Cyclopharm Limited (CYC) Earnings Call Transcript & Summary

Thanks for standing by, and welcome to the Cyclopharm Q3 Investor Update Webinar and Q&A, which will speak to an updated presentation that was lodged with the ASX by the company this morning. [Operator Instructions] There will be a presentation that will last approximately 15-20 minutes, followed by Q&A. [Operator Instructions] And also note the session is being recorded. On behalf of Cyclopharm, we have the CEO and Managing Director, James McBrayer, and I'll hand it over to him now.

Thanks, Matt, and good morning, everyone. We're not required to report quarterly, but we want our shareholders to see our progress as it happens. And this quarter, there's a great deal to report. Cyclopharm is only getting started in the world's largest health care market. And today, I'll show you why. A quick note on the safe harbor statement. Today's presentation includes forward-looking statements. The third quarter figures are unaudited, and we're not providing guidance today. For those new to our story, here's Technegas in a nutshell. It's an Australian invented lung imaging technology. It's made at point of care on site of the hospital. The patient only needs to bring 3 to 6 breasts to administer Technegas, and it travels all the way to the alveoli where oxygen is exchanged, showing true functional ventilation. A camera then images in 3D. Pair that with a perfusion scan and you have the V/Q scan historically used to diagnose pulmonary embolism. Technegas is used in 67 countries with more than 5 million procedures. It was U.S. FDA approved in late 2023, and it runs on a razor-razorblade model. We place the system once and every scan uses our consumables. Hybrid imaging and AI, leveraging Technegas data are contributing to a new era in pulmonology. Hold that thought, I'll come back to it. If you remember one number today, make it this one. For the quarter ending 30 September, 76% of our U.S. sales came from consumable orders at existing sites. That's up from 58% in the June quarter. The majority of our U.S. revenue now comes from ongoing sales in the installed base. That is the razor-razorblade model working. And it is the annuity model that has delivered our largest U.S. quarter ever, $1.62 million, up 124% on last year and 45% on the June quarter. 9-month U.S. revenue of $3.8 million is already 40% above the whole of 2025, and our installed base reached 84 systems, up 83% in just six-months. Look at the bottom row. I'll speak more about the new guidelines later, but they only landed on 29 July in the middle of the U.S. summer. And by 30 September, committee reviews were up 71%, contract reviews were up 61%, and 30 locations had come off hold. We're now engaged with 1,877 locations, more than 1/3 of the U.S. market. The U.S. growth is leveraging off a solid global commercial base. Global revenue for the 9 months to 30 September was $25.9 million, up 13.7% on $22.8 million a year ago, and we held $9.6 million in cash at 30 September. Importantly, our cash burn has declined rapidly. We averaged $1.8 million per month in the second half of 2025, $1.3 million per month in the first half of this year, down to $900,000 per month in the quarter to 30 September. Receipts on a month-to-month basis can be lumpy, but the trend is clear. Why is that? Well, our U.S. installations are paying back. 76% of our Q3 revenue came from patient consumables at around 95% margin. And our business across 66 other markets, together with third-party distribution supports the rollout. Another important point to make about our cash position is that a substantial U.S. inventory is already built, paid for and landed in the U.S. 110 systems at 30 September are ready to deploy there. So what's ahead? Here are our catalysts across three horizons. In the short-term, we have an installed base up 83% in 6 months with the guidelines in hand for only 3 weeks after Labor Day. 186 primary sites are now at committee review and 105 signed or in contract review. In the medium-term, we will be taking Xenon's half of the market, landing and expanding across hospital networks. We will be leveraging the shift to SPECT/CT and benefiting from high-margin consumables. And in the long-term, the full USD 180 million U.S. market. Then add to that more than USD 1 billion Beyond PE within our broad existing label that will be driven by AI quantification. The U.S. pulmonary embolism market is worth around USD 180 million a year from about 2,000 primary target sites. Around half of it, roughly USD 90 million a year, still uses Xenon-133, and that's where we see the strongest conversion momentum. Xenon needs a negative pressure room and a gas trapping system. Administration takes up to 15 minutes, and it's limited to old planar imaging. The new guidelines direct the move to 3D SPECT to which Xenon is not suited. So as aging Xenon systems come up for replacement, hospitals have a clear choice, renew a legacy setup or move to the guidelines preferred agent, Technegas. The other half of the market is mostly DTPA aerosol, where droplets clump in the central airways and create hotspots that leave more scans indeterminant. In comparison, Technegas behaves like a true gas and reaches the periphery of the lung, showing true function. Here's the momentum. Our installed base went from 40 systems at the end of 2025 to 84 at 30 September. We installed 44 systems in 9 months, more than in 2024 and 2025 combined. Our U.S. revenues tells the same story from $723,000 in Q3 2025 to $1.62 million in Q3 2026, with patient consumables growing every single quarter this year. A word on seasonality. U.S. hospitals make capital decisions ahead of budget year-end. So growth is weighted to the second and fourth quarters. And the northern summer slows the third, even so, 13 of our 14 Q3 installations landed in September as soon as hospital teams were back. Now to one of the most important milestones in the company's history, second, perhaps only to receiving FDA approval. On 29th July, 4 societies: the U.S. Society of Nuclear Medicine and Molecular Imaging, the European Association of Nuclear Medicine, the American College of Nuclear Medicine and the Australian and New Zealand Society of Nuclear Medicine published a joint guideline for V/Q lung scintigraphy. The first update to U.S. guidance in 14 years. Guidelines rarely update. So we expect Technegas to be the standard of care globally for likely the next decade, if not beyond. The guidelines named Technegas, generally preferred when available. It directs the move from planar to SPECT and SPECT/CT. The guidelines confirm a breast dose up to 70x lower than a CT angiogram. It sets out Beyond PE applications and it names AI quantification as an emerging complement, noting that Technegas data requires no correction, and it just keeps getting better. Only weeks after the U.S., European and ANZ guidelines were released early in October, the Chinese Thoracic Society and 6 partner bodies independently named Technegas the preferred radiopharmaceutical. Recommendation #1, in fact, with 100% consensus where we have -- now we have 4 continents, one conclusion, choose Technegas. And here's the exciting part. Every U.S. installation we've had to date was won before these guidelines existed. So what happens next? Guidelines matter because they shape referrals, hospital committee approvals, capital decisions and reimbursement, they hold for years. The timing matters, too. The guidelines landed only on the 29th of July in the middle of the U.S. summer break when few committees were sitting. The first real selling season began after Labor Day on 7 September. This is what we've seen. Just within 3 weeks, committee reviews were up 71% from 109 to 186 primary sites. Contract reviews were up 61% from 44 to 71. 30 locations came off hold and engaged primary sites passed 1,000. And this is only the first pass of the guidelines impact. This slide shows our full pipeline as at 30 September. 84 primary sites are generating revenue linked to 430 affiliated network sites, 514 locations already inside revenue-generating contracts. A further 34 primary sites are signed or installing, 71 are in contract review and 186 are at committee review. This point is important. Once the primary site reaches contract review, count it. Sites at this stage have historically gone on to convert to installation. In total, 1,877 locations are engaged. This is equal to 36.5% of the 5,139 U.S. sites conducting lung imaging. So why do hospitals say yes to Technegas? First, better diagnosis. Technegas delivers fewer determinant scans than other nuclear medicine agents. And under the new guidelines, nuclear medicine with Technegas provides a better negative predictive value than CT for pulmonary embolism. And normal scan rules out PE with confidence. So we expect fewer repeat scans and faster discharge. Technegas is faster, too. Technegas takes under a minute to administer. This convenience is good for hospital staff and most importantly, ease of administration is good for the patient. Second, the economics. The hospital buys no hardware. We own and install and service the system. The year one cost is USD 14,000 and USD 7,000 a year. At about 25 patients a year, the hospital breaks even and a department scanning 5 patients a week is past breakeven by the fifth week of the year. Additionally, moving to SPECT/CT, a clinically superior technique, it pays up to $906 more per study under Medicare. Our customers are among America's most prestigious hospitals. All 20 Honor Roll hospitals are in our pipeline, about half use Technegas and 49 of our 84 systems are in the top 200 U.S. hospitals. This is a hub-and-spoke business. Land and expand works through each hospital's own network and across hospitals in the regions that they service. At University Hospitals Cleveland, one agreement became 11 sites, 362 sites already sit under agreements we hold and 54% of our revenue-generating sites are expansions inside existing customers. I trust that you've noticed throughout this presentation that every claim is referenced with the footnote on each slide. I do that deliberately. I suppose it's my training as a pharmacist, but more so, you deserve facts over fiction. So let's take a moment to address some of the myths and misconceptions about nuclear medicine. Myth one. Other clinical modalities show lung function just as well. Well, Technegas measures ventilation directly. CT and other structural modalities image anatomy and infer through algorithms and data manipulation how the lung works. Myth two. Nuclear medicine means a high radiation dose. Actually, the opposite is true. A Technegas V/Q scan delivers around 1 to 3 millisieverts against around 20 for a CT angiogram. That matters most for children, women and repeat imaging. Myth three. Nuclear medicine is old technology. Today, nuclear medicine is precision medicine. AI uses our pure functional data, which the guidelines confirm needs no correction to quantify regional function down to subsegmental levels and help guide which part of the lung to treat. Myth four. It's too cumbersome for busy departments and our operators would rather not perform it. Technegas solves all of that. Three to 6 breaths, that's all it takes, no negative pressure rooms and now new generation cameras can complete V/Q imaging in 5 to 8 minutes, which brings us to Beyond PE. Technegas is U.S. FDA approved, not just clear, there is a difference. Technegas was approved through a full new drug application as a drug device combination. Here is the FDA label, word for word. Technegas is for use in adults and children aged 6 and over 4: first, visualization of pulmonary ventilation; and second, evaluation of pulmonary embolism when paired with perfusion imaging. That first indication stands on its own. It's not tied to pulmonary embolism or any single disease. Every application on the right, CTEPH, COPD, asthma surgery and transplant uses ventilation imaging, no new approval and no large costly registration trials. Furthermore, the 29 July guidelines already set these applications out. These represent more than USD 1 billion of opportunity on the same installed Technegas systems. Remember the new era I mentioned at the start, this is it, the era of precision medicine. And here it is in the U.S. opportunity because the U.S. has not historically had Technegas. U.S. lung imaging is still predominantly 2D planar. Only about 1/3 of the U.S. departments use SPECT for PE. The new guidelines direct that move to SPECT and SPECT/CT. And outside the U.S., in major markets where Technegas has long been available, we hold more than 85% market share. Each step on this slide adds precision, function from Technegas, anatomy from low-dose CT and AI fusing the 2 down to segment and subsegmental level, ultimately delivering a data analysis report the clinician can act on. Technegas is bringing U.S. lung imaging into the new Millennium and every new AI application drives more scans on the same installed system. This is a snapshot of precision medicine AI ecosystem around Technegas. It's growing fast and getting crowded, software from Hermes and Siemens to MIM to Thirona and open source tools. The list keeps growing, and we work directly with many of these providers. Technegas isn't essential to any of them, but every one of them can leverage our pure functional data and each new platform gives clinicians another way to use it. The value within the combination, true function from Technegas plus low-dose CT anatomy analyzed for every patient. Underpinning it all is a moat that is hard to replicate, a U.S. FDA drug device approved combination made at every point of care, every component made by Cyclopharm in-house, delivered direct to the customer without an intermediary and a razor-razor blade model that drives a proven annuity revenue stream. So let me bring it all together. Technegas is the globally recognized choice in lung ventilation imaging backed by guidelines on 4 continents now with more than 85% market share in major markets outside the U.S. The U.S. is now even in early days, our #1 Technegas country market by revenue. The growth is real, record U.S. revenue, 76% of it from consumable orders and 44 systems installed in 9 months, more than the previous 2 years combined, and the momentum is building. Committee reviews up 71% within 3 weeks of Labor Day, 110 systems ready to deploy and more than the USD 1 billion Beyond PE opportunity within our broad label. A proven product, guidelines behind us, real growth and momentum is building. It's an exciting time to be part of Cyclopharm. We're only getting started. And thank you, and I'd be delighted to take your questions.

Thanks, James. As you mentioned, we'll move on to the Q&A. [Operator Instructions] So I'll jump into those now. So James, the first one is alluding to earlier this year, CYC announced a lawsuit. Since then, the person sent a question that I can't recall having heard or read about any update on this development. Can we please get an update on where the matter stands?

Well, as we announced, that lawsuit was taken up by our insurer. It's still before the court, and that's pretty much all I can comment on. But we're very grateful for our insurer taking on that case.

The next question is earlier this month, CYC announced that Technegas is a preferred technology lung agent in China. How many systems has the company installed in China and selling each year? And how many pass boxes are being sold there?

Yes. China is an interesting market for us. We've been in the Chinese market for close to 20 years. We've got about 166 units deployed in that market. And what the interesting thing and exciting thing to happen, the way that they were see nuclear medicine was very site-specific. These guidelines are an absolute game changer. It's changing the way that China is addressing the practice of nuclear medicine. And their #1 recommendation in this lung imaging space in nuclear medicine is to use Technegas. Where we see the real opportunity is that now that we're named in these guidelines, we're looking to leverage some of the reimbursement opportunities from there. So we see China as a great opportunity for growth for us going forward.

Next question is, can you expand a little bit on the use of AI alongside Technegas?

Yes. When you looked at that slide, I talked about precision medicine and the growth. It's when you look at planar versus where we are today with AI and the hybrid imaging and the new technology, it's trying to compare almost Sputnik to SpaceX. We're at SpaceX. And Technegas is at the heart of that because we show true functional imaging. We give that true pure data set that can be analyzed, not an algorithm, not a manipulation of data sets. We show true function. So it's evolving rapidly. The number of companies that are participating in the space are -- it's quite crowded right now. So -- but we partner with key ones and a lot of our clinical trials, the small trials that we participate in and expanding Beyond PE applications, we work very closely with some of them.

A question that came through during the presentation. How has rest of world revenue increased during Q3?

Well, I made reference to the growth in Q3 over the same period last year. A lot of that is driven by the U.S. growth. But I think one thing that people can take from this presentation is that Cyclopharm is an established revenue-generating company with operations all around the world and the growth that we're seeing year-on-year and quarter-by-quarter is a testament to our technology.

And on a similar vein, someone asked, can you provide an update on how installations have progressed to end of October? And what's your current expectation on the number of revenue-generating sites by the end of the year?

We're not going to provide guidance on installations. And we've committed to quarterly updates. So the numbers that we provided you show where the -- we actually haven't even seen the benefit of these guidelines yet other than the information that we provided you about engagement. We're starting to see that flow through in Q3. But we're not going to run an ongoing commentary on unless it's a material update that would warrant an ASX release.