ImpediMed Limited (IPD) Earnings Call Transcript & Summary

Good morning, everybody, and thank you for joining the ImpediMed Shareholder Conference Call this morning. I would like to start by first acknowledging the traditional custodians of the various lands on which you will work and join us today. The call today will be hosted by ImpediMed's Chair, Don Williams. And also joining us are Nonexecutive Directors Amit Patel, Jan West, Danny Sharp and David Anderson; as well as Managing Director and CEO Rick Valencia and Chief Financial Officer Tim Cruickshank. [Operator Instructions] We will, of course, endeavor to answer as many questions as possible, but if we do run out of time and don't get the opportunity to answer your question, please don't worry. And send us an e-mail, and we will come back to you as soon as we possibly can. Before we begin. The company acknowledges the short notice that this meeting is being held but wants to reassure shareholders and make them aware that this is only the first step in the communication process. The directors have been conducting a thorough review and findings -- and review the findings [ in the framework ] of their governance process. The intention of this call is to begin to provide additional details on the company's response and to provide a forum for Q&A. Don Williams and Rick Valencia and other directors will be on the ground in Australia next week for meetings, between the 22nd and the 24th of August. And this -- they will be able to provide some additional forum to meet with directors surely -- to meet directly with shareholders. Again thank you for joining us. And I'll now hand over to Don to begin. Thank you.

Thank you, Hannah. Welcome and thank you for joining. You are aware that we are here today to talk through the proposal from a minority group of shareholders to effectively take control of ImpediMed by replacing 4 of our current 7 directors. This is currently and will continue to cause significant disruption to our commercial momentum and future growth. We want to ensure that all of our shareholders have access to the information and facts about the impact of this action; that you have the opportunity to ask questions in an open forum to ensure you understand our growth strategy, our progress and our focus and what and who we need in order to lead our company to maintain and accelerate our recent momentum. We appreciate the concerns and comments provided by this group of shareholders and view this as an opportunity to continue to strengthen our lines of communication. Our Board and management team remain committed to our shareholder base, which is predominantly Australia. At the end of the day, the best form of shareholder engagement is delivering results. We've entered a period of growth for the first time in company history where outside milestones such as clinical data and incorporation into industry guidelines are behind us. Because of this, the company has begun delivering consistent results and can now rely truly -- and can now truly become an operating entity capable of gaining a strong commercial footing and capturing significant market share in cancer-related lymphedema. This is the moment so many of us as shareholders have been waiting for. The opportunity before ImpediMed is significant. And the directors of ImpediMed are aligned in their commitment to protecting our future success from this opportunistic and flawed action. I will be in Australia next week along with our CEO, Rick Valencia; and Tim Cruickshank, our CFO, to meet with shareholders. I will also be joined by several of our directors at these meetings. Yesterday, we lodged a comprehensive response to the notice. And I want to take you through our response to this action to replace 4 of our 7 directors and explain the rationale behind our strong conviction that this is not in the best interest of our shareholders now or in the future. Let me get to the point directly. ImpediMed is in the strongest position it has been for many years under a new CEO, with a Board that has the right skills and experience and with a clear strategy in place. The Board has full support of management; our ImpediMed workforce; many of our shareholders; and as you will have seen, the strong support of Jan West and Michael Seiden, the 2 directors unaffected by this action. It is with the confidence of this support that we are unanimously recommending shareholders vote against all 8 proposed resolutions. That is the replacement of 3 exceptional directors, Amit Patel, David Anderson and Daniel Sharp; as well as myself by 4 directors with little additive experience and skills, little commercial U.S. experience and collectively little public company experience. We have taken a very measured approach to our response. We have spoken to shareholders, employees and other market participants. And we have engaged with a representative of the requisitioning parties to listen and understand their position. Following this engagement, it is with conviction that we are urging all shareholders to vote against all 8 resolutions, based on the following. This is a serious distraction to the successful continuity of our positive momentum and near-term success. We need to capitalize on U.S. commercialization and NCCN guidelines now, and we need to move quickly to realize the full opportunity and value. This action has put this at risk. The proposed action will trigger an acquisition of control, but there is a conspicuous absence of strategy, which should be viewed as a significant concern to all of our shareholders. Our existing Board has the right skills and experience as well as independence. U.S. representation on our Board remains critical to our growth and the successful execution of our strategy. Lastly, I reiterate the current directors have full management support and have been integral to ImpediMed's success. In recent times, the directors have stabilized the ImpediMed workforce, made critical leadership changes and established a focused business strategy for more rapid commercial activation. Before I address the meeting further, I would like to hand over to Rick to speak to our business strategy, which is in a critical stage of revenue activation, is in a phase of strong momentum; and to ensure all shareholders are aware of the [ substantive ] risks to the execution of this strategy in both the near and longer term. Rick?

Thank you, Don. When the Board appointed me to the CEO role in December 2022, I was given a very clear mandate to execute a commercial strategy that could capitalize on the growing opportunities and build shareholder value. I want to outline for you why this proposal for change is a serious risk of disruption to the stability and focus of our company. With the Board's support and a strong leadership team, we've made considerable progress executing our strategy, which has been reflected in our recent share price momentum. Since the 8th of March this year, we have seen our share price appreciate over 250% and trading at or near a 2-year high; and we are confident of maintaining this momentum. When the NCCN guidelines were updated in March 2023, which we'll talk more about shortly, our addressable market in the U.S. doubled to over $2 billion. The opportunity is real and it's very significant. Our quick response to ensure we're resourced to scale up to meet this opportunity was changed -- has changed what our future will look like. We're at a critical juncture in our business strategy and growth, and any distraction could have a significant adverse impact both operationally and in terms of market perception. Our employees are highly motivated and focused on what we need to achieve, but I can assure you this action is already impacting our ability to finalize several important leadership roles, including a Chief Medical Officer and Chief Commercial Officer, which will hinder our ability to fully operationalize our strategy. These roles are at the final stages of completion. Then this action has created uncertainty and resulted in a pause in this critical stage of the process. As your CEO, I'm recommending that we remove this distraction immediately and focus on continuing to execute an effective strategy in a phenomenally big market for ImpediMed. We must maintain momentum, which includes the strategic prioritization of certain U.S. payers, to expedite changes to published policies and achievement of critical mass coverage and a large uplift in the number of system sales and patient tests completed. Evidence of our successful momentum includes, in under 5 months, we have secured 12 positive published medical policy changes, including SOZO and BIS, with critical mass coverage 80 -- that is 80% covered lives secured in Michigan and Alabama and nearly 80% in 6 other states. This includes a major top 5 national payer, Cigna, which operates across 38 states; a record number of patient tests of over $100,000 conducted in the last 6 months; 54 SOZO system sales globally in Q4 of '23 alone, up more than 200% on Q4 of last year; [ 50 ] new customers secured, and expansion within 5 NCCN centers, in Q4 of fiscal year '23. I've seen the Board make countless decisions and support management to prioritize the enablement of success of the company. Our collective priority is to benefit patients, first; employees; and shareholders always. Disruption to this momentum with the introduction of new Board members with very limited or no relevant experience or additive skills to our existing Board would be detrimental to shareholder value. The reality of the situation is that a small percentage of shareholders have selectively picked 4 replacement directors who will, if 4 of the existing 7 directors are removed, take control of the Board, similar to a takeover action. Under this scenario, the strategy and the direction of the company will be under their control. This would occur with no indication of their views on the company's strategy and direction or a proposed Chairperson. This lack of transparency and strategic focus should be a significant concern to all of shareholders. I'll hand it back to Don to talk to other reasons to vote against the resolutions. Don?

Thanks, Rick. I would like to now focus on why we needed to capitalize on U.S. commercialization and the changes to NCCN guidelines and the progress we have made. More directly, I would like to respond to accusations of a disconnect between Australian shareholders and a Board which is majority U.S.-based. The United States has always been a key region of strategic importance for ImpediMed. As Rick mentioned, when the NCCN guidelines were updated in March this year, our total addressable market in the United States more than doubled to over $2 billion. We had an opportunity to accelerate how we capture market share and to rapidly drive value for all shareholders, but we also knew we had to act quickly. As you are all aware, to immediately accelerate and invest in our growth, we completed a placement and share purchase plan in July, raising $30 million. This capital raise will allow us to scale over the coming 12 months and beyond, which we expect will allow time to demonstrate the change in the payer landscape and positive medical policies and the resulting revenue uplift in demand for SOZO. This funding has removed the equity capital market risks. We stand by the view that it was prudent to complete the capital raising expeditiously. Waiting for further news prior to raising capital would not have necessarily re-rated the share price. Having a strong balance sheet in place is a critical component to attracting key top-tier talent in the U.S., such as a CCO and CMO mentioned by Rick. Let me also claim some facts around the raise. The raise was carefully structured to be fair and accessible to all shareholders and was modeled to ensure that more than 98% of shareholders could achieve a pro rata or better participation. This meant shareholders who made the decision to participate at the maximum subscription experienced no dilution. Only shareholders that chose not to participate experienced dilution, albeit that dilution was modest given only $30 million was raised on a market capitalization of nearly $300 million at the time. And the subsequent increase in the value of their shares post raising has been substantial. Prior to the capital raise, we met with a cross-section of our shareholder base. The overwhelming majority of shareholders understood the immediate opportunity and the need to fund raise to capitalize on it and establish SOZO and BIS as the standard of care for cancer patients at risk of lymphedema. We acknowledge there were a small number of shareholders who thought we should delay the fundraising. We listened to this small group and did consider their views. However, on consideration, the Board and management concluded that the acceleration of the payer policy time lines required us to have the resources in place to properly build for scale. If we did not resource up in order to scale up, we would have unnecessarily compromised our progress and revenue projections, to the detriment of all shareholders. It is important all of our shareholders understand that the following factors were critical in the consideration of when to do the raise. The 2-year cash runway asserted by the requisitioning parties assumed a slow, conservative pathway to cash flow breakeven. This was prior to the impact of the company's technology being specified in the NCCN guidelines. Post NCCN, the cash flow was inadequate to resource the company to deliver on the increased scale of a more robust growth plan. And failure to immediately resource the company would have risked being unable to service customer inquiries, site deployment and customer service to support the sales activation strategy. Given ImpediMed had conducted the only randomized trial in lymphedema management in breast cancer patients, management and the Board believe that it was imperative to protect the first-mover advantage and have the infrastructure and resources in place to respond to anticipated customer inquiries and expectations. The next point I want to talk to is the fact that the proposed Board changes will trigger acquisition of control, but the minority group has not presented or even indicated any views on strategy and direction or a proposed Chairperson, as Rick pointed out. This lack of transparency and strategic foresight should be a significant concern to shareholders. We have an independent Board with a broad, capable and highly relevant skill set. Our business strategy leverages the experience of all directors and positions us strongly for accelerated future growth, the execution of which has already begun and is evident in the positive news flow and share price momentum. We have strong U.S. representation on our Board, because our business is predominantly U.S.-based, and a critical growth market that requires relevant skills and experience to guide management. We know from experience that it is critical the Board has direct experience and capability to guide local U.S. management on U.S. reimbursement and commercialization issues. The current directors have intimate knowledge of the U.S. market, regulatory environment and health care markets, including reimbursement. They have run commercial operations in the U.S. and global businesses. Let's also get it on the record that, despite the U.S. focus, the company is proudly Australian and has no intention to leave the ASX or seek listing on the Nasdaq or any other foreign exchange. Our existing Board understands what needs to be done to continue to grow our success in the U.S. market because they've done it before. Replacing our highly experienced directors would result in a significant loss of this knowledge. And replacement with directors proposed by the requisitioning parties that have virtually no or very limited board experience, nor up-to-date U.S. operations experience, would be detrimental to growth in this market and compromise shareholder value. Furthermore, our Board is already actively involving -- evolving and updating with positive results. Over the last 12 months, we have undertaken a strategic process to align skills and experience with our development and growth. The process identified the need for stronger commercial expertise in oncology and Australian capital markets experience to maintain a closer link to our majority Australian shareholder base. To address these needs, we appointed Daniel Sharp and Dr. Michael Seiden in June 2023. The experience of the 4 directors targeted by the requisitioning parties, in conjunction with other directors and the management team, provide a comprehensive skill set specialized in the commercial growth and development of medical devices and health care technology companies across all regions of strategic importance to us. They have a demonstrated history of delivering growth and rapid industry uptake for a range of emerging and large life sciences companies across the globe. We outlined our strong support, within our formal response to the market, for all directors named in the notice, but I would like to make a few comments about my colleagues. Amit Patel has deep experience in securing FDA clearances, structuring strategic relationships and delivering international growth in IoT technology-based medical devices, including the U.S., Europe and India, some of the world's largest medical device companies. Amit is currently CEO of the company he founded and sold to Murata Manufacturing, thereby bringing decades of operational experience in U.S. markets to the Board. David Anderson has deep expertise and strong relationships within the private payer network and has been instrumental in guiding conversations to secure the first changes to published policies. David is also a former CEO of Highmark Blue Cross Blue Shield of New York, a $3 billion private payer with decades of operational expertise. Many of you will remember his stewardship of ImpediMed as Interim CEO at a critical time of leadership instability. Daniel Sharp is an independent and experienced Australian director with over 25 years experience within the Australian capital markets. He has supported the commercial and corporate growth for some of Australia's leading ASX companies. He has not been connected to any single brokerage firm since 2021. In terms of my background, I have spent more than 20 years as either a public company director or an executive, with experience delivering strategic guidance and operational oversight. I'd been a director of a med tech company that grew from USD 25 million to over USD 1.7 billion in market cap during my tenure. I made the decision to step down from that board position to focus more clearly on ImpediMed several years ago. This Board has effectively supported management on critical elements of our business. They are collectively steering the business on a successful paths -- path. Recent proof points include: facilitated the CEO replacement, with Nonexecutive Director David Anderson stepping into the Interim CEO role to ensure stability. We recruited a highly experienced, new CEO, Rick Valencia; supported the ImpediMed team to improve morale and stabilize retention risk during challenging times; reprioritized the reimbursement strategy; utilized the clinical evidence and rallied key opinion leader clinician support for guideline inclusion; reversed previous negative private payer rulings; commenced the process of obtaining positive national and large regional private payer coverage; redesigned the SOZO technology to automate it into clinical workflow; introduced Software as a Service high-margin sales model that will enable future recurring revenues; and expanded the market opportunity, with a focus on oncology. We have serious concerns about the experience of the nominated directors, which I will outline, but before I do that, I will also confirm that we are not opposed to change, and have an active process of Board succession planning. However, appointments to the Board should be considered through a proper process to determine a nominee's alignment with the skills and capability needs of the company. We do not believe this is the case here. While they each might be experienced professionals and well suited for their current positions, based on the very limited information provided by the requisitioning parties, our concerns include none of them have CEO experience leading a medical technology company in the U.S. market. Only one has prior experience as a director of an ASX-listed company. We have a strong CFO in place and an experienced Australian finance professional as our audit and risk chair. A CFO without previous ASX nonexecutive director experience will not strengthen the Board. While we have an extensive amount of intellectual property, our IP is well established, and we use a well-regarded Australian law firm to help us manage our IP portfolio and IP strategy. We have no current plans to license or independently commercialize our IP, and there is no need for IP specialization at the Board level. The one nominated director with stated U.S. operational experience is substantively out of date. Of recent several years, his focus has been on private consulting and running private hospital networks in Australia and China, which is not relevant or additive in value to the Board. The requisitioning parties have proposed removing me as Chairperson but are not proposing a new director with a requisite experience to become the new Chair. Moreover, whilst the replacement of 4 out of 7 directors will result in the nominated directors acquiring control, the nominated directors have not presented any plan or strategy on how they would utilize that control. As mentioned, we maintain the commitment -- we maintain a commitment to further Board diversity measures, and we'll continue to evaluate director skills and experience annually, but we have not identified skills gaps in the areas held by the nominated directors proposed by the requisitioning parties. The current Board understands what needs to be done to continue to grow our success in the U.S. markets because we have done it before. Replacing our highly experienced directors would result in a significant loss of this knowledge. And replacement with directors proposed by the requisitioning parties that have virtually no or very limited Board experience, nor up-to-date U.S. operations experience, would be detrimental to growth in this market. Finally, our Board has an unambiguous approach to our governance role, guided by the principles in its corporate governance statement and regulatory requirements. No examples of poor governance have been provided by the requisitioning priorities, and we strongly refute and challenge any suggestion of such. Directors are held to high account in their roles and contribute to the Board. I appreciate that this is a lot of information for our shareholders. And we are disappointed that this action is taking place at a time when we should be supporting and celebrating progress. I hope this has been valuable in helping you to understand why the proposed changes will undermine our commercial momentum, growth prospects and shareholder value. My fellow directors and I look forward to engaging with many of you directly in the coming week to answer any additional questions you may have. I will now hand this back to Hannah, who is managing the submitted written questions. Thank you.

Thank you, Don. That's right. We will now begin the Q&A portion of the call.

[Operator Instructions] And Don, I will start with some questions that we received from shareholders in advance of today, first one being why has it taken so long to respond.

We have...

Don [indiscernible] -- go ahead, Don.

Rick, I can take that. Thank you. We wanted to take, in accordance with our governance, a very guided and directed process to responding. And that included being in a position where we have the opportunity to reach out to shareholders to make inquiry. We reached out to our employee base to make inquiry, but we wanted to make sure that, when we did respond, we have the most informed response possible. Thank you.

I'd just like to add to that, that a great sign of the good governance of this company is that we did take the time to be thoughtful and measured in the response. Keep in mind that this -- the requisitioning parties created 2 classes of directors for our company, those who were called out for replacement and those who were not. And those who were not had a right to have an independent view and opinion on this; and so we needed, of course, to give them the time to seek guidance and decide how they felt about this. And in fact, they, as you've heard already, 100% support to vote against the measures that have been proposed, but I commend the Board for taking the time that it took. I also want to use this moment as a point about the 4 new proposed directors. We've seen their bios, but we've been given very short bios on each of them. They all seem to very professional people. We don't have any particular issue with their professionalism, their background, their experience. It's really, given such little time, such short bios and not much available info on them, very hard for us to see how they're additive to the Board, but once again it was I think the right thing to do, to take the time to do our best to review their backgrounds and see whether or not they could be additive. Hannah?

Has the Board been advised by any institutions, both substantial and not substantial, that they are voting yes and what their percentage holdings are?

We're not at a point right now where we're counting votes. We've spoken with a number of our larger institutional investors. And we've heard some voice their statements pro and against, but of course, that was very early on right after the lodging occurred. We had yet to put together a -- our response to it, so we'll have a much better feeling for that next week after we go out and visit with folks directly and them having had the benefit, of course, of reviewing our response.

All right. The next one is actually in 2 parts, the first part being directed to Amit, which is: A trial was done a few years ago by a U.S. HMO with a number of SOZOs monitoring heart failure patients in their homes. What became of that? Are the Board members keeping remote patient monitoring in mind for the future?

Thanks, Hannah. Yes, absolutely, that was a study done at Scripps. And what it showed us is that, while heart failure is a substantive market opportunity and the technology has significant promise, the other elements of a successful commercial launch include having substantive clinical data and reimbursement. And as a Board, we need to continuously prioritize how and where we spend our resources. And in this, at this moment, the lymphedema opportunity is a tremendous opportunity that needs to be accelerated upon. That being said, remote patient monitoring for indications such as heart failure, renal and others remain interesting and of value to us. I think there's many ways in which we can extrapolate on that value. And for now focus is incredibly important. And that's where we're taking a phased approach to, starting with lymphedema, and keeping those other market segments available to us as and when we have the capital resources and momentum to capitalize on those opportunities.

That actually leads very nicely into the second part of this question, which is a priority has been set to focus on lymphedema addressable market for years. "I'm concerned that years is too long and to leave chronic heart failure and renal markets, where competitors may arise over the years. Could this be a concern?"

So there are very few companies that ever find themselves in a situation like we have recently found ourselves in. We have, with the guidelines, the guidelines calling out bioimpedance spectroscopy for the surveillance of cancer-related lymphedema; payers responding very rapidly behind that to update their medical policies for reimbursement, not only calling out bioimpedance spectroscopy but calling out ImpediMed, calling out SOZO -- calling out our L-Dex, lymphedema index. It's a proprietary index of progression towards lymphedema. The -- and we -- there's no other company on earth that has FDA-cleared technology to measure for lymphoedema the way it's called out in the guidelines. This is such a rare opportunity for a company. It's created a $2 billion market opportunity for us. It would be criminal for us not to finally get this business on solid commercial footing by focusing in on an area where we have 0 competition, a great product, wonderful existing customers who believe in this technology and are willing to advocate it -- for it within their organizations so we can grow even faster within existing customers, so yes. It makes perfect sense that this company focuses initially on lymphedema and that we get our business to profitability, to get us to standing on our own 2 feet so that we can then use that profitability to invest in these other markets, but when the question says, "Years. And is years too long," years means that it's going to take us many years to fully penetrate this market that's right ahead of us. It's an enormous market, and so yes, it will take us years to fully penetrate the oncology market, but we better be there first. We've -- again we've got the only technology right now that can deliver upon it. Years doesn't necessarily mean that we will not be investing in other markets and other indications and finding whether or not there's commercial opportunity for us and appropriate reimbursement in those markets. I've mentioned in the last 4C call that we had recently submitted for FDA clearance our updated 510(k) to clear the contraindications. That is solely for heart failure. We also have a clinical study, a cardiac clinical study, underway right now to understand the outpatient environment to give us an experience on how our SOZO technology would be applicable there. And Amit just mentioned the clinical study that we had previously done in heart failure. So we will continue to pursue these other indications. We've -- now have some additional capital to do so, but any company at this stage, given the setup that we've been given that doesn't take maximum advantage of it, it would really be folly and would be a destruction of value where we have an opportunity to really create great value here; and again, getting our own 2 feet, to get to profitability, maybe a quarter or 2 later but with a lot more momentum than we would have gotten to profitability had we stayed on the path that we were on before the capital raise.

All right. Next one. With respect to the recent capital raise, how did the Board quantify/evaluate the trade-off between potential additional shareholder value created by raising capital versus the permanent loss of shareholder value by raising equity at 0.13?

Don, did you want to take that one...

Rick, do you -- I can take that, certainly. I think most importantly is to look at the fact that the dilution was very minimal to existing shareholders. I think it's the most important. I do believe that what we were focused on and what has played out in the market following the raise is that bringing on the additional institutional investors created a much stronger shareholder base for the company. And as I mentioned, that is evident in the share price increase following the raise.

All right. What capital requirements did the directors foresee the company having over the next year and in the longer term?

So the -- we have stated -- Tim and I, when we've been speaking with shareholders and also in the 4C, have stated that the goal of the capital raise is to ready the company for scale. With private payer reimbursement coming on very rapidly, we need to get ready. This company is not ready for scale. We're thinly staffed everywhere, single threaded in most parts of the business. We don't have a commercial lead. We don't have a Chief Medical Officer. We don't have the capacity to do the clinical studies that we need to do to go after additional cancer types, so we had shared with the market that we would be adding an annual roughly $10 million to our expense base. We are going to pace ourselves to get to that point, so it won't be that way in the next fiscal year. It will be significantly lower. It takes time to hire up the right people and scale the business properly. And also we want to time ourselves accordingly with the private payer reimbursement coming in the door. I can reconfirm for you that we are very confident that we are going to achieve at least 50% private payer reimbursement for the end of this calendar year; and close to 100%, 95% or so, by the end of our fiscal year next year. We need to invest in that growth. And this capital raise positions us to get to cash flow breakeven still but, a quarter or 2 later, get there with a lot of momentum and growth, as opposed to barely making it to cash flow breakeven had we not done the capital raise. So we are very well positioned right now with the capital that we've raised to get to that cash flow breakeven and to grow a great business. It will get us on our own 2 feet.

I think this one is probably for you, Don. And it is why is Rick so involved given this is a governance issue.

Well, I will give a brief response to that, but it may be something Rick also wants to respond to. But I think Rick's involvement reflects the fact that 4 of the current Board members are actually being affected by this and impacted by this. And I think Rick is looking to the support that he receives from the Board, the understanding of the strategy and the monetization of the company at this point in building out the strategy that is in place, so I certainly believe Rick sees that having a Board that is able to support him and his entire management team is critically important to him being able to successfully execute that strategy on the ground.

Absolutely. And...

Rick, do you want to add to that?

You bet. Thanks, Don. Absolutely. And again I'll mention we don't really know the proposed new directors. We don't know much about their backgrounds other than short bio, but I do know my current Board. And I know the experience that they bring to the table. I know the support they provide not just to me but the whole company. I know that 2 of them are former CEOs that lived the life that I lived; that understand what it takes not just to run a business but to be a leader and to keep a team motivated, to develop a culture where people are excited to come to work and to win in the marketplace. This company has been around for 25 years and is yet to find its commercial footing. And for -- I'll take a little bit of credit for it for some of the work that I've done, but also timing is a big deal as well in terms of how things played out with NCCN and now private payer. But in terms of the culture of the company, in terms of morale of the company, it is significantly changed right now from where we were before. There's -- this company has gone through just wrenching change over the last few years. And this instability that's being created is dramatically affecting morale of my existing team. It's limiting my ability to recruit the type of people that I want to recruit. I've mentioned to a number of you that I've got a phenomenal candidate for a Chief Commercial Officer, someone I've worked with before who never would have even considered coming to a company like this before the last year or so because of the accomplishments that we've had generally as a business but also because of my leadership. We've got a Chief Medical Officer in a similar state that is going to be wonderful for this company, but both of them are second-guessing their decision to come to the company given the potential instability that's been presented by this, so it's this is directly impacting my ability to lead this company and lead this team. It's directly impacting my team's morale. And the quicker we can get this behind us and get focused back on growing the business and creating value, the better for everybody.

Another one. Why are the directors' fees so high when the company has insufficient capital?

Rick, I can take that one, if you like.

Sure.

I think, when we look at the compensation of the directors, we don't do it in a bubble. We actually step outside the company and use an adviser to assist us in guiding our thought process on director fees. We work with them to develop a cohort of [ corporate ] comparable companies, which is made up of entities in both Australia and in the U.S., in terms of determining what those compensation ranges should be. In order to maximize our cash flow and to better align the directors with shareholdings of the other shareholders, a couple of years ago, we actually changed to a 100% equity reimbursement, yes. And the -- it's currently 60% equity and 40% cash for tax purposes, so we believe that we've done our best to not pull cash out of the company and, again, to better align the directors in terms of shareholdings with the shareholders.

So this is another one on the capital raise. With respects to the recent capital raise, how did the Board decide which of its largest shareholders should be offered shares under institutional placement and which would not be?

Tim, would you like to weigh on that one for us?

Sure. We worked closely with our JLMs and the top shareholders from our share registry. In terms of the SPP, 98% of shareholders that participated in the SPP were able to receive their pro rata share or better. In addition, a portion of that 2% were also able to participate in the retail broker bids via the joint lead manager networks. We don't have the percentages specifically on the percent of company, but that's less than 2% of the shareholder base that, from the SPP, were able to avoid dilution, so a really strong result from a capital raise perspective.

One -- we've got a few more and then a few that have come through live. [Operator Instructions] One for you, Rick: What are the metrics for success over the coming years?

Well, first and foremost is taking advantage of the opportunity that we have in front of us in cancer-related lymphedema. I will state again there are very few opportunities [indiscernible] that get presented to a company like this. If -- it's an indication that's been -- it's a condition, lymphedema, that's been around forever. It's only been managed really once someone develops lymphedema because there hasn't been a great way to surveil for limb lymphedema. We have developed a technology that does address that and -- identifies it before it reaches its chronic condition where it needs to be managed with horrible therapies, including surgeries that try and extract that and fluid from the body. We can stop all of that with our technology. And we're the only company on earth that can do it to the guidelines and that can do it to the private payer reimbursement medical policies that have been updated to date. Companies just don't get presented with those opportunities very often, and it's not a small opportunity. It's a $2 billion market opportunity. That's bigger than any other market opportunity this company has ever identified in any other indication. And so again I think it would just be criminal of us [ not to focus on that ] [indiscernible], so that's what we're going to be doing this year. It's going to be all about getting those [ private ] payers to convert by the end of our [indiscernible] [ just with ] 95% of them. That's priority #1. Beginning to sell more SOZO systems: We're continuing to see our pipeline improve. And we're continuing to get great feedback from our existing customer base that wants to now scale more systems because reimbursement is coming along with it, but I'm not going to get ahead of myself. Again I'm going to tell you that we're going to make really good progress this year, but we have to time that progress to our ability to scale, having the right resources. We have to build out our support team. We have to build out our sales team. We have to build out our market access team so we can continue to shape these medical policy changes, so this year, it's about getting on private payer reimbursement, up to 95% of the private payers, in the U.S. And we will definitely start to see the scale in system sales and revenue this year, but next year is going to be the big year for revenue increase. In addition, I will also mention that we are not giving up on other indications. We're going to continue [ investing there ] as well, but again, we're very thinly staffed right now. It's going to take us some time to get the teams built up to even do that work going forward, so give us a little bit of leeway. Give us time to get those teams put back in place. And we'll continue on with our FDA clearance for contraindication so that we're ready for heart failure. We have a big work effort in front of us to develop the commercial model to go after other indications.

Just a few more here. Does the Board acknowledge any mistakes with respect to the structure and execution of the recent capital raise?

Don, would you like to handle that?

I think there are, in retrospect when we look back, the raise accomplished, what our primary objectives were; and that was to immediately take advantage of the NCCN guidelines change. It was to derisk the company in terms of capital raise. It was to do it in a timely fashion so that longer term we did not have downward pressure of a financing overhang on the company. And it was be -- it was to be able to grow the company at an exponential rate rather than slowly growing the company. So when we look back, overall, we do believe that it was highly successful. I think that, if we have a regret or feel that anything may have been done wrong, I think that's where we want to go back to the shareholders, mostly next week, and be able to have those conversations with them to work through their concerns around that.

We have reached time today. I know that there are still a few questions that have come through at the very last minute -- yes?

Hannah, can I ask one -- can I answer one question that I see here that came in just a minute ago?

Yes, of course.

Have any of the Board taken a listed company from 0 profit to $100 million-plus profit? What are the names of those companies? Yes. I have. It was Tandem Diabetes. And Tandem Diabetes is a great example of a medical technology company. They take sometimes decades to build. And the investment that goes into getting a product commercialized, especially in a competitive environment like that, is tremendous. And this is not unusual, what you've seen here at ImpediMed. These things just don't happen overnight. And by the way, in terms of recruiting lots more directors that have taken companies from 0 to $100 million-plus in profit, we're in a better place to do that. And we've all admitted we're willing to continue to evolve the Board and find the right type of Board members for the future of the company, but be honest with yourself as shareholders. A few years back, this company had been around for a long time and yet to find commercial footing. You weren't going to find a lot of directors that would want to join the board of a company that had that sort of profile if they've taken a whole bunch of companies from 0 to $100 million-plus in profit, but I just want you to know that I have.

Thanks very much, Rick. Yes, like I said, there are a few that we haven't been able to answer. If you'd please send them to me or to the investor relations at ImpediMed's e-mail address, we will come back to you as soon as possible. Before we close out today, do you, Rick or Don, have any closing remarks?

Yes. I would just like to thank everyone for taking the time to join the call. And we look forward to having an opportunity to not only address you next week live and in person, but I'm sure there will be other opportunities over the next couple of weeks as well.

Ditto that. We look forward to seeing as many of you as possible next week.

Thank you very much, Board of Directors. And thank you very much to all of ImpediMed's shareholders. As it was mentioned before, Rick and Don will be in Australia next week. If you would like to meet with them, please also send me an e-mail, and I will get that arranged for you. And thank you very much for your time today, everybody, and we hope to speak to you soon. Goodbye.

Thank you.