Perimeter Medical Imaging AI, Inc. (PINK) Earnings Call Transcript & Summary

Greetings, and welcome to the Perimeter Medical First Quarter 2023 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jodi Regts. Thank you. Jodi, you may begin.

Thank you. Good afternoon. Thanks for joining us on this call and webcast to provide the first quarter 2023 results for Perimeter Medical Imaging AI, or Perimeter. Joining me on today's call is Jeremy Sobotta, Perimeter's Chief Executive Officer, who will provide an overview of Perimeter's progress, and we will then open the call for your questions. Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the future financial position; business strategy and strategic goals; commercial activities and timing; competitive conditions; research and development activities; projected costs and capital expenditures; research and clinical testing outcomes; the potential benefits of our products, including Perimeter S-Series OCT, Perimeter B-Series OCT and Perimeter ImgAssist; the efficacy of our clinical trial designs, the timing and anticipated enrollment in our clinical trials and the timing of potential publication or presentation of future clinical data. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEDAR filings. Our results may differ materially from those projected on today's call. We undertake no obligation to publicly update any forward-looking statements. For additional information about the risks and uncertainties facing our business, management encourages you to review the company's public filings and press releases, which are posted on SEDAR at www.sedar.com. The news release summarizing this business update that was released today will be available under the Investors section of our website at www.perimetermed.com and filed with SEDAR. Now I would like to turn the call over to Perimeter's CEO, Jeremy Sobotta.

Thank you, Jodi. Good afternoon, and thank you, everyone, for joining us today. I'll provide a brief review of the quarter, including commentary on our commercialization activities related to our S-Series flagship technology, as well as the clinical development of our next-gen investigational B-Series technology, augmented with our ImgAssist artificial intelligence software that is currently being evaluated in a clinical trial under our ATLAS AI project. I'll then provide a brief overview of our quarterly financial results before opening up the call for your questions. Beginning first with the commercial front. A key part of our go-to-market strategy is to successfully target early adopters of Perimeter's transformative technology. The highly engaged champions of our technology at these newest accounts continue to build upon our foundation of reference sites, and our team is focused on training and supporting these surgeons as we drive towards future iterations of our AI-enabled technology that has the real potential to democratize it for more widespread adoption. As we continue to reach out to leading surgeons across the U.S. to educate about the benefit of our flagship Perimeter S-Series OCT, we're pleased to report the first commercial placement in the State of Utah. The momentum continues to build in our sales pipeline, resulting in increased leads and demonstrations with key opinion leaders like Dr. Tittensor who represent the champions and initial adopters of our groundbreaking technology. And we look forward to updating you on additional deals nearing completion. As noted on our last call, although we continue to add to our funnel and build upon the momentum that was kick-started in the fourth quarter, our discussions with both customers and clinical investigators, we're discussing some of the headwinds facing their adoption of new technologies more broadly and the broader med tech industry. Of note, staffing shortages and ongoing global inflationary pressures on the labor market continue to raise concerns, I'd say particularly for the research staff and those in specialty medicine applications. But despite these macroeconomic pressures, we're encouraged by the caliber of surgeons and institutions adopting our flagship technology and believe the key opinion leaders at these reference sites are providing a strong foundation that validates our commercialization strategy and as we strive to build a base of strong early adopters in advance of the expanded market opportunities when we launch our AI-enabled technology. As the overall sample size of S-Series enabled procedures continues to grow, we continue to see positive results from our early adopter user base. With a backdrop of national average reoperation rates in the 20% to 25% range, initial reports from our customers are reporting single-digit results when utilizing our technology to visualize our margins intraoperatively. We're also encouraged and excited by additional supportive clinical evidence published this quarter in a white paper that featured case studies from the commercial use of Perimeter's S-Series OCT. Dr. Amelia Tower, a Board-certified general surgeon with advanced training in breast surgical oncology, authored the paper and described how she integrated our S-Series OCT system into her breast oncology practice. She concludes that when assisted by Perimeter S-Series OCT in these particular 3 cases, she was able to make intraoperative clinical decisions to excise additional tissue during the primary surgery, sparing those 3 patients the need for a second surgery and relieving the associated burden on the clinical, economic and cycle social resources. It is these kinds of results that are driving excitement around Perimeter's technology, both from our existing user base and newly targeted surgeons who are learning more about our margin visualization technology and requesting evaluations in their own ORs. Further, it is this high level of engagement that continues to reinforce our belief that the next-gen B-Series OCT with ImgAssist AI has the potential to be a transformative technology that could democratize the new standard of care that would easily be adopted at a mass market scale. We have also made significant progress within our ATLAS AI project. As a reminder, that it is a multicenter, randomized 2-arm pivotal clinical trial, evaluating the Perimeter B-Series OCT, combined with its proprietary ImgAssist AI software, in approximately 333 patients, with study completion anticipated at the end of this year. It's led by our principal investigator, Dr. Alastair Thompson at the Baylor College of Medicine in Houston. And the aim of the study is to assess unaddressed positive margin rates of surgeries utilizing Perimeter's technology compared to the standard of care. We believe that this further enhancement of using AI alongside our proprietary OCT imaging technology is going to empower surgeons with the tool set to improve health care outcomes. By the end of last year, we had activated all the initially planned clinical sites and received FDA approval to expand the number of institutions involved in our trial. I'm pleased to report that we have now initiated an additional clinical trial site at Baptist MD Anderson Cancer Center in Jacksonville, Florida and continue to engage with other potential investigators to further accelerate study completion. We continue to hear from the investigators involved in the clinical trial that suggest combining OCT with deep learning algorithms could assist surgeons to better identify regions of interest, supporting real-time decisions on margin status in the OR, potentially setting a new standard for specimen imaging technology during breast conservation surgery. With the number of users growing across both our commercial and clinical initiatives, we continue to have a strong presence at key medical conferences, including the International Conference on Surgical Cancer Care hosted by the Society of Surgical Oncology, or SSO, in late March and more recently, at the Annual Meeting of the American Society of Breast Surgeons in Boston. At our booth on Perimeter-led educational symposiums, we see many physicians across different surgical oncology specialties want to evaluate our technology and see the advantages of using S-Series for their margin visualization in the OR. At the American Society of Breast Surgeons this year, we had a full room listening to a session moderated by Dr. Beth DuPree, as Dr. Beth Anglin and Michele Carpenter shared their experiences using the S-Series OCT in their operating rooms to help personalize clinical decisions for each patient at the point of care. And their excitement is inspiring. We're committed as a team to educating about the benefits of Perimeter's technology in surgical practices with the aim of improving patient outcomes and reducing health care costs. I would now like to turn my attention to a brief overview of our first quarter financial results. For more details, please refer to the press release issued earlier today. As noted in our year-end results, the company changed its presentation currency from Canadian dollars to United States dollars. The change in presentation currency was made to improve investors' ability to compare the company's financial results with other publicly traded businesses in the industry. And in making the change to U.S. dollar presentation currency, the company followed the guidance in IAS 21 and has applied the change retrospectively to all prior periods as if the new presentation currency had always been the company's presentation currency. Operating expenses for the 3 months ended March 31, 2023, were $3.8 million compared to just over $3.8 million during the same period in 2022. For the 3 months ended March 31, 2023, the net loss was $3,259,459 compared to $5,087,044 during the same period in 2022. And from a cash flow perspective, for the 3 months ended March 31, 2023, cash used in operating activities was just over $4.5 million. As of March 31, 2023, cash and cash equivalents were $23.6 million. With our strong cash position and prudent fiscal management, we're confident that we will be able to support our clinical development activities and fund the continued commercial rollout of our products. And finally, before concluding the call, I would also like to reiterate our gratitude to Dr. Tony Holler for his many contributions to Perimeter over the years during his tenure on the Board, including his service as Chair from 2019 to 2022, and building a world-class group of directors. The entire Perimeter team wishes him well. Suzanne Foster, our current Chair, supported by a Board of globally recognized experts, including our AI thought leader Anantha Kancherla from Meta, will continue to provide strategic guidance as we strive to transform cancer surgery. Finally, on behalf of the Perimeter team, we firmly believe in the opportunity to deliver a transformative technology to improve patient outcomes, lower health care costs through our innovative medical imaging and AI platform, and we look forward to providing progress updates on future calls. I'll now turn the call over to the operator and open the line for questions. Operator?

[Operator Instructions] Our first question comes from Frank Takkinen with Lake Street Capital Markets.

I was hoping I could start with, one, on new users evaluating the technology as well as placement expectations for 2023. I think last quarter -- or last conference call, you mentioned there was double-digit new users in evaluation. One, how does that look versus just probably about 1.5 months ago? And two, how do you kind of think about placements for 2023 versus your 6 in 2022, if you count the 2 placements that were between December and January in the 2022 year?

Yes, certainly. Thanks, Frank. Yes, on the evaluation front, we continue to actually progress in the active evaluations, but also the interest is growing and we're shipping out new ones on a pretty much ongoing basis. I think the really continued encouraging thing, I'd say, about the composition of that funnel is we're continuing to see a variety of more physician-owned surgery centers, kind of the smaller and closer to the customer kind of sites of care, but also the large academic institutions that, again, form part of our strategy to build these reference sites. And the feedback from the clinical users, the surgeons, has been continuously positive. I think they're involved in their understanding of what the technology is doing. They see how it can enhance their practice and, again, improve patient outcomes. And we're really excited about the clinical support we're seeing at the end of those evaluations. Now some are taking longer than we would like, I will say. I think one of the things about an evaluation for us is we're avoiding a problem that doesn't happen every day, right? So they might only have a few patients a week. And if there's not a positive margin for us to highlight in those few patients, then we have to go through a few more cases to really be able to let our technology shine. But even with that, folks see the possibility there and continue to work with us to get more and more cases in to see the aha moment, as we like to say, from a marketing perspective. So that's been positive. Even post winning clinical support, then we continue through the contracting phase and feeling really good about our win rate and the folks that are moving along the funnel there. All that to kind of preface your second question, which is how do we think about 2023 compared to 2022 from a placement perspective, and we definitely want to continue to grow on that. The one placement in Q1, I'd say, was a little disappointing for us just given that we wanted to continue to build that quarter-over-quarter progress. However, I kind of look at placements similar to like a capital cycle where you can make up with that and it can be a timing thing instead of -- it's not like a consumable business where once the procedure is done, you can't make it up. So we're definitely looking for growth on last year. And like we said on the last call, we think somewhere in the 12 to 15 kind of range is a good anchor point to be thinking about what a good body of reference sites would look like for us as we start to shift gears early next year towards thinking about the AI technology coming on the market.

Okay. That's helpful. And then maybe for my second one, a 2-parter on the clinical trial. One, where does enrollment stand today? I think the last update was 50% enrolled. And two, can you just remind us of the time line, once that's fully enrolled, to get that product on the market?

Yes. It hasn't been that long since the last call, so we're a little bit north of that now. We are continuing to think we'll be through with the study at the tail end of this year. And the path from there is we have to compile the evidence and submit the marketing application and still are optimistic that we'll have the B-Series on the market sometime mid '24, so really no real change on the last call there.

[Operator Instructions] Our next question comes from Scott McAuley with Paradigm Capital.

Jeremy, I just wanted to touch on kind of the utilization that you're seeing in these early sites. I don't know if you can touch on here the total number of cases that have been performed or the number of cases in Q1. Or is there any other way that you can kind of quantify how many cases these early adopter sites are doing at the moment?

Definitely. So I'll kind of segment it to just the commercial cases. We're not including the evaluation cases. So I think the ramp-up really across the board has been pretty consistent with our expectations. I'd say we have, on the whole, higher-volume users picking it up, so we're encouraged by that. And it hasn't been too much of a ramp to get them to be using it on 100% of their patients, so that's also really positive and, I'd say, consistent with expectations. We were just kind of doing some math on total case numbers, and I think we're up over 500 at this point across all of our commercial users there. And again, as I mentioned in the prepared remarks, the results continue to be on trend and continue to be really positive from their actual results and reoperation rates being reduced. And it came out loud and clear from our presenters at the American Society of Breast Surgeons. They're excited about it. They were telling their peers about it. And I think some of the nuances that come out in those presentations are things like they feel like they're seeing more disease because they're looking at the entire specimen in real time versus waiting for a sample pathology slide. They're able to kind of manage patient cases easier because, if it's something where you have to go from a lumpectomy to a mastectomy, they can figure that out in 1 procedure instead of 3 procedures. So a lot of really exciting anecdotes ala the case series from Dr. Tower coming out as we continue to expand those users.

That's great. And I have a quick follow-up on that. You mentioned that some sites are kind of trending towards using the system on all of their cases. I don't know what you have in terms of kind of either on average or what the trend is in terms of getting more of those sites to use the system on all of the cases instead of just some.

Yes. I mean the vast, vast majority of surgeons are using it on all of their lumpectomy cases. We have some early indications, very specific applications, in some mastectomy cases where surgeons are interested in the utility there as well. It's a little bit of a higher burden to want to take more tissue in a situation like that, but encouraged by that. And the pre-op diagnosis in the evaluation phase, they want to see it used more on DCIS in the evaluation. But I think once we demonstrate the utility in that phase, they pretty, pretty well quickly pick it up regardless of the pre-op diagnosis. The thing that we're continuing to build on more and more, and you've seen it with our public remarks around the way different facilities have expanded within an integrated delivery network, but also the same thing occurs within a specific facility where 1 surgeon may be the initial champion and then we start to pick up additional surgeon users. So I guess all of that to say like we're really pleased with the expanded utilization of each device, whether it's additional case mix or additional surgeon mix.

That's great. And one of the things you kind of highlighted before, and we've seen with some of the early cases, is facilities acquiring multiple systems. Most of the sites that you're looking at, are they interested in either acquiring multiple systems because they have multiple sites that they think it would be useful for or a single site that might be looking at acquiring multiple systems? Is that still a trend that you're seeing and working through?

Yes. That remains consistent with kind of what we've said later last year. I guess as a follow-on to the last remarks, it hasn't always started that way. But once the colleagues are speaking and the peers are speaking, it's definitely continued to be momentum in multiple unit deals. Now, like we focused later last year, that tends to take longer, but we're excited by the broad interest from each of those systems.

Got it. And lastly for me on the trial, you're saying you're looking at bringing on new trial sites. Do you need to bring on those kind of additional trial sites in order to achieve the goal of completing enrollment by the end of the year? Or is that more of a nice to have?

I'd say it's more of a nice to have. I think we're squarely moving down that path. We've done a lot of diligence from a site qualification perspective and have a couple of additional candidate sites that we're really excited about. And so I think we want to give those folks the opportunity to participate. And we'll be looking to share some news on that in the near future.

[Operator Instructions] Our next question comes from Rahul Sarugaser with Raymond James.

So most of my questions have been answered, but I just had one last sort of follow-up. Last call, you talked about the development of reference sites. And so given sort of the establishment of now one or more newer sites and then the balance, making sure that you're having sufficient commercial cases done. Can you please maybe just kind of give us an update on how you're seeing your sites evolve as reference sites for the eventual AI-enabled device of the future.

Yes. Great. Thank you for the question, Rahul. Well, two things I'd say there. One, you're seeing the geographic expansion here which, if you look at our early markets as, what I'll say, little microcosms of what we're trying to do more broadly, once we get that initial foothold in a geographic area, that's turning into a reference site even for the S-Series, so that's been really encouraging. But maybe from a more long-term perspective, I think since the last call, we couldn't have a better data point than what happened at American Society of Breast Surgeons. So that, for us, is our big medical conference that we attend. We had a booth there, along with the presentations I mentioned in the prepared remarks. And there, the excitement about the technology, the impact of the technology onto those physicians' practices and just the results they're seeing really prove to be infectious, whether it was in the symposium where Dr. Carpenter and Dr. Anglin presented, or them just in the buzz at the booth, from them hanging around, talking to their colleagues and folks interested in evaluations coming over to hear from them. So I think that part of our strategy is really playing out and just the foundation of that being built. And I think when you see names like Dr. DuPree, Dr. Carpenter and Dr. Anglin associated with the technology, one of the really encouraging things I'd say from that conference this year is more surgeons coming over saying, "Yes, I'm really interested to talk to you because I respect those doctors so much," and "This isn't just a flash in the pan. Now I'm hearing people I actually respect using your technology. So I want to learn more and come to see it," so I'll call it the grassroots of that strategy are really starting to sprout and excited about where we're going.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.