Imagin Medical Inc. (IME) Earnings Call Transcript & Summary

Yes, and I agree. I think anything we can get to decrease the cost and the burden of bladder cancer for our patients, and whether it's getting hospital systems to invest in an earlier equipment that's less expensive or trying to cut down the cost of consumables, whatever it is, the more people we can get to use blue light, the lower the burden for the health care system in general, it will be all across the globe. I agree with you, absolutely.

And ultimately, I think we need to focus on a couple of things, which is to continue to improve on the procedures, improve on our resections in the training and get the best equipment to visualize what sometimes you can't see using white light. And that's exactly where new technologies have a place.

Our colleague out on the West Coast has some thoughts that he wants to share with us.

Nice.

Thank you. Dr. Kamat, Dr. Zlotta, for the kind introduction and the great overview of the importance of blue light cystoscopy in management of our bladder cancer patients. These are unprecedented times we're dealing with, so I do appreciate everyone's attention. The note -- the issue I really want to address is the issue of cost. The blue light cystoscopy is clearly beneficial, and we need to understand better the fact that there's a drug called Cysview and an equipment that has to be used to visualize this drug. In the U.S., this equipment has to specifically be KARL STORZ blue light equipment. The issue is that not a lot of hospitals have this exact equipment. And actually, most hospitals do not have this exact equipment. So if a physician wanted to be able to perform blue light cystoscopy, that would necessitate the hospital system buying this exact equipment, this proprietary KARL STORZ blue light equipment. When they already have other brands of equipment that they can use for cystoscopy, it is a difficult roadblock to pass at time because capital budgets are tight. And so the reality is that even if someone wanted to use blue light cystoscopy, and many institutions they are unable to do so because of the fact that the hospital simply doesn't have that equipment and the cost expenditure would be too great, and this would essentially completely put the blue light cystoscopy on the back burner for them. So for example, I was at Emory, and we did fortunately have the KARL STORZ system. I was able to use blue light benefits that everyone had talked about already for blue light. I was able to utilize those for my patients. As I've switched to another institution and also some of my other colleagues across the country, this institution does not use the KARL STORZ equipment, and I'm unable to do blue light cystoscopy. And the reality is that as much as I would like to upgrade the equipment to the KARL STORZ equipment, there is also people that don't particularly like KARL STORZ equipment. My partners might not agree. They might have a preference for Wolf or Olympus. And so the importance of a device that would allow any system to be able to be utilized for blue light cystoscopy is tremendous. And I think there will be cost containment. There would be a lot more buying from physicians. Some physicians who might particularly -- might not particularly want to use KARL STORZ and want to use their Olympus or whatever other brand that they're loyal to, that we'd be able to then in the U.S. utilize all these different systems for blue light cystoscopy. So again, I do appreciate everyone's time. Jim, thank you so much, and I'll pass it back to you.

Doctors, we appreciate your real-life insight into bladder cancer visualization. It's an honor for us to hear from you. It's clear that there's significant value to blue light. Let me show you how Imagin delivers blue light. Imagin Medical is a surgical imaging company. We believe that we will dramatically improve the way surgeons view cancer during minimally invasive surgical procedures. Bladder cancer is Imagin's first target market. Now bladder cancer is the sixth most prevalent cancer in the U.S. It's the third most prevalent for men, yet it's the most expensive cancer to treat, all costs in, $4 billion. There's a greater than 50% reoccurrence rate, and there are 600,000 people living in fear of reoccurrence, and half of them are [ probably ] going to have another procedure. Every year is approximately 80,000 new patients. The current standard of care is to use an endoscope with white light. This is a decades-old technology and accounts for 95% of the market. White light is highly effective when the cancer is protruding above the wall, the doctor can see those margins. But flat tumors may look very similar to normal tissue, and the white light is just not effective in visualizing the margins. And this is what leads to these 50% recurrence rates. Now we've been talking today about promising new modality, and that's to use an endoscope with blue light. In this procedure, a contrast agent is put into the body about an hour before the procedure, and then a blue filter is put over the white light. It accepts the fluorescence in the tumor, highlighting the cancerous tissue. I mean, the difference between looking on the left and moving to the right is very dramatic, and I'm sure that you would probably want this kind of a procedure if you have bladder cancer. Now there's another key message that's in Imagin's favor. And that is we don't have to do the market development. It is underway. There's already published data that supports 25% more tumors are found. Blue light has been added. The American Urology Association guidelines and the reimbursement codes are in place. Now the problem with this blue light is a surgeon can only view one image at a time, so they have to be switching back and forth. The white light image shows the full landscape of the bladder, so the doctor knows where they're located in the bladder, but it doesn't highlight the cancer. The blue light does an excellent job of highlighting the cancer as you can see from left to right. Now here's the problem. Surgeons can't operate using the blue light. The blue light is not in real time, and the doctor can lose their orientation in the bladder. Surgeons must manually go back and forth. And we've been told by many doctors, when they look at the blue light, it's exciting, but that's not where they operate. They have to remember where it is and toggle or switch over to that image on the left. With that said, if I had bladder cancer, if a friend of mine had bladder cancer, I assure you we would be seeking out a facility and a doctor that hit blue light. And today's blue light is exclusively available only from one scope manufacturer. This greatly restricts the growth of the market. Now let's just talk about the Imagin i/Blue Imaging System. Imagin's i/Blue imaging system corrects the limitations of today's blue light. Now I want to start to talk about the Imagin system and our control unit, but I'd like to make it more interesting. I'd like you to see today's blue light equipment. You're looking at a tower of equipment, 3 large expensive modules. We take the camera control unit, a light source and the video data recorder. We put them all together, and then we've miniaturize them into the i/Blue system control unit. This is a dual wavelength light source, a 2 channel hammer control unit and a data recorder with a power supply. This is the brains of how we put simultaneous white and blue into the bladder to illuminate. It works with our dual view camera head. Now the camera head that you're looking at on the lower right side of the screen has 2 very sophisticated cameras in it. And it also has sophisticated optical filters that split the white and the blue light images. So I've just mentioned to you that we've illuminated the bladder. And when we bring the white and the blue light out, the white light goes to one camera, blue light goes to the other camera, and we have simultaneous acquisition of the images on the monitor. Imagin's i/Blue system, we're going to make blue light cystoscopy practical. This is going to be a new standard of care for visualizing bladder cancer. Our value proposition to the marketplace, simultaneous acquisition of different images. You don't have to switch back and forth. We show the cancer in context, and it's all about giving the doctor a better view, so they can get a better resection. Our camera head fits onto most scopes that exist in the market today. But let me just explain that to make sure everyone understands that rather remarkable value of this. Today, there's only 1 scope manufacturer that sells a light system. They have 40% of the market. If they are in their own accounts and the account wants to go to blue light, it might own 7, 8 scopes, maybe as much as $60,000 to $75,000 worth of equipment, but they can't use it. They have to buy new blue light cystoscopes. Now our camera head will fit on the existing scopes, most of the existing scopes there already are. Now let's take a look at the other 60% of the market that this company doesn't control. And for example, Olympus is the largest scope manufacturer in the world. So to get the blue system sold by this company, they have to break the hospital contract, and then they have to get them to pay this money. This infuriates a lot of the doctors and the hospitals to begin with. Now I want to make it clear. Our camera head will fit on most of the scopes that exist in this 60% of the market. This is really significant. And we believe that we -- and I don't want to get too carried away here, but we really believe we can dramatically expand the market and then dominate it. Many of you are attending this webinar because you're interested in investing in the health care market. To help us navigate from a big picture perspective, Ron Insana is joining us from his CNBC studio. Ron is a highly respected and has been named one of the top 100 business journalists. He's written 4 books about Wall Street and is well known for his high-profile interviews with presidents and major business leaders. We're excited to have Ron with us today and get his perspective on what's happening in the health care industry.

Thanks, Jim. And hi, I'm Ron Insana. Welcome, everyone. I'm from CNBC, as you may well know, and I've been covering a wide variety of industries over the course of my 36-year career, but few have been as interesting or as exciting as medical technology. It's amazing to think that in the last 120 years or so, all of the biggest advancements in medicine have occurred and have had a profound impact on both the quantity and quality of human life. Take anesthetics, antibiotics, antiseptics and vaccines have all altered the course of human history, but until recently were the single most important developments in the medical revolution. That is now changing at a pace we've never seen before. From CAT scans to targeted chemotherapies and from mapping the human genome to monoclonal antibodies, advances in medical science and medical technology are advancing at a revolutionary rather than evolutionary pace. We've witnessed this firsthand in the rush to find effective therapeutics and a vaccine for the coronavirus. Never before have advances come at such a rapid pace. Small companies that toiled for years in relative obscurity are now at the forefront of vaccine and therapeutic development, working hand-in-hand with large pharmaceutical firms to bring an end to this plague in record time. The dynamics of the health care market are very exciting. Now we continue to see large pharma and medical device companies form partnerships for development and distribution with innovative, small technology companies or simply acquire them. Now in the pharma area, we've also seen some whales swallow some minnows. And in the device area, we continue to see major companies with large distribution channels purchase multiple small companies with breakthrough technologies. Now 9 months ago, the general public talked a little about messenger RNA or polyclonal antibodies, and now they're working their way into our everyday conversations. The work of visionary scientists backed by equally visionary venture capitalists is speeding new drugs, new treatments and new technologies to markets in ways only science fiction once imagined. And it's only just the beginning. It's been said among futurists that the first person to live to 150 or maybe even beyond has already been born among the millennial generation. Now if that's true, I will most certainly need to leave my children much more money. But seriously, it's not just longevity that small and large companies are offering to the next generation of human beings, but a higher quality of life along with an expanded quantity of the joys that life has to offer. It's an exciting time to bet on the future of medicine but an even more exciting time to be a beneficiary of all that medical technology has to offer. Jim, back to you.

Thanks, Ron. We appreciate your perspective. And I want to assure you that I'm not one of the millennials who's going to live to be 150. Let me change the topic back to Imagin and the Boston health care environment that we work in. Boston is one of the leading medical hubs in the world. In the greater Boston area, 1 out of 4 people work in health care. Year-after-year, the Mass General and the Brigham And Women's Hospital are ranked in the top 5 hospitals in the world. We have 4 major medical schools: Harvard, Boston University, Tufts and the University of Massachusetts. This environment helps spawn multiple early stage medical technology companies and people with a relevant experience to run these businesses. Imagin's management team has grown up in this environment. We've worked together in previous successful early-stage medical device companies. We know how to bring products to market through the development cycle and the FDA. At this point, Imagin is an execution play. We're now setting up our manufacturing operation and have already met with the FDA twice. I'd like to mention 3 key members of our management team. Our association with John Vacha, our CFO, goes back 20 years. He's been through the development to commercialization process in small companies. His last company was a start-up in breast cancer. They developed a breakthrough solution for breast cancer removal. Their strategy was remarkably similar, the Imagin's plan to bring unique products to market that improve patient outcomes. After bringing the technology to market, they were acquired by a large strategic company for $100 million and just over $1 million in revenue. The point is these multinational companies with huge global distribution channels, new start-ups like his to grow through acquisition. Mike Vergano is someone I've known and worked with for over 30 years in 3 different start-ups, one being Microvasive that grew into a major division of Boston Scientific. He truly understands medical device engineering and manufacturing and runs Imagin's operations. He is a go-to kind of a guy that you can always count on. He works hand in hand with Pam Papineau, who's someone I've known for 20 years. She also has experience with Boston Scientific. And Pam and I have been associated at another startup. She understands the FDA regulatory process and has taken many technologies through the approval process. She's a great person, and we're very lucky to have her. Our goal today was to show you that Imagin Medical is an investment you should consider. Three key points that I'd like to share with you. Here's where Imagin is today. The development risk of the i/Blue Imaging System has been greatly reduced. Functional products have been built. And we have overwhelmingly positive feedback from key opinion leaders across the country. Innovation absolutely changes medical practice, and we've seen this over and over again. Medical markets evolve when advanced technologies become available, and doctors have the ability to improve their patient outcomes, and patients begin to demand these procedures. Our market timing to provide a better system appears to be excellent. Urologists are looking for advanced blue light technology, and Imagin's i/Blue System will make these procedures practical and cost-effective. Patients are beginning to seek out doctors and facilities that can provide blue light. A urologist told me a 90-year-old man and his 89-year-old wife, who had bladder cancer, drove 2 hours to his office because he wanted the best for his wife. He wanted blue light. We believe Imagin's i/Blue System will establish a new standard of care in bladder cancer visualization and will be the foundation for building a major surgical company. As we conclude, for fun, consider this. White light is like an old telephone line. It was great, but new technology came along. Today, blue light is like the early cellphone, and we know what happened to them. We believe Imagin's i/Blue System is like a smartphone and will establish a new standard in bladder cancer visualization. And lastly, the market is ready for Imagin. We appreciate your time today and look forward to future communication. Thanks for joining us.