Hyperfine, Inc. ($HYPR)

Good morning, everyone. Welcome to the Jefferies Healthcare Conference. My name is Chris Thomas with the Jefferies Healthcare Investment Banking team. It is my pleasure to introduce Maria Sainz.

Thank you, and thank you for the opportunity to share the Hyperfine story here this morning. Quickly cover our disclosures and move into how I want to kick off really the presentation this morning, which is what I would call the state of Hyperfine as we advance in our mission to expand MRI with our very novel portable brain MRI technology. Reporting freshly off of Q1, which was a really strong start for the year for us, about a $4 million quarter and 83% year-on-year growth, strong expansion in gross margin as well. Over 50% reduction in cash flow and really ended up the quarter with a healthy balance sheet north of $40 million. More importantly is really our track record on execution. First, we need to continue to drive sort of the R&D improvements to render the product more and more clinically relevant and valuable. So expanding the clinical utility, reporting on yet another FDA clearance for the latest generation of software. We're also keen on geographic expansion and happy to report on CE and UKCA approval of our second-generation system with its Optive AI software, as well as a great milestone in getting approval through CDSCO, which is a regulatory body in India. We have also reported on placing the first system there at the flagship institution in New Delhi at AIIMS. And last but not least, the strengthening of the clinical data that really continues to drive the clinical value and the economic impact of our technology with data readouts on stroke with a SVIN paper, as well as clinical utility in the neurology office space with the NEURO PMR data set. A very important initiative for us here in 2026 is the journey we've undertaken to get to an expansion of our indications for use to include contrast brain MRI exams. We're right now in the conduct of a small clinical study that will be the basis for FDA submission that will happen later this year, and we are reporting on a really healthy pace of enrollment in that study, which is contrast PMR. Our outlook for the year guidance is a really significant step-up in revenue, $20 million to $22 million, expansion in gross margin, 50% to 55% reduction in cash burn in '26 to '28 and really with that, a cash outlook and a cash sort of runway through the beginning of 2028. How we really look at our business now today is really a derisked platform. It is the first in its category. It's a very diversified sort of revenue opportunity across 3 business verticals, and I'll cover those in a little bit more detail later in the slides, the U.S. hospital business, the U.S. neurology office business and international markets. It really is the continuation of our R&D execution, as I say, to drive broader and broader utility, clinical utility of our technology, which is now established diagnostic value. And then I'll also start teasing you all into really what we think we have built here that gives us the right, the opportunity to play in building a business that will be much larger than just portable brain MRI in the relatively short term. So we have not reinvented MRI. What we have transformed is the delivery of MRI using a pretty bold technology, which is a fraction of the field strength of conventional MRI. We operate at 64 millitesla and conventional MRI is either 1.5 or 3 tesla for the most part in the ones that are used for clinical use. From a research perspective, they go up in tesla as well. What have we done in this transformation? What we have done is really address the bottlenecks that make MRI not as readily, easily, affordably accessible to the global population as a whole. So we have technology that does not require dedicated MR technologists to operate. We have developed technology that does not require dedicated facilities that are shielded and reinforced to operate. We can move it to where the patient needs it, so we can go to the point of care. And with that, we significantly shorten the time, the time to the MRI as well as actually make it very versatile in the sites of care where you can get your MRI. So this is how we look at our market. We look at our market based on the sites of care where people today do not readily easily get MRI and could and should because that would bring terrific clinical and economic value to the clinicians, the patients and the providers. We are right now calling on the middle of this chart, which is that $6 billion opportunity that is U.S. TAM alone. And that takes into consideration the different call points inside the hospital, critical care units, emergency rooms, neurology departments and neurosurgery and also the neurology offices that are not affiliated with the hospital. That in the U.S. alone is about a $6 billion market. What's more important is to really think about the conditions for which clinicians use a brain MRI. And those are actually primarily neurodegenerative conditions and on an acute basis, primarily stroke. Those are very, very large TAMs on their own as well. We would argue that not as many patients that suffer strokes are getting treated, we help with the triage of stroke. We would argue that patients do not get triage for dementia early on to be able to affect the course of the disease early on, and we touch on the ability to detect dementia early. So not only is it a very large TAM from a site of care perspective, it's a really compelling TAM when you think about the kind of disease states that our technology is able to influence positively. So this is what I would like to call the new phase of MRI. It's an MRI on wheels that really moves around the hospital through doors and elevators. There is a joystick that allows it to drive at a decent pace through the hallway. The operation is very, very simple so that any health care professional can use it. The user interface is off of an iPad, and it's pretty much plug and scan. The images immediately come on the iPad, but they also, of course, are seamlessly integrated into the workflow for radiology. So they are uploaded into the PAC system and our equipment will take orders directly from electronic medical records. So this is really where the transformation has happened. Anyone can use it. It can be used anywhere and the images are pretty much immediate, but they're also seamlessly integrated into the workflow in the hospital setting. So as a company, we've been around for a little over 10 years, and I'm going to talk about 2 phases of our company. The first phase, which was one of really building a solid foundation for the company. And the second one, which is the one that we started about a year ago, and that was when we crossed the chasm in terms of introducing the next-generation scanner and system, which is ready for broad-based adoption and also diversified our business by adding the vertical of the neurology office. So let me walk you through some of the fundamentals that were built through the first phase of the company. Highly proprietary technology, over 200 patents, also over 200 sites that are actively using our system clinically and on a research basis and about 250,000 images that will come in very important to drive really our ability to help our sequence development with AI and learning from that body of data. The product category is strong. The labeling -- so first of all, it's a 510(k) product. The labeling is very broad. It is not tied to any condition. It is basically brain imaging for patients of any age and reimbursement is in place. In the outpatient setting, our system and exams performed with our system are reimbursed using the same CPT code 70551 that a conventional MRI for a non-contrast MRI utilizes. So very, very strong fundamentals that way. We have been on a journey of fast iteration. I would say we're a fast iteration machine. It's all been primarily through software and AI. We are on our 11th and working on our 12th generation of software. We have only had 2 generations of hardware, Model 1 and Model 2. Moving on to the chasm that we crossed. A year ago, pretty much a year ago, we received FDA clearance for our Model 2 next-generation system, and we also made a conscious effort to really launch into a new business vertical with a neurology office. What is in Model 2? Model 2 has actually taken all of the learnings from our 5 years. Model 1 was first cleared by FDA in 2020 in terms of what the physician expected, what the patient experience, and how to continue to drive clinical utility of our technology, even though we utilize a very low field magnet. We have not changed the field strength. We're still operating at 64 millitesla. We have now image quality approaching that of conventional MRI. We also have some critical components in the way we've thought about some of our proprietary technology around the electronics and the magnetics in our technology that gives me high confidence that our journey of image improvement and expansion of clinical utility is going to be accelerated through this second-generation platform. It is a more patient-friendly also device as we have slightly changed it so that the patient experience is more open and the patient really feels like they are not in a constrained chamber like they are on the conventional MRI. And we also took some feedback from clinicians that wanted the device actually to move a little faster through the hallways to go from point of care to point of care and help patients in different locations. So as we look at where we are now with this second generation, we've seen incredible market activation. We have seen radiologists now tell us that we are at that very, very close level to conventional MRI for image quality, which is the best supplement anyone can make because the fact that the technology is portable is cool and it's definitely valuable. But if you do not produce diagnostic quality imaging, it doesn't really matter. And that was incredibly important. The market is telling us that. We're also seeing the traditional call points, so neurointensivists, stroke neurologists want to actually use it more, and we have data that shows that our utilization at existing accounts has increased very significantly. We're also seeing other use cases come up to us. Neurosurgery, that is not an area where we have traditionally called on, and now there are neurosurgeons wanting to bring this technology because it is possible to bring this technology into the OR without interference for an immediate post-op check, which provides a new potential use case that is very attractive for us. The fundamentals are strong. I said we have 200 sites by now. We have scalability. We use a contract manufacturer that we have partnered with for the last 10 years that is able to really drive the production of this to the levels that would make this business extraordinarily attractive with pretty much low capital investment and just manpower. And as we have seen the ability to drive phenomenal image quality, that is what has really had us think about where else would we take. So thinking about our technology as a platform play as well. So image quality. This is where the money is, and this is the proof. This is right one case out of our neuro PMR study where we were comparing our 64 millitesla images with 3 tesla images. We're talking about 40x less strong of a magnet in our case than the conventional. And you see really, really well, even if you are not a trained radiologist, the close proximity of the images between our images and the 3 tesla magnet in detecting the pathology. The results of this study were that we had 98% concordance in the readouts between our ultra-low field system and the conventional systems that were used, which for the most part, were 3 tesla, but there were some that were also 1.5 tesla. So how do we get there? So we get there a variety of ways, but we also get there with the help of AI, and that's where those 250,000 images come in very valuable and helpful for our development efforts. We get there through sequence development, software development and AI. AI serving two purposes, one that is really important in MRI, which is noise cancellation, denoising of the images so that the artifacts can be removed. And the second one is with processing. We are not creating -- this is not synthetic MRI. It is processing of the images to actually render them more sharp and higher resolution. And we actually rank really nicely high in the list of FDA publishes of the highest -- the largest number of AI-powered technologies that different manufacturers have gotten cleared through them. So that's sort of a proud record for us being a relatively small company. So over the course of our history, we've really developed this more diversified revenue and growth profile with 3 business verticals. Most of our business started being just a U.S. hospital business, and it was very much actually just intensive care units, making a case that it was significantly better from a risk to the patient, cost to the system, burden to the staff to bring the MRI to the patient and to take those critically ill patients down usually to the basement for a conventional MRI. As our technology improved in clinical utility, as our sequence development made the technology be used for more things we've seen a progression across multiple sites of care in the hospital. So the hospital went from just critical care to now also neurology clinics as well as emergency rooms, and we have our eyes on neurosurgery, so the ORs and the angio suites, but then we added the opportunity to play internationally. So we started our international business with the help of distributors, and I'll talk about that in a little bit more. And then as I said, a year ago, mid-2025, we introduced our neurology office business, where the value proposition is slightly different as it relates to neurology offices, and I'll cover that in a little bit more detail. These three business verticals are fueled by the improvements in technology. So they are not only incremental. They don't cannibalize each other, but they also get significantly accelerated with the adoption of the second-generation technology. So I'm going to start with the hospital. And first and most important since that is our longer-standing business is to talk about really the transformation I have personally witnessed, I have been running the company for 3.5 years and really the feedback from the hospital business, the radiologists, the neurointensivist, the stroke neurologists around our technology. It is in a short summarized way, it's ready for prime time. It is ready for prime time. I have seen our best center we started working with 4 years ago, get to 1,000 cases in 4 years. We have -- the first center started working with the second technology is going to get to 1,000 cases in less than 1 year. The traction around utilization, utility, using it across different sites of care is like anything we have seen. We have been working with hospitals individually for as long as we've been commercial. The talk is now no longer at the individual hospital level. The talk has elevated to the system level and the IDN level. And actually, most -- I think the data shows that about 70% of all hospitals in the U.S. belong to a system or an IDN. We're immediately getting into a conversation about what does IDN system-wide deployment look like. And very often, in the conversations with individual hospitals, we're no longer talking about, let me see, let's buy one and try it out. We're talking about we need one here, there, there. We need one in critical care for adults. We need one in our kids hospital, and we need one in the emergency room. So we've elevated the conversation to broad-based adoption in as many ways as I can -- as I have witnessed in just the last year since this is capital equipment, so it does take its time, but the market activation is real. So the opportunity to bring Swoop into a hospital translates into clearly better patient flow. The time and access to MRI moves the patients through much faster, which is economically definitely better for the hospital as well. It is the opportunity to generate more revenue also with the conventional MRI. As I said, the reimbursement is using the same code as we use in -- as they use, sorry, with conventional MRI. And really, this is a very good business for us as we think about where we're going to take things forward. I want to cover the other 2 businesses as well. The value proposition in the office is slightly different. So neurologists in offices prescribe a very large number of MRIs. They don't perform them, only 90 -- only 10% of neurology offices have MRI on their premises. So this is the opportunity to bring MRI to a portion of the 90% that do not have it. We have worked through a process of enabling offices to get accreditation through one of the accreditation bodies called IAC. Once they get accredited, they can register with CMS and then get reimbursement for the scans. And we have now proven through a pilot program that they get reimbursement through CMS as well as private payers and many offices are driving some self-pay if they're not fully concierge, partially concierge type of practices. So it really is about diversifying their practice. It's about making the practice more comprehensive. We have conducted a study called NEURO PMR. We compare with conventional MRI. That was the case I showed earlier. And that 98% concordance is an extraordinarily strong showing that was reported in January at the ASN meeting. So not all offices are made equal. Some look like mini hospitals and some are really a single neurologists operating a practice. So we are doing some market segmentation to understand the different offering between our Model 1, Model 2 and how the dynamics in the office work. We operate both of these 2 verticals through the same sales force in the U.S. Last but not least, the international vertical, we have been in international markets for more years than we have been truly commercial in international. That was the ability to also build reference sites and strong thought leadership support in international markets through a partnership with King's College in London and there then getting funding from Bill & Melinda Gates Foundation to drive the use of our scanner for pediatric brain development studies. So we built on that and really appointed a number of distributors in 2024 to get into a more commercial phase. We have been successful with the clearances, and we have also now really mastered the art of getting ourselves to what I'm calling local products. So we need to make sure that we have translations and labeling in all of the local languages to be able to operate. So we are transitioning from something that was more of a research-based international business to commercial. It looks very much like the hospital business in the U.S. Okay? So from a commercial footprint, as I said, we are distributors -- we operate through distributors outside of the U.S. We operate direct in the U.S. We operate with a single sales force in the U.S. We have about 15 field-based employees. They are not all quota-bearing. So we are still using a relatively small sales team. And with our IDN and multiple placements in a given hospital strategy, we believe we can drive a lot of productivity out of a single team for quite some time. Clearly, working with an IDN, the first placement is the toughest, the longest, the hardest, the one with the most paperwork. The ones after that, a significantly easier lift as it is primarily piggybacking on all of that paperwork and working on contracts and working off of just funding and PO kind of arrangements. Our business model is capital upfront. So our MSRP in the U.S. is $590,000 for the system. Just in comparison, a 1.5 tesla or 3 tesla capital equipment alone without any buildup is somewhere between $1.5 million and $3.5 million. The first year, the site gets the software, the support and the service included in a 1-year guarantee period. And then contracts are usually 5 years. So starting years 2 through 5, we charge about 10% to 12% of the capital purchase on an annual basis to actually do the software, the service and the support. We do provide 1 to 2 software versions every year. So that's included in that package of service, software and support. Outside of the U.S., we have a very small team that manages the network of distributors. So our ASP is different as this is sort of a transfer price, the sales price to the distributor network. So these are our financials. As I said, our guidance for this year, $20 million to $22 million is a dandy step-up, 50% to 55% gross margin for capital equipment in imaging is something that we are very proud of. With scale, we see that expanding to sort of MedTech level gross margin despite the fact that we are capital equipment and imaging. We have been good stewards of capital, and we will continue to bring our cash burn down. And as I said, we have a healthy balance sheet. We did a confidentially privately marketing offering in October and raised $20 million. We put a little bit of debt for the first time in the history of the company in Q1 on the heels of that equity raise in Q4, and we're well capitalized through the beginning of 2028, assuming we don't take any more debt from the facility, which gives us extra flexibility. Now I'm going to talk a little bit about what else besides portable MRI. And I know I only have 3 minutes, but hopefully, this is good enough to tease people into seeing us through the lens of a much bigger play. So we have not changed MRI. There are 4 fundamental pillars to MRI. The image pipeline, the electronics that you use, the noise cancellation, the denoising and the magnetics. We've taken all of those and really through our proprietary technology and know-how have shrunk them, have miniaturized them to render a technology that has no compromise in image quality, unlocks the access to MRI and has a safety profile that makes it versatile anywhere. That is a huge core technology play and asset that we think can take us many other places. Starting with adjacencies in the brain space, intraoperative brain MRI, mobile brain MRI unit, but possibly going into other anatomies and other applications. So we have a relatively large radar of opportunities that would all benefit and give us a very proprietary, sometimes first-mover position or if not, the ability to lead in many categories that are on this chart. For now, our business plan are $20 million to $22 million, a 50% to 55% gross margin and $26 million to $28 million of burn only includes continue to sort of flash out in which of these we're going to be putting additional investment. This would be activity that starts 2027 and beyond, but it has become very clear to us that if we've been able to do it in the brain with a portable system and bring so much clinical value and economic value, we have to be able to do it in any of these applications and just add additional not business verticals, but new businesses to our portfolio. So in summary, we have a very large TAM. The brain is a really important organ. I know many of us talk about the heart all the time, but I would argue the brain is just as important. And I had the privilege to work on both of those in my career. I think the ability to be in a space where you touch dementia, stroke and can put these systems across multiple types of care is phenomenal. I think our business fundamentals are very strong. We have demonstrated the leadership position. We have the evidence. We have the R&D engine. We have now a diversified business. And we have built even at our scale, a very, very strong business that I'm very excited to take forward. Thank you very much.