ImpediMed Limited (IPD) Earnings Call Transcript & Summary

Thank you for standing by. Welcome to the ImpediMed Limited conference call. [Operator Instructions] I would now like to hand the conference over to Mr. Rick Valencia, Managing Director and CEO. Please go ahead.

Thank you, Rachel. Welcome, everyone, and thank you for joining us today. We're hosting this conference call to discuss our recent announcement related to the NCCN Survivorship guidelines being updated to recommend regular screening for lymphoedema, including the bioimpedance spectroscopy, commonly referred to as BIS. Joining me on the call today is Tim Cruickshank, Chief Financial Officer; and Frank Vicini. Dr. Vicini is an internationally recognized radiation oncologist. He has extensive experience in cancer clinical trial design and implementation. He is the former Chief Medical Officer of ImpediMed from 2014 to 2022 and remains a dear friend and adviser to the company. Dr. Vicini is currently the Global Chair of Breast Cancer Research and National Director of Breast Cancer Care Services at GenesisCare, one of our key customers and partners in advancing patient care. Dr. Vicini has also -- has held multiple academic appointments and has been involved in numerous clinical studies, including breast and prostate cancer. He's also the coinvestigator and led the design of ImpediMed's L-Dex post-approval PREVENT clinical study, the largest randomized trial ever for the prevention of breast cancer-related lymphedema. He also happens to be listed as one of the few oncologists and best oncology doctors in America. Thanks for joining us, Frank. So on today's call, we'll highlight and expand upon the 4 key points related to the NCCN Survivorship guidelines recommendations. After that, I'll ask Frank to make a few comments on the impact of this major company milestone will have on the patients and providers in the medical community. We'll then turn the meeting over to Q&A to answer any questions you might have. So let's get to it. First, the NCCN Survivorship guidelines specifically named bioimpedance spectroscopy as an objective measurement tool to identify early signs of lymphedema. Based on conversations with physicians and industry experts, while it is not that uncommon to call out specific pharmaceuticals in the guidelines, it is rare that a specific technology is called out. Bioimpedance spectroscopy was called out as the only objective measurement tool specified. With SOZO and L-Dex, ImpediMed has the only FDA-cleared commercially available BIS solution. Second, the NCCN Survivorship guidelines now recommend regular screening for all cancer survivors at risk of lymphedema. While our focus remains on breast cancer-related lymphedema, the guidelines are not specific to a cancer type and, therefore, open new opportunities in oncology over time. Regular screening using an objective measurement replaces subjective self-reporting by patients. This change shifts the responsibility for lymphedema follow-up away from the patient and back on to physicians and care teams, increasing the likelihood that more and more patients get access to screening. Third, the recommendations made by the NCCN Survivorship Panel were Category 2A, which means that there was uniform NCCN consensus for this new recommendation. Most large private insurance companies use the Category 2A recommendation from the guidelines as a key factor for coverage policy determinations. And fourth, the inclusion of bioimpedance spectroscopy in the guidelines will help establish BIS as a standard of care and accelerate adoption by private payers and providers. These changes not only represent a transformational moment for the company but, more importantly, for cancer survivors. The updated guidelines now recommend proactive screening of all cancer patients at risk of lymphedema, which is a change from the previous reactive approach, which relied on patient-reported symptoms to identify lymphedema. The latest research shows that currently 20% of breast cancer survivors are impacted by chronic lymphedema. However, real-world evidence shows that a proactive surveillance model of care using BIS, like our lymphedema prevention program, can stop lymphedema its tracks and reduce the rate of impacted cancer survivors to just 3%. With that, I'll turn it over to Frank for a few words about the impact these changes on the NCCN survivorship guidelines will have on patients and providers in the medical community. Frank?

[Audio Gap] with breast cancer. I've been an oncologist for over 30 years now, having treated literally thousands of women with breast cancer. And I can tell you the fear of developing of breast cancer-related lymphedema still remains one of the greatest concerns for my patients despite all the many advances we've made in improving the survival of the disease. In fact, the long-term effects of cancer treatment have now taken on a prominent role for us, clinicians, as we help patients improve their [ arts ] of surviving. Without sounding too dramatic, it's been an honor for me to have worked with ImpediMed on this journey for over 10 years now, looking back to when I was first approached by Rick Carreon, who asked me what I thought was needed, convince doctors and research scientists that this was needed to reduce the impact of lymphedema in our patients. I was very blunt at that time, and I said things had changed in cancer treatment and only level 1 evidence through a large, expensive and scientifically sound study would be sufficient to convince the skeptical oncology community that screening with this through SOZO was critical. Rick and ImpediMed leadership and the Board had the courage to spend the resources, time, patience and very hard work to develop this evidence. And now here we are 10 years later, we have this, having achieved the level of importance such that we are now part of the standard of care for breast cancer treatment, as Rick pointed out, and part of the NCCN guidelines. I'd like to point out, this is no small achievement. This means the medical community and the peer review process is now saying that educating and screening patients for breast cancer-related lymphedema with BIS is a critical and important tool to help women through their cancer journey. I've been involved in NCI-sponsored clinical trials for over 30 years, and I've been the principal investigator in 2 other large NCI prospective randomized trials to improve cancer care. I can tell you it's not too often one can be proud to say they were involved in advancing the science of cancer care and improving the lives of millions of women with breast cancer and making it into the NCCN guidelines as a new standard of care. This is truly an important achievement, and I personally would like to thank ImpediMed, to thousands of women who participated in the PREVENT trial, Dr. Sheila Ridner who was the PI of the trial, as I mentioned, Rick Carreon and Cathy Kingsford, the ImpediMed Board, and everyone involved in the trial and, certainly, the investors are making this improvement in the quality life of women with breast cancer, a reality. And now I'd like to thank Rick Valencia and his staff for taking the baton now and making SOZO available for all women with breast cancer. This truly should be a new standard of care for monitoring patients with breast cancer, and I certainly have implemented it in my clinic. Thanks, Rick.

Thank you for your comments, Frank, and your dogged determination to improve cancer survivor care through a decade of scientific advancement and prospective lymphedema screening. And congratulations to you on this great achievement. With that, I'll turn it back to Rachel and we'll open it up for Q&A.

[Operator Instructions] Your first question comes from Shane Storey with Wilsons.

If I can start with one question, maybe on the breadth of the guideline change. The survivorship, as you said, sort of maps onto other areas of oncology outside breast. So maybe it's a 2-part question. The first part, maybe for Rick, maybe some shifts and thoughts clears on how you'll frame that situation for prospective payers. And then maybe the second part for Frank, maybe just to talk about what evidence development looks like from here in order to extend coverage over time, particularly, say, in [ to level in ].

Thank you, Shane. So from a business standpoint, we are currently a breast cancer-related lymphedema company, and we'll remain focused on that. We committed to the market that we would be responsible stewards of the capital that we've recently raised and continue on our path to breakeven. And we have a very good path and an even better path now to break even, in focusing on breast cancer-related lymphedema. What we're excited about, however, is that by being added to the survivorship guidelines as opposed to the breast cancer guidelines, and having no reference to any specific cancer type in most survivorship guidelines, it does open it up to additional opportunities within different cancers that create the risk of lymphedema. So in time, we will be considering the users and where we can make the greatest impact and where we can develop the evidence. I'll let Frank talk a little bit more about how we go about developing that evidence with his background. But I'll tell you that, with the established footprint that we've got already in these phenomenal NCCN institutions and IDN customers, all the devices that we have in the market, all the data that we currently have and new data that we can generate within oncology, the path to generating that data is certainly much quicker than it would be going into other conditions. Frank, do you want to add anything to that?

Yes, sure. You already said it, basically, the path of physiology of lymphedema development in chronic lymphedema is applicable to other disease sites, other cancer types, such as melanoma [ GI ] oncology cancer and even some prostate cancer. So realistically, any surgical procedure or radiation that it struck or potentially interferes with lymphatic flow potentially SOZO can be used to screen patients and to prevent lymphedema. So in time, as we've pointed out, we can start investigating. We actually already have, looking at some of these other disease sites in preventing lymphedema. It can be a significant problem, as I've mentioned, in melanoma and some other disease signs.

Look, I might just have 1 or 2 more. Rick, I heard you just say a moment ago that you're still sort of on that path to breakeven, so maybe some updated thinking about how you, I guess, thinking about the optimal sales force investment to deploy over the next year or 2. And then maybe a more speculative one, is it too early to revisit thinking about contract structure for SOZO just longer term, thinking whether or not we should be contemplating volume-based structures coming in given that the guideline has turned out to be so inclusive?

Yes. I'll say that it's -- it was your very good questions that we're spending a lot of time on. It's only been since Friday, of course. Well, while we were anticipating good news, we have a lot of work to do now that we've got it to really rethink how we approach the marketplace, both in terms of -- well, actually, in terms of our entire operational effort, not just sales, but clinical and market access and pricing structure. So we're not quite ready to announce any specific changes there other than to say we've made some changes recently in our sales leadership. That enabled us to flatten out the organization and actually get more folks out in the field on the front lines with customers. So we've already got some new capacity just in the last few weeks in the field. We're -- we have both that work to do, and the market access work to do, shifting the effort that we currently have in our case assistance program as we have less and less denials -- that won't happen overnight, of course, and as that happens more into the market access team that's actually going out and visiting directly with the payers to request the medical policy change. We need a little bit of time to finish our planning and rethinking on that front, and we'll be letting you know about that soon.

Your next question comes from Elyse Shapiro with Canaccord.

Just from here then, with that new investment, what does the cadence of payer additions look like? And what do you think the timing looks like to see a step change in payer acceptances?

It's very difficult to give you timing this soon after. We know for sure, it will accelerate things. It does -- it did cause us to make a shift in our reimbursement strategy. We've got a 4-point strategy now that is more around where we can get some quick wins. And the key one is in removing the experimental -- removing ourselves from the experimental technology list. So there's about 1/3 of the payers who have us listed as not in their medical policy but referred to on a list of experimental technologies. We've called that before -- in the past, we've called that silent coverage where we get them to remove us from that list, so we're no longer listed as a non-covered service. We're just not listed. That will create significant reimbursement uplift fairly quickly. So we'll target those first. We've got multiple other -- we have 3 other prongs that we're working on our general reimbursement strategy, including we now have a big customer-led effort that's going to help us without having us to put too much energy into it. We'll have to organize and coordinate and support them, but our customers now will be able to go to the payers with the guidelines on hand themselves, with their request for reimbursement and make progress on our behalf. So that will be one of the ways that we go about it. Of course, we'll continue to work on policy determination directly with payers one at a time. And then we're going to also take a regulator approach. It's one thing to go state-by-state, payer-by-payer, but if you can get the attention of a regulator and you can say, "Look, we've got the guidelines in hand now. We are effectively the standard of care. You're going to have patients who are with one insurance company that changed company and moved to another insurance company that we're getting care and are no longer receiving it," because they've yet to update their medical policy, we might as well just address it. I mean their job is to ensure their constituents are receiving the standard of care, the best possible care that can. So we're going to work on those forward approaches to help speed the process. I wouldn't expect to see any dramatic improvement in the first quarter or so. But certainly, within the first -- the next quarter, I would say, we will start to get a really good feel for what expectations we should set out there for the pace of landing reimbursement, all the while, of course, continuing to self broaden our footprint within all those key institutions.

I just had one quick point. Yes. Don't underestimate the impact this is going to have on patient advocacy groups of the academic community and cancer treatment in general. The onus now is on the cancer centers and most of the programs to look at this and realize are they doing what's necessary in survivorship for their patients. So I think not just ImpediMed, but I think the oncology community and patient advocacy that's going to be driving this at least in the States, at least that's my opinion.

Thanks, Frank. Elyse, do you have another question?

Just the ATM, you mentioned that you were working with 3 payers across 6 states for coverage. Can you give a bit of a status update on this?

We announced 1 win in Michigan that we've shared with the market. It was more on the side and coverage front. The -- we've had one that decided against making a medical policy change. We've had a number of the appointments that we were working on that either were delayed on their part. It's a pretty large group of people that they bring together for these calls. And if a few of the key people can't make it, it's not at all unusual that they'll postpone multiple times. And some of them we decided to postpone because, as we learn more what to bring and what does have impact, we want to delay because we sometimes only have 1 shot a year. The great news is that we have the chance now with the NCCN guidelines to do out-of-cycle reviews. We can bring this new evidence along with our FDA clearance, along with the fact that we've already got Medicare coverage in all 50 states, our Level 1 randomized controlled study, the disruptive change from the current standard of care, which is tape measured to this highly accurate technology. All of those things, we go with those in a very tightly documented, well-worded, structured form -- format to approach the payers with now. And again, we can get them to take our meetings off cycle. So while those meetings were important to us, we're in a whole different world now, and we're going to be able to generate these appointments out of cycle and much more quickly and, of course, with a lot more ammunition and evidence.

Your next question comes from [ Ian Hyde ], a shareholder.

A couple of questions in no particular order. Now that we've got NCCN Category 2A, we still have NCCN institutions that were not signed up. I assume that would be a key focus to get them all signed up, of course, the optic value on that would be immense.

Absolutely. The good news is that they're all in our -- somewhere in our pipeline. Some of them are in our near-term forecast. And yes, that's going to be job #1. And to Frank's earlier point, they will be looking at this and actually needing to address it. So we think that our path to getting those -- the rest of those NCCN institutions will be swift.

So as a layman, we can assume that because you've got the 2A approval, it's just automatic that the institutions will just fall in line.

Frank, do you want to lay on that one?

I think it's just a question of time right before this gets disseminated. Whenever you have a new standard of care or an improvement in the standard of care, its driven by several factors, as I stated, patient advocacy. We've got in the States where we have the accreditation program for breast care centers, which now we'll be taking a look at this. And I would imagine we'll incorporate it into their guidelines for staying that a program is a certified breast cancer program, right, that has survivorship with some type of screening with this. So I think it's going to be driven in multiple areas, but certainly, it doesn't happen overnight, obviously, but there's a lot of pressure. And having just happened Friday, I think it's going to disseminate rather quickly in the academic society that meetings across the country and through word-of-mouth from practicing oncologists.

By the way, [ moving into ] the American Society of Breast Surgeons here in just a few weeks waving the flag. So we'll be getting word out pretty rapidly.

It sounds like a plan. Next thing, you mentioned you've got a few more sales people. How many do you actually have now?

We have 6 salespeople in the field as of next week from -- at 1 level of management there, along with support from myself and Tim.

And then another big group of people, that's the clinical implementation team that support the sales to try big programs on top of that as well, and then the reimbursement fee, which is a little over 10, close to a dozen people on the reimbursement client [ status ].

Okay. And knowing me as you do to, and you'll understand this next question, how many devices is it possible for a salesperson to sell on an average. I know you talked...

I think the key here -- yes, to answer exactly how you want it. But I think the key here is just thinking about those target states that we're going after, and some of those shorter-term wins that Rick was talking about, with 1/3 of health plans that have us as on the experimental list. Getting that removed in those key markets, I mean, New York being one of them, you're looking at large enough markets where it will have a major impact on the sales team's ability to increase their numbers. So...

And Ian and others have heard this -- you and others have heard me say this, that a company getting this far, this much penetration, with the quality customers that it has in a world without reimbursement is very, very rare. So as things evolve with the guidelines now and then as we start knocking down these payers for reimbursement, we don't have salespeople that have ever really been at capacity because they haven't been able to sell into a reimbursed world where they could put together a really well-defined ROI. Our customers have been buying because they know it's the best technology to use to prevent lymphedema. Now they'll buy also because they need to. That's a standard of care effectively and because they can generate a real business out of it. So we'll learn more about their capacity in that environment than we have historically.

Sure. Would be good to know because even if I could do 1 a day, with 6 sales rep, that's only 180 a month, but anyway, who's counting. That's the next question. So you're [ assuming the fact ] that how many machines can you manufacture a year because it's clearly going to be an uplift in demand.

Yes. The good news is, as we've gone through the development of SOZO Pro, which will come down the line, we've gone through a full iteration of looking at all the parts that are utilized. So we've done an immense amount of work in terms of our supply chain and understanding the ability to source product and the contract manufacturers that we have on. Obviously, we'll be working with them on this development of NCCN guidelines to ensure capacity. But they're large sophisticated contract manufacturers, the largest medical device companies use. So -- at present, we don't have a concern over their ability to scale along with us. But we'll obviously keep you appraised of that as it becomes reality.

Well, that would be handed to shareholders and access, that's all like the bottleneck or these sort of things. So it will be easy to assume, you could easily crank down a couple of thousand per annum?

Yes. We're excited that this is now the focus of conversation and look forward to just filling that. We'll of course keep up there.

Tim, you remember, I asked you 2 years ago how many you could make. So anyway, it's not new for me. Next question, you've got thousands of hospitals and clinics signed up currently through your group master corporate and IDN contracts. So some of them are going to wait for reimbursement before they sign up, but there would have to be some low-hanging fruit there that now that they see the writing on the wall, that will be wanting to get an early start. So do you have to hit this short list or focus on what can be done there?

Yes. We're very lightly penetrated in virtually all of our customers. All of our customers can benefit from establishing a broader program for the follow-up, the maintenance that's not being done in a programmatic way today. So our best, fastest path to growth would be within our existing customer base because there's a lot of capacity there.

What I would offer is in the 4C, if you could start to put out some information to the world just about how many hospitals and clinics are there, that is the potential market size now that we shown what we have in the bag because I don't think very many people really understand just the size of what's available. All you have to do is go and look at the analyst forecast and what they produce, and it's not even the same universe. So can you please do that? That would be lovely.

Fair enough. Thank you.

That's enough for me. I'm going to grill you in person when you come out.

That's what we did. I know we're up against the time, but we have a couple more minutes at least. There's a couple of more quick questions. Rachel?

Your next question comes from Sam Chipkin with 5AM Capital.

Congratulations. My question is actually about inventory, which was just really addressed by the prior caller.

Thank you.

Your next question comes from Marian Lee, a private investor.

Yes. Yes, this will probably be naive of being comparison to your other more educated ones. But I have the idea that it was only women who lymph nodes have been invaded who would be -- well, what's the word, looking to have this use for them. But something the doctor said made me think, is there some idea that all women who had breast cancer would have this?

It's a very good question, and I'll let Frank answer that.

Yes. I mean any woman who's had lymph node samples, any woman who's had -- [ had always ] chemotherapy, anyone who received radiation therapy, and that's probably the vast majority of women with breast cancer in the states anyway, potentially you should be screened for the development of lymphedema. So it's a broad. The inclusion into the prelim trial included those groups of women. And that's who this is really targeted. So those higher-risk patients, obviously, the more expensive the surgery, the more extensive the radiation. But pretty much any patients treated for breast cancer where the lymphatics are either targeted for surgically or radiation or receive some type of chemotherapy that can impact the lymphedema, the potential candidate to be screened now with the technology. One other point, if I could, lay here. And that is, now for every type of research has got going on for breast cancer, you've established a new standard to look at lymphedema in clinical trials and whatnot. So they're -- the academic centers, the research centers across the country are going to quickly have to adopt if they haven't already this technology to test -- when we're testing immunotherapy for patients. And it runs itself quite well to objective measurements, as you know, for lymphedema. So that's really another target audience for the expansion of SOZO.

Can I ask another one? People talk about -- well, I've seen the figure 90% for the gross profit. But what -- after that gross profit, what does that -- what have you subtracted to get down to get 10% off? And then what we're really interested in obviously is the bottom line. What do you think -- well, not so much now because the company is still making a loss. But in future, what projections have you got to -- what will actually be the -- coming down to the actual profit.

Yes. And that's the work we'll be doing on the addressable market now that we're beyond just the potential for breast cancer-related lymphedema and going into down the road of all cancers. But the way we've looked at it in the past is while we're focused on getting the breast cancer-related lymphedema business to cash flow breakeven, based on the pricing ranges that we have, we've told the market it's between 200 to 400 systems in the market to get us to that breakeven. And at the higher end of pricing, it's on the lower end, 200 to 300 systems. And that's all it takes to get us to breakeven. And that's the first step we're focused on and accelerating that as quickly as we can.

Right. So what does gross profit in your system refers to? What do you subtract to? Is that just the cost of the equipment or -- because obviously got an increase...

Yes, the 90-plus percent margins are on our Software as a Service, which has the hosting fees and the support fees to allow our clinicians to use our technology. And then we've got a blended rate in gross margins of 80-plus percent, which includes the actual hardware to get out and the additional support that it takes to do that.

Right. I see what you...

So that [ 90% ], I can tell you is a very, very high gross margin for a medical company, and it bodes well for the future as we grow the business and maintain a reasonable cost base for developing a profitable company in out years.

You're not aware of any competitor who could come -- who could -- right now perfecting a machine very like SOZO and come along with the SBA and say, "Look, our machine is so -- as they can do with medication. Our machine is so like SOZO. Can you approve it?" And then you'll have a competitor, and that competitor hasn't had to go through years of the PREVENT trial, et cetera. Is that a concern you've got [ to pass in the future ]?

That's only the concern of ours and hopefully of any companies is to be paranoid about we also might be coming up behind you. We've got such a good beachhead right now in most of the key customers that would benefit from using this technology from their patients. The trick is to get out to the rest of them as quickly as possible. So we established that beachhead, if you will, and make sure that we continue to grow within those accounts and effectively lock other people out as the gold standard and the first to market. But it's -- what we do is really complicated. So it's quite possible that someone's out there trying to develop similar technology, but it wouldn't be easy and it wouldn't be soon.

Okay. And wonderful news for everybody.

Thank you for your questions. And I think with that, Rachel, we will wrap it up. Thank you all for attending, and we look forward to seeing those of you who will be able to join us when we are in Australia in about 3 weeks.