really been a focus on building out our commercial footprint in the U.S. I'd first like to just start with our foundation customers. And as we've said for some time, our biggest and highest short-term focus and commercial objective has really been to get all 3 of our U.S. foundation customers, Tanner Health, Northeast Georgia and Cone fully live and generating their scan volumes across all the different hospitals and sites that they have. This quarter, we came really a lot closer to that by having Tanner Health now fully integrated across all their hospitals and all their CCTA scan volumes coming through Salix and Northeast Georgia Health going live a couple of weeks back in their first hospital, and we'll continue to build into the remaining hospitals within Northeast Georgia. And while we do see it as early days at Northeast Georgia, we do see that broader adoption will be a much faster process with them, partly because of some of the work we've done with Tanner Health and some of the learnings we've got with regards to them. One thing that we have seen, and I do want to spend a bit of time on that this morning is that because of the speed that Salix provides clinicians with results either in the inpatient setting or an outpatient setting, we have needed to support that faster process for the reimbursement process a lot faster as well. And to give you some context, when the patient comes into a hospital system, the normal process and what they have been used to for quite some time is that the scan gets taken, that will then be sent to a radiographer or technologist to prepare the scan, which will then go to the doctor who will just read the general CCTA report. From there, they will then give an indication back to the reimbursement team on whether they have plaque and need plaque assess or FFR or flow assess. The reimbursement team then has to signal and perform a preauthorization process with the insurer. Once that has happened, that information will be sent back to the doctor again to then be able to pull the report, report on the patient from a plaque and flow perspective and then treat the patient accordingly. That has taken anywhere between 24 hours and 36 hours, primarily because they've had to wait that long for other solutions that are in the market. And the reimbursement team hasn't been geared really to do a lot of this preauthorization process upfront and automate that. So what we've really worked very closely with Tanner on, and I'm sure many of the shareholders and listeners heard that when Tanner was here earlier is that the whole workflow process around reimbursement is critically important for them. The longer that takes, the longer they take to get access to the plaque and flow products and then also be able to treat the patients. So we've worked very closely with them to automate that process over the last quarter. And that pre-authorization process is critical for us in using our software in real time so they can also get the plaque and flow when it's cleared, get those 2 products reimbursed in real time as well. And that's been a major focus for us over this last quarter with Tanner so that we can get that streamlined and ready to go. And we've put 2 phases in place for that, one which is an initial approach to get that pre-auth lot faster. And then a secondary piece, which is going in the next month or so, which is fully embedded into our software, which allows them to fully automate that process going forward. So as we go forward with these hospital systems and as this is being built in, we expect to see our plaque numbers specifically start increasing because of this process we put in now, which has really been a hindrance to them, the current workflow to the doctors in using our product, and we've now solved that with them over this last quarter. So that is a big opportunity for us to speed up how doctors report to help them accelerate more patients coming through, but also get patients more to the right clinical pathways. The second thing, none of our competitors are able to do this because they cannot turn the results around in real time. And it's another moat that we're able to put in a hospital system that makes us a lot stickier within the hospital system as well. And we've heard that from a number of customers beyond Tanner. One specifically last night that I was on a call with mentioned that this is a massive opportunity for them to streamline a very, very manual process for them, and it's very time-consuming and cumbersome. A very large hospital system that we are working closely with at the moment down the commercial pathway stated the same thing across many of their hospital systems. This is a huge, huge issue and optimizing this will be a massive opportunity for them to use a system like ours going forward because it does streamline that process as well. So I am pleased to say that the first phase of this approach has now and is in the final processes of being implemented within Tanner, and we're starting to work with that -- through that with Northeast Georgia as well. And then we'll start bringing in that second phase once that's fully built into the product in the next couple of months so that it's all automated within one single solution and they're able to really feel comfortable going forward. So I did want to give that context that it does make us a better business, makes us a lot stickier with the hospital systems, and it's something that makes them get patients through a lot faster, allows them to generate more revenue by clicking plaque a lot faster as well. And this is a proprietary and confidential bit of solution. When I say confidential, it's a proprietary bit of work that we've built in. It's something that we are patenting as well. And that's something that will allow us to accelerate and scale the business as we go forward. So that was just a bit of a context I wanted to give around what we did specifically around this quarter with our foundation customers. Moving back to our work with Cone Health and our customer success team. They worked very closely with Cone over the last few months with regards to the cardiology and their IT teams around the integration process. That's been -- that started happening. And we are working towards clinical deployment. And while we plan for that to happen now this early this month, -- because of their acquisition by Kaiser about 1.5 years ago, we've had to work with their IT team closely, a lot closer because of a new IT team that's come in to really move this forward. So that's now happening, and we do expect to go live once this is completed and start generating revenue with Cone Health as well. Beyond Cone and the foundation customers of Tanner, Northeast Georgia, of course, we are aiming to build a much bigger business as well beyond our foundation customers. And we're already starting to progress that and build out our sales pipeline with future customers really off the back of our SAPPHIRE sites. So we're starting to get into a lot of commercial discussions, some early, some very well advanced with many of the SAPPHIRE partners. And as many of our listeners know that we are leveraging SAPPHIRE, the SAPPHIRE study as a clinical evidence program, but really our go-to-market commercialization strategy. And I'm really happy to say that, that commercial process is now really in full swing, and we expect to see more of those partners moving to commercial agreements this calendar year. And as these groups start using Salix and start getting more access to it, that will also help us to get feedback and improve the product as we go forward as well. Beyond that, we are also looking at other inbound requests that we're getting. So we're starting to really accelerate a lot of the inbounds we're getting as well. There's quite a bit of new customers, potential customers that we -- that are interested in doing what we're -- using what that we're providing -- when I was at SCCT in San Diego a few weeks back, met with many, many other groups outside of the SAPPHIRE Group are really interested in having that singular real-time point-of-care solution that allows them to report a lot faster, improve their workflow efficiency, but then also get Plaque and Flow in real time. And as we go forward over the next few months, we'll start accelerating that process with a lot of those hospital groups outside of the SAPPHIRE study. Another big piece of what we've been working on is the Salix Coronary flow module from a breakthrough perspective. And we are finalizing the final validation work of that so that we can get that submission in. We've worked heavily with our team over here, the clinical team to perform the study. We're running through a lot of the data analysis at the moment, and we expect to get that submitted in the very, very near term. And for us we have done that, we have to secure very high quality and clinical data sets from many U.S. sites that we use and want to calibrate the product, but also validate the flow module. And that's been work -- and that's been happening quite a lot over the last quarter, and we're very, very focused on getting that submission into the FDA and a quality submission into the FDA. So just as a maybe a reiteration on that piece, the flow product is a critical piece for us. It doesn't mean that it's a limitation to revenue, but it does wrap up the total solution for us in one single platform, and it allows us to expand our revenue base beyond just the CCTA and the plaque numbers that we're looking to get from there. It is a Category 1 code as well. It does have $877 in U.S. reimbursement available for that, and it's one that we're heavily targeting as we get close to clearance, which we expect the second half of this calendar year. Moving to SAPPHIRE, and I'm pleased to say that we have now formally launched the study with many of the principal investigators that were at SCCT, the Society of Cardiology and Computer Tomography conference in San Diego there, and we met to discuss the protocol, site questionnaires, discussing the type of data we need from those different centers, the outcome data we need. And many of those centers are very, very excited because of the study that we're running and the future that it may bring to coronary artery disease detection and assessment. And while we're still finalizing the review of the protocol, we're starting to look at the contracting and ethics progress process for those sites at the moment. And some of them are large, so that takes a little longer. Some of them are smaller, they will go a lot faster. But the focus really for us is to have very initial preliminary data from the SAPPHIRE study reading at the end of this year that we can use to go and push into abstracts for conferences that we want to present this at going into calendar year '27. The other last piece of good news alongside the study launch is that we have advanced heavily around our Clinical Advisory Board and which, as many of you know, some of the partners that we have and investigators that we have from SAPPHIRE will form part of that Clinical Advisory Board. Dr. Ron Blankstein from Mass General Brigham will be chairing that CAB. It's an incredible representation for us, having someone like him with his credibility and his status sitting and chairing our Clinical Advisory Board. And we'll start bringing more of that into future product road map, using them for clinical awareness, helping us get access to other hospital systems and also helping us present at many of these conferences going forward. On other activities before I hand over to Richard, there's a few things really worth mentioning from an investor engagement perspective. We've been very fortunate to attend the Morgan Stanley Australian Summit in June, and that was followed by a non-real deal -- a couple of non-deal roadshows here in Australia as well as in Hong Kong, and there's a lot of interest in what we're doing. And many of the funds and institutions that we talk to are very well aware of HeartFlow and some of our competitors and some of the status that's happening in the U.S. health care system and are very excited about what we're doing because of the problems we're solving with not only the Salix Coronary Anatomy platform, but also the real-time Plaque and Flow module. We're also seeing increasing interest from brokers with Barrenjoey initiating their research to join Bell Potter and Petra Capital and then Brown. And next week, I'll be presenting at Bioshares at the Bioshares Conference. And I also look forward to catching up with a number of investors who are there that are interested in talking to us about what we're doing and our progress going forward. So with that, I'll now hand over to Richard just to take you through some of the financials and then go through some questions and answers after that. Thank you, Richard.

Great. Thank you, John, and it's a pleasure to be here with everyone today. As John said, I'll take you through the key financial activities for the quarter as reported in our Appendix 4C that was lodged with the ASX yesterday. All the numbers that I'll be referring to are in Australian dollars and in accordance with the ASX listing rules. And please also note that these numbers are unaudited. So as we close the first financial year as a commercial business, there are several points I'd like to highlight as part of the 4C. Firstly, receipts from customers totaled $60,000 for the quarter, bringing our year-to-date receipts to $176,000. As John alluded to, we expect revenue and related cash receipts to materially increase once customers are fully integrated and the streamlined preauthorization process is implemented. Other cash inflows included a receipt of $470,000. This relates to an adjustment to our FY '24 R&D tax rebate. Interest income of $1.2 million was received in the quarter, which was substantially higher than the last quarter due to the maturity of our term deposits. As at 30 June, the company held $65 million in multiple term deposits with a range of maturities, including $30 million, which is held in a 6-month term deposit. Combined, we expect these deposits to generate circa $2 million in interest income moving forward. Furthermore, given the level of R&D undertaken by the company on the flow module during the quarter and year-to-date, we expect to receive a material R&D rebate for FY '26. The receipt of this is expected in late 2026. In respect to operating costs for the quarter, when we exclude interest income and R&D rebate was $6.5 million, which is slightly down from $6.8 million in the March quarter. This is largely due to a reduction in some R&D costs as the development of the Flow module comes to a close. Moving forward, we expect R&D expenditure to reduce as the modules reach maturity. However, these savings may be offset with increases in commercial and operational related costs. In respect to financing activities, we received a further $2.3 million from the exercise of options in the quarter. And it's worth noting we still have a large number of in-the-money options, which we anticipate will be exercised by the relevant holders, further strengthening the company's cash position over the next 12 to 24 months. So taking all this into account resulted in a net cash outflow for the quarter of $2.6 million. To conclude, as at 30 June, the company held a total of $74 million in cash and term deposits. I'll now hand you back to John to discuss our outlook and priorities moving forward. Thank you.

Thanks, Richard. And moving forward, I'd like to just outline now a couple of the key priorities for the 2027 financial year and how these really fit into our commercial growth strategies. As I mentioned earlier, the next capital rank for us is the lodgement of the Salix Coronary flow module with the FDA. As I mentioned earlier, the FDA submission is getting very close, and we're putting the final touches on the actual validation study, the statistics and working through that so we can put that into the submission and get it in. And just to reiterate, we focused a huge amount of time making sure this is a quality submission that we can go into the FDA so that it can streamline the process at the back end of this as we go forward with the FDA. On the commercial front, we want to have all 3 of our U.S. foundation customers live and growing the scan volumes going forward. We already have Tanner live across all 5 hospitals and their scan volumes are growing. So the focus of our customer success team now is to make sure that, that preauthorization, the automated preauthorization and reimbursement streamlining that I mentioned earlier is fully ramped up into Tanner Health so that those Plaque volumes can start growing as we expect them they will and also making sure that Northeast Georgia is fully integrated across all the hospital systems and that we're fully integrating Cone and then doing the same thing with them and driving the revenue from Plaque as well as the CCTA volumes that we're getting from them. We're also pushing heavily around new opportunities. As I mentioned, little bit earlier, we are getting a number of new sales opportunities coming in, which we're progressing actively as well and aggressively with those. The other focus for us is the SAPPHIRE study, and we're continuing to build on that as well beyond just the commercial side and converting some of the commercial -- the SAPPHIRE partners into commercial agreements. We're also looking to move the study forward, get the ethics completed, get some data in so that we can have a first preliminary abstract going into some conferences early next year and providing some of that data back to some of our shareholders. And finally, a big focus for us is, as always, our customer experience. Part of the workflow experience that we're working on is this reimbursement streamlining that I mentioned. The other piece is supporting our customers well. We're consistently building up a really good team in the U.S. from a clinical perspective as well as integration perspective and optimizing that piece so that we're able to continuously support our customers well so that they are relying on us as being the experts and supporting them through this whole journey that we have with many of these foundation customers and the others going forward as well. We are also growing our team beyond the team in the U.S. We are -- as many of you have seen, Clayton Hatch from Pro Medicus is joining us as our CFO from the 1st of September, and we are looking to expand our Board as well. And really, the next focus from a marketing perspective is building that clinical awareness through many conferences that we'll be looking to present at the latter part of this year and going into next year as well. So once again, we are making very good progress on a number of fronts in the background that we pushed heavily forward with many of our foundation customers and other customers that we're talking to. We're looking to transform this company away from being R&D into really an execution-focused company and really looking to change the way heart disease is assessed. So I do thank everybody for listening and the ongoing support on where we are. And I'll hand over to David now for any questions.

Yes. Thanks, John. We do have a lot of people on the line today. [Operator Instructions] So your first question relates to Northeast Georgia. And the question is, how did the integration go? Was it smoother having been through the process with Tanner is the first part of the question. And then secondly, with the advancement of AI in recent times, has that helped you with integration and your time line to do so?

Yes. Look, that is a good question. It was smoother. However, when you deal with IT and a lot of the work that they put in place, many of the times, we've got to educate them and really help them across the process. So we've gotten a lot better at having the procedures and processes in place to do that with them. That's what's really made it a lot smoother with Northeast Georgia. And we do see that becoming smoother as we bring on Cone and as we bring on others as we go forward. And that's one of the key performance metrics that I've got for our team here is to make sure that, that integration process continuously is reducing so that we can accelerate getting into the hospitals and giving our software to the doctors. And regarding the advancement of AI, look, to some extent, it does, to other extent, it doesn't. There is still quite a lot of work we've got to do with regards to anything we use from an AI perspective because we are a regulated business. We can't just accept anything that AI gives us. So there are certain things that we're doing, and we are using AI to help us accelerate, but many of the things, it actually is a bit of a hindrance at the moment. So we're very much focused on our experience and knowing what we do and using AI as a supplement to some of that.

Thank you. We have a number of questions around sort of the Tanner and the volumes. So the next one is from Andrew Wilkinson of Venn Brown. And the question is Plaque module has been rolled out across Tanner for probably around -- since around about April time frame. Can you give some comment on why the numbers weren't higher than this listener would have thought? Is it because of the product itself? Was it the preauthorization? Was it implementation? What were the real holdups there with those volumes?

Yes, yes. So as I mentioned earlier, the big focus for us was to streamline the reimbursement pre-authorization process. And that is something that is building a strong product and feature for us that builds a moat for us around getting into these customers. So that has really been the reason why. And as many of the listeners heard when Tanner was here, they said the exact same thing that for them and many other hospital systems, preauthorization and the workflow around preauthorization is incredibly manual. And it's the first time they've got a real-time solution that allows them to read in real time and get results in real time. But the pre-authorization process takes 24 hours to 36 hours, and that's the process that we worked with them to bring that back into a real-time approach as well so that they can do that a lot faster and make their life easier as well. And that's really where the delay in the Plaque numbers has been is that the doctors have waited on this process to come into place so that they can feel comfortable that preauthorization is there when the scan has been processed by Tanner and not wait another 24 to 36 hours and come back to that scan then.

There's a follow-on question picking up on Tanner attending the last call. And the question relates to the comment that they made that volumes were doubling month-on-month. And what are the monthly scan volumes that you're seeing today? And where would you expect them to be as a 5 hospital network as we move forward?

Yes. I mean in general -- so all the CCTA scans for Tanner are running through Salix platform at the moment. So every one of their scans they perform runs through the platform, which they use to report. And I've just mentioned the reason around the work that we're doing around Plaque to start really accelerating those volumes as well. We do expect those numbers to ramp really up to the 50%, 60% and 70% expectation as that -- over a period of time as we start getting that preauthorization process built in. In a 5 hospital system, it just depends on the maturity of the hospital system and their maturity around CCTA and CT first that can vary between 2,000 scans a month to 5,000 to 6,000 scans -- sorry, a month per year, 2,000 scans a year to anywhere between 5,000 to 6,000 scans per year. So that's really what you're looking at a 5-hospital system from a volume perspective. And to give another lens, Huntsville Heart Center who has 9 hospitals perform probably just over 10,000 scans per year. So it just gives you some perspective on the size of hospitals and how many scans they can actually go towards.

A follow-on question from Melissa Benson at Barrenjoey. From the Tanner example with the preauthorization streamlining, do you expect efficiencies in implementing this across Northeast Georgia and Cone? Or do you think there's going to be some further integration R&D in the sense that those hospital systems may have varying processes for their current PA processes? So is it going to be a case of a simple plug and play using the Tanner model? Or will you have to do some implementation work to help them get their preauthorization?

So we do the implementation work anywhere on a hospital-by-hospital basis for the product. So that happens anyway. The pre-authorization process is not supposed -- we haven't built it for customization. It's supposed to be there so that it can be rolled out across all hospital systems unilaterally once we implement it. Now each hospital does have a certain accession number that's associated to the patient. That is something that we do put into our data module over here. But that's a simple piece that we work with, and it's something that we have built into and we continue to build into this preauthorization, the streamlining feature that we have over here. So we don't expect that to be a hospital-by-hospital new feature or a new bit of integration work regarding that. We just have to understand the information that they need to get preauthorized by so that we can use that information and send that back to them once that scan gets taken.

Just diving a little bit deeper into the preauthorization. -- another question about the specific challenges your customers are having with this. And I guess part of that as well as you mentioned 2 phases. Maybe just comment on the second piece of work you've got in front of you.

Sorry, David, I didn't...

The question is, can you outline some of the challenges the customers are having with the pre-authorization process? So just explaining a little bit about why it's been a problem? And secondly, what the sort of second stage of work is?

Yes. So I'll elaborate on the comment I made earlier is that the current process with existing solutions is a very manual process. It requires a number of touch points, manual touch points by doctors, by the technologists and the reimbursement team, and that may take 24 to 36 hours for that to happen, assuming that each of those stakeholders are ready for that information to come to them and then they're triggering the pre-authorization process. So as an example, the CCTA comes in, that then gets sent to the doctor or the technologist to perform their initial work. That goes to the doctor. The doctor does the initial CCTA read to get a CAD-RADS score, which is a number between 1 and 5. To get preauthorized for Plaque, you need to have a CAD-RADS score of between 1 and 3 for Flow between 2 and 4. So if the patient has a CAD-RADS score between 1 and 3, the doctor will then send an e-mail to the reimbursement team and say, please trigger preauthorization for this patient. The reimbursement team will then go up and go through their process and request preauthorization and then that will come. Now they haven't had to accelerate this in the past because of our competitors taking 24 to 48 hours to turn around their results, they were comfortable waiting 24 to 48 hours for pre-authorization. Now because we are giving them our results in real time, both Plaque, the CCTA read and flow in real time, they don't want to wait 24 to 48 hours because it means it's destroying all the CCTA efficiency and patient throughput efficiency that they're getting at the moment. So what we've done with them is automated that piece and bring -- brought everything to the front so that by the time the scan is done -- and within 8 minutes of the scan being taken, we automatically provide a CAD-RADS score back to the reimbursement team that triggers the pre-authorization process. That gets approved and it comes back to our software so that by the time the doctor comes to do the CCTA read, both Plaque and Flow are already preauthorized.

So John, just clarifying one of our other questions. So effectively, this preauthorization is almost real time. Is that a fair...

That's correct. Yes. So we're shifting away from a very manual process to a real-time process.

Great. Okay. And just one other related question was what sort of level of Plaque analysis are you seeing? We previously we've talked around a 70% assumption. Is that what you're seeing? Or is that still too early to decide?

No, it's not too early. I mean it's -- obviously, it's lower than that because of all I've just mentioned around the pre-authorization piece. But as we get that implemented, that we'll start seeing those numbers really ramp up, and we expect those numbers to ramp up to where everybody -- where we see that 60%, 70% Plaque approval rate -- Plaque clicking rate.

The next question -- sorry, David, John, just quickly, can you explain to the audience what a CAD-RADS score is? What does CAD-RADS stand for?

Of course. Yes. So CADRADS is it's basically a risk score that takes stenosis and narrowing as well as plaque into account. So effectively, what preauthorization is looking for is for Plaque, you need to have at least a CAD-RADS score of 1, which means at least 1% to 24% of narrowing in your coronary artery with some Plaque up to 69% narrowing in your coronary artery with Plaque. So within that range, CAD-RADS 1 is 1 to 24 and CAD-RADS 3 is 50% to 69% and that's what CAD-RADS is. And that's how reimbursement is geared is that around those requirements for stenosis or CADRADS is what allows the hospital systems to get reimbursed. And if they're not within those CADRADS scores or those stenosis scores, they don't get reimbursed. So Medicare has been pretty clear on how they get reimbursed, and that's where that 70% reimbursement click rate that we expect to hit is coming from because of the number of patients that are within that CADRADS 1 and the CADRADS3 score.

Just changing gears a little bit. The next question says, I know that HeartFlow costs more for a hospital than the government payment, but it looks like they give volume rebates, which is pretty common practice. Does that make it a profit center for the HeartFlow-aligned hospitals?

So if they do, they give very minimal, and we've seen that through a number of very large customers as well as the smaller ones. Across the payer mix, it's still a net negative margin for the hospitals even with those volume-based discounts if they give them there. So -- and we've seen that with many of the other hospital systems.

Thank you. A couple of questions around sort of ramp-up. One of them is how should we think of the ramp-up in scans from Northeast Georgia now they've gone live? So a 2-part question. How do you see that volume growing? And how do you see yourself rolling out across the rest of their sites?

So we do expect with this preauthorization process coming, we do expect the volumes to start growing. And from a client perspective, the CCTA volumes will start growing as well. As they become more efficient, they're able to see more patients. We do expect the CCTA volumes to start lifting, which inherently means that Plaque volumes and Flow volumes will start lifting over and above what they currently will look to do now as well. So what that rate looks like will depend on clinician capacity and how much they can do. But based on where we -- what we see at the moment, being able to give them a real-time analysis of CCTA is allowing them to do more scans on a daily basis, and we do see those CCTA volumes increasing.

David, I guess as a general comment on that, we've told the market previously that we're aiming to have an exit rate in FY '27 of 15,000 scans across our foundation customers. So yes, that gives people an idea of what we're aiming at for FY '27.

David, just -- maybe just to clarify one other thing. I'm just going to just explain one last thing around the software from a CADRADS perspective. Within the period that we process the scan within an 8-minute period, we generate that CAD-RADS score, and that's why we're able to turn around in real time. So as soon as the scan is taken and we've processed everything, we get all the information we need for preauthorization in that real-time approach to send it back to the pre-authorization team to get that done. And that's why it's very unique to us and that why nobody else can do it because it is -- we do give the ability to the doctor straight away.