Micro-X Limited (MX1) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Micro-X Limited RPH development contract Investor Call. [Operator Instructions]. I would now like to hand the conference over to Kingsley Hall. Please go ahead.

Thank you, Rachel. Welcome, everyone. I'm Kingsley Hall, and I'm pleased to be talking to you today following our major announcements last Tuesday and Wednesday, the third and fourth of December that Micro-X has been awarded a development contract of up to $25 million. As we'll outline on this call, this funding with the U.S. government agency, the Advanced Research Projects Agency bank or ARPA-H and will fund us to develop through the regulatory approvals, a full-body CT scanner, which is lightweight and exceptionally portable. Also on the call with me today is our Chief Operating Officer, Anthony Skeats, and Dr. Brian Gonzalez, President of Micro-X Inc., who's in Seattle. Both Anthony and Brian will be available for questions and answers, which will follow an overview of the details we'll be providing on this operates contract.

Hello, everyone.

Hello, everyone.

Now before we begin, we'd like to remind those of you on the call that today's call may contain forward-looking statements, which involve inherent risks and uncertainties. Those risks and uncertainties include those disclosed in our ASX lodgments, which we recommend that you review. While there are reasonable grounds for any forward-looking statements made today, due to inherent uncertainties, we recommend that you do not place undue reliance on those statements, and you note that actual results may, of course, differ materially from those forward-looking statements. So let me begin by saying how excited we are to be talking to you all today about the contract we've entered into with up to develop a full-body CT scanner. This is U.S. government-backed nondilutive funding for us bringing our high-quality development work closer to commercial products and revenues. It's also a natural extension of our groundbreaking work with the ASA for the HCT program, which we announced last week has now successfully taken images and we'll be moving into clinical studies to strike detection in Australia in 2025. We believe CT when powered by Micro-X's next technology has enormous benefits over conventional CT by being smaller, lighter and using much less radiation on the patient. So while the head CT was our first program that has been funded by the Australian Stroke Alliance to date, the full body CT is the next generation of the same product line not a new one, which provides a compelling solution with the obvious broader users being able to scan the home body. When we completed our strategic review a little over 12 months ago, we made it clear, we wanted to build partnerships and source nondilutive funding to benefit the development of our technology and provide market access. The PRH development contract shows delivering on this commitment with another key U.S. government agency, which provides us both market access and funding. Many of you may ask if there's any commitment to the U.S. government to order the product once complete and approved. And while that's beyond the remit of ARPA-H to place any orders or commitment, it's not lost on us that the U.S. Federal and various state health departments want a product like this once it's complete, and that's why they're supporting us with this funding. I'd like to highlight that as you would expect with the government funding program. This contract was the outcome of a highly competitive tender process, involving deep review and diligence process, led by Brian and supported by its aspect of our business. We believe our breakthrough capabilities and technical know-how shown through. And the second major U.S. government contract for Micro-X is another strong testament to our capabilities and technological offering. Turning now to the key points of this contract and what it will add to our business. So firstly, our U.S. subsidiary, which is a U.S. government approved vendor, has signed a contract with U.S. government agency upper with a program objective to develop a lightweight and portable full-body CT scanner for integration into a small vehicle that can be deployed into rural America. We expect that they'll be making a major announcement in the near term, where details of their plans and health care objectives will be made public, which we will then share with our shareholders once that's occurred. To give listeners some context of this product and its applications. I'm sure many of you have been in a conventional CT scanner, which is usually found in a large room in a radiology suite or a hospital. It's the large cylindrical system where you lie down the bed slide you inside of the CT. So it's all around you for the 5 to 15-odd minutes the scans are being taken. For many of us, it's not a pleasant experience. And of course, the scale of these systems make them very expensive and not at all feasible in small regional or remote centers where it's often a small clinic with no radiographer or just basic triage capabilities. But just like our head CT, which aims to bring diagnostic and imaging with a small enough to fit into a roadside ambulance. The goal of the full body CT is a unit which is also a small cylinder, the size of a basketball hoop, but can scan not just the head but the whole body where the patient lies on a small bed with the device or who runs back and forth over them. In terms of the contract, it's a 5-year development contract for up to $25 million, which will be split into two stages. The first of which is a $12.5 million contract, which funds the development of the first prototype CT scanner over an initial 2-year program. Subsequent to this, RH has an option in the contract for an additional $12.5 million, which would fund the full body CT development through the 510(k) submission with the U.S. FDA over a 3-year period. It should be noted that all funding under the development contract is completely non-dilutive and Micro-X retains all rights to the developed product and its associated IP. I'd like now hand over to Brian to provide some more background. Thanks, Brian.

Thanks, Kingsley. I'd like to start by providing a little background as to why we have not provided a lot more detail in this very exciting next step in Micron growth. We have been asked by ARPA-H to keep our public disclosures to a minimum until they can coordinate an official launch event sometime after Christmas. To this end, we will try to keep our discussion of the contract and details on this call more focused on Micro-X while providing only a limited amount of information about ARPA-H and the overall PARADIGM program. With that said, I do want to provide our investors with a little background about the U.S. government agency, ARPA-H, because many of you may never have heard of it. Advanced Research Programs Agency for Health is a spin-off of DARPA. DARPA, Defense Advanced Research Projects Agency, we set up in the 1950s to fund research from an early level all the way to productization that the U.S. military needed but companies found too risky to fund themselves. Some of DARPA's more notable successes include the Internet, the first weather satellite, GPS, the M16 rifle, just to name a few notable examples Several years ago, ARPA-H was set up with program officers from DARPA to help gain changing medical technologies that the conservative medical device industry have been slow to invest in, technologies that could transform impact -- could have a transformative impact by improving health for all Americans. One of ARPA-H's first big program was called PARADIGM, for Platform Accelerating Rural Access to Distributed and Integrated Medical Care. I'd say that the focus is all about making health care more accessible to people who live far from hospitals, and they see advanced high-quality CT imaging as a key component of this program. Through a competitive multistep selection process, Micro-X and another organization were selected and are now funded to do the research and development for a revolutionary CT imaging system. I cannot yet say who the other organization is, but I can say that they are the top of the world in CT research as opposed to core technology development and will provide a rich research focus on the use and application of CT. Having them part of this project enables Micro-X to not only bring a revolutionary CT to a product but also to work with the best in the CT research and clinical use of CT in the world. Micro-X is now under contract with ARPA-H to design and deliver a full-body CT that is substantially lighter and more rugged than any other CT ever conceived. This builds on the head CT, which is already the lightest, smallest and most rugged CT ever developed. The head CT is specifically designed point-of-care emergency response head imaging, a high diagnostic need, whereas this new CT will image entire bodies over the full range of CT clinical applications and a full range of patient size, just like a hospital-grade CT. Micro-X is funded for the first 2 years of the project in the first year Micro-X cell partner with John Hopkins University and Monash University, extending the existing relationships that have worked so well for head CT to do the background work required to demonstrate that we can deliver the full body CT, this will include simulations, clinical input and tube and generator development to increase the performance of our current mini tube. At the end of the 2 years, we will demonstrate early prototype using our current mini tubes and the first working -- and the first high-performance MiniTube, this will enable us to demonstrate that we can deliver the full body CT. After 2 years, ARPA-H has an option to continue funding Micro-X. If they choose, Micro-X will build and test two full CTs. Included in this testing will be images of humans to support FDA submission. These prototypes will have the same design that is demonstrated in the early prototype but replace our current mini tubes with a higher performance MiniTube. The goal at the end of the second period is that we have all the data to submit to FDA. There's one -- there's a final 1-year phase focused on finalizing FDA and integration testing. So overall, this program funds Micro to take the final technology development step to bring our tubes and generators and imaging to be able to do any CT imaging. I believe at the end of the program, Micro-X will have an imaging system, FDA-certified that directly competes and could disrupt the major medical imaging players. ET is the heart of medical imaging and the most profitable segment of the market for both medical imaging companies and hospitals. This funds Micro-X to develop a product that could end up delivering competitive CT imaging in a system that is lighter, simpler and more cost effective than these other systems a system that is both cheaper to acquire and to maintain while also opening the door to new imaging capabilities in the future. Finally, I just wanted to share a personal background with all of you about this. I have been working with carbon nanotube x-ray and CT imaging since 2005, and when I defended my dissertation in 2010, this is the system I wanted the technology to grow into. The technology has been very challenging. We have come up against and overcome many obstacles that delayed our progress. But we are now demonstrating we can deliver meaningful CT with the head CT scanner. We are imaging real explosives with the security CT scanner and we are being recognized as the best solution to deliver a full-body CT with this technology. In the past, we played in the side show, but now we're beginning to play on the main stage of medical imaging, the key is the reason everyone has always cared about carbon nanotubes. It is the reason Siemens originally invested in Shinri it is the reason that hundreds of millions of dollars were spent with other companies trying to make CNC work, it's the reason that hundreds of peer-reviewed journals have been published in carbon nanotube x-ray and it's the reason that the entire medical imaging community track Micro-X every step. Micro-X always believed that in order to get carbon nanotube x-ray to deliver CT imaging, you needed to take baby steps into niche markets with simpler systems first. And without that, we could have never gotten here. but we are now really entering the CT world. The first CNT x-rays will be imaging real patients with CT for the first time ever in the world and we are now funded to take all -- we take that all the way to full body CT. This is the reason I have persevered for nearly 20 years in this technology and I'm deeply grateful to all of you who have persevered with us in this journey.

Thank you, Brian. It's Anthony here. Yes, I'd like to echo your sentiments to all that continue to support Micro-X on our journey to remove the technology limitations of conventional X-ray tubes that drive high-cost, heavy and complex x-ray products, limited availability of x-ray and CT to the wider global population. On this note, I would like to expand on the linkage between our head CT and the Full body CT. Three years ago, we partnered with the Australian Stroke Alliance under MRFF grant to research the possibility of further miniaturizing our CNT X-ray tube about the Rover to 25% of the size and explore the possibility of delivering a stationary array of tubes in a compact lightweight low-den easy-to-use device that could change how the timely provision of stroke diagnosis is made, with the aim of making any ambulance capable instead of expensive and highly complex mobile stroke units. Last week, we passed a significant milestone in producing head CT images show full anatomical structures using our novel mini tuber, high-voltage switching, unique curve detector and reconstruction software. We have a concept design winning under 70 kilograms that mounts into a standard road ambulance is retrofittable and delivers less than 1/3 of a conventional [ CTOs ]. The development of this continues as we commence building hospital imaging prototypes planned for human imaging trials in 2025, subject to clinical imaging acceptance from the Australian Stroke Alliance and subsequent ethics approvals. The underpinning core technology extended from a semi circular arc and into a full ring as described by Brian, is the first test system that will be built in the ARPA-H program, reusing the components developed under head CT whilst in parallel, our higher power tube will be developed. This has many benefits to the head CT program as it provides funding to expand and mature the manufacturing systems used to produce a mini tube and the potted high voltage components, thus providing the ability to accelerate development of the test benches into fully integrated prototypes for future vehicle integration, testing and medical device technical file preparation. It also has many benefits to the ARPA-H program and that the fundamental core technology has been significantly derisked at commencement, thus allowing the project to progress into the imaging development phases more quickly and with more certainty. This is exciting as it operates is a natural extension to Head CT, leveraging our existing know-how in the same medical CT space, allowing us to use increased resources on a common more. One final point for me is that as operator commences, we remain firmly committed to the completion of the MRFF program and commercialization of the head CT, which offers a compelling and new market in pre-hospital emergency head imaging driven by clinical need and a unique opportunity for Micro-X to be the leader. Over to you, Kingsley.

Thanks, Anthony. Thanks, Brian. Look, in summary, we're incredibly excited to be extending the development of our groundbreaking CT technology into a full-body CT solution. This contract extends our funding pathway and build on the work we have completed with the initial funding provided by the Australian strike Alliance. In terms of headline numbers, in the financial year to June 2025 we're forecasting to receive around $3 million to $4 million from operates across this period. I would add that we don't see any incremental head count or major CapEx requirements to fulfill our obligations as we transition the Head CT team across and that product moves into its clinical phase of work. We remain committed to executing our near-term priorities as outlined at our recent AGM, and securing this nondilutive funding is the latest example of this commitment. With that, I'd like to turn over -- turn back to the operator, for the question time. Thanks, Rachel.

[Operator Instructions] The first question comes from Scott Power with Mullen Financial.

Congratulations, team, on that fantastic grant award. I might just start with asking Anthony a question. You just say the commitment to complete the current head CT program. What is left to do and just the time line for that? And then my second question, think possibly to Brian. Just in terms of the technology step-up from head CT to full body, how would you describe that in terms of step change it more complex or 20%? Just to try and sort of get some sort of idea of how you see that step going from head to full body?

Yes. Thanks, Scott. Okay. So yes, the Head CT program, we're basically producing three hospital test benches right now. These are basically representative of the product that we'll go into an ambulance that instead of being mounted to the wall by means, there are wheels, so that we can put them into radiology departments. Our plan is to install all three of those in the next 6 months. They're going into the Royal Melbourne Hospital first, then the Royal Adelaide then Box Hill. And they will be basically conducting a clinical study clinical imaging study on a range of patients, acute word patients and then patients being presented in the IC in the ER or off of a mobile stroke unit into the hospital. So we can gather enough data set to prove that we can clearly see 5 different types of bleeds in different parts of the brain. We had about 27 of each different type for it to be statistically significant. That study takes somewhere between around 9 to 12 months. We just simply have to wait for that number of people to turn up with those conditions. In parallel to that, next year, we are working with the South Australian Ambulance service to integrate a working unit into an ambulance and actually conduct roadworthiness testing and make sure the whole kind of circle zero halfway work called the store ambulance when it gets deployed, can the operators use it to the clinicians at the Royal Adelaide hospital receive the data. I'm anticipating that's going to be kind of finished around the end of next year at the same time as a study, and that will give us all the information we need to start progressing the medical device technical submission, so roughly about 3 to 6 months beyond that. We should be in a position to actually do our regulatory filings. Brian?

Yes. So to try to answer that question. I think the first thing to note is that this is -- this development is probably the most incremental new project that Micro-X has taken on in the past when we've taken on new projects, they were almost completely new when we started the baggage screening system we were building on the back of very little and had to build up a lot. This is an extension of the head CT program in the sense that we are taking from a ring around the head and growing it to be head CT to a ring around the body. So on that sense, it's not as significant as other jumps that we have made. The other -- the really significant component of the project are around continuing to improve the performance of the mini tube so that it can image through a human. Again, this builds on all that we've learned and all that we've developed in all of our tube and generators to date. And it also means working on doing our imaging, but again, that builds on what we've done with John Hopkins. So it's hard for me to give a percentage, but I think of it as building on everything that we have done and leveraging everything that we have done in CT, both head CT and the baggage CT and bringing all of this knowledge together, including what we've done for Rover and taking the next step with it. So it's kind of the next big step, but it's a continuation building on all of that. So it's hard for me to quantify that as a percentage, but that's how I think about this as the next step in our development, if that makes sense.

Your next question comes from Brendan Earle a private investor.

Congratulations, everyone. That's tremendous news. Did -- I know you can't say too much, but did I hear correctly that the other partner in the program is likely to be more a hospital group rather than a device provider. Is that correct?

Yes, that is correct. Yes. The other -- within the -- it's -- what we are finding in is a very large program, and there are two people working on the CT. The other provider in the CT is a hospital group. And a research group based out of a hospital. When they -- when the program does its big industry day, we can update people with some more about it. But when that goes public, it will be very clear that it's a hospital group and a research group out of a hospital that's working with a university in a hospital together.

Thank you, because I had to look at the existing ARPA-H webinars and they talk about down selecting after 2 years, but it sounds as though in our case, if we meet the specifications, we're not likely to be taken out by a competitor.

I would certainly agree that that's how we feel. And I cannot speak for the government. But yes, I think that that's a valid and we share that perspective.

[Operator Instructions]. I have a follow-up question from Scott Power.

Just another question back to Brian. You spoke about the competitive landscape over the last couple of years. I'm just wondering if you could give a little bit more insight into what else is out there. Clearly, from what I think you were saying is that you feel like your technology is still ahead of everything else. And even the major instrumentation companies are still working with some fairly legacy technology. Just perhaps a little bit more color around that.

Sure. Yes. So I was specifically talking about cold cathode carbon nanotube-based technology. And I got into that in the -- around 2005. And when I did everybody, all the major players, GE, Siemens, Canon, Fuji Film we're all trying to make it work. Many of them have since given up. And -- but the reason everyone was interested was because they saw the value in CT. And it was actually the reason that Siemens invested in Shinri way back in the day and then exited because they felt it was -- the technology wasn't mature enough. Another notable example, more recently, is Nano-X. When Nano-X went public, it was on the assumption that they could do full body CT. And they've lost a lot of value when people realize that they can't. And what they're doing now is tomosynthesis, which is not the same thing, it's full body CT. And even that, they're still -- they felt technical challenges. Realistically, there isn't anyone who's close to us, there are some companies out of Korea doing carbon nanotube technology. That tends to be very low power and very low performance. And this is further validated by our strategic partnership with Varex, a big part of the reason that Varex was interested in wanting to collaborate with Micro-X and partner with Micro-X because they see that this technology goes forward to BT, and that's a big part of their motivation is the future of CT they're doing stuff with multi-beams, multiple beams, and we're doing stuff with individual tubes. And we think that having individual tubes in a ring is a far more robust and cost-effective solution. And -- so that puts us ahead of everyone else who's there because no one else can deliver the performance or the capability of what we're doing. And a lot of people have since given up on because they just can't get to where we are.

There are no further questions at this time. I'll now hand back to Kingsley for closing remarks.

Thanks, Rachel. So thanks again for all of your support and for joining us on this key update call. As I said earlier, we're really excited by this recognition of our technology and to secure this funding of up to $25 million, enabling us to build on the success of our MCT product and created solutions for whole body CT. This is an absolute game changer in terms of medical imaging, taking CT imaging to a greater number of people in need around the world wherever they may be in a major city or not. I look forward to speaking with you again to report on our progress. Thank you.