Profound Medical Corp. (PRN) Earnings Call Transcript & Summary

Good morning, and welcome to the Profound Medical Annual and Special Meeting Conference Call. I am Frans, and I'll be the operator assisting you today. [Operator Instructions] I would now like to turn the call over to Dr. Arun Menawat, Chief Executive Officer. Please go ahead.

Thank you. Good morning, everyone. It is now 10:04 a.m., and I will ask that this meeting come to order. My name is Arun Menawat. I'm the Chief Executive Officer of Profound Medical, and I will act as the Chair for today's meeting. On behalf of Profound Medical, I am pleased to welcome you to this meeting of our shareholders. Before we proceed with the formal business of today's meeting, I would like to introduce the Directors of Profound Medical. Brian Ellacott, Cynthia Lavoie, Murielle Lortie, Kris Shah, and Arthur Rosenthal. Welcome. Some members of our management team are also present today, and I would like to introduce them as well. Rashed Dewan, our CFO; Mathieu Burtnyk, our Company President; Tom Tamberrino, our CCO; Adam Milligan, our Lead Sales Vice President, Ian McLean, our Market Development Leader; Chris Driver, Engineering; and Rob [indiscernible] they're all here. Great to see you. Welcome. For those shareholders listening to this broadcast by the way of the webcast or conference call, you need not take any action during the formal part of today's meeting, and we wish to thank you for submitting your proxies in advance of today's meeting. Your votes will be recorded as you have instructed. And again, you need not take any action during the formal part of the meeting. . I am pleased to advise that Profound Medical received proxies representing 68.46% of our outstanding shares. Shareholders listening to this broadcast will not be able to participate during the formal part of today's meeting. However, you will be able to ask questions after the formal part concludes. That said to facilitate the timely completion of the formal business, arrangements have been made with those management shareholders physically present today to move and second the resolutions to be considered. I will call on some shareholders at the appropriate time. In accordance with the bylaws of Profound Medical, Rashed Dewan, Chief Financial Officer, will act as the Secretary for today's meeting, and I appoint Rosa Garofalo of the TSX Trust Company to act as scrutineer. The notice calling this meeting, the information circular and a form of proxy were mailed to all registered shareholders on record as of April 4, 2025. The declaration of mailing is available for inspection by any shareholder, and I ask that the secretary file copies of each with the minutes of the meeting. I've also been advised that the Secretary that -- by the Secretary that the quorum has been met for the meeting. The scrutineer's report is available for inspection by any shareholder, and I ask that the Secretary file a copy of the report with the minutes of the meeting. With that said, I declare this meeting regularly called and properly constituted for the transaction of business. All votes today will be conducted by way of show of hands except for votes regarding the approval of the corporation's unallocated stock options, which will be concluded by way of ballot. I remind those shareholders listening to this broadcast, you need not take any action during this formal part of the meeting. I will now proceed with the formal business of the meeting. The first item of business is the presentation of the 2024 audited financial statements of Profound Medical and the auditor's report thereon. The financial statements are available on our website and SEDAR+. No action needs to be taken by shareholders with respect to such statements. The next item of business is the appointment of the auditor of Profound Medical. May I have a motion for such business?

Mr. Chair, I move that PricewaterhouseCoopers LLP be appointed as the auditor of Profound Medical to hold office until the close of the next annual meeting or until its successor is duly appointed as such remuneration as may be determined by the Board of Directors.

Thank you, Mr. Tinaz. Is there a seconder?

Mr. Chair, I second the motion.

Thank you, Mr. Johnstone. Any discussion? All those in favor of this resolution, please signify by raising your right hand. Contrary? [Voting]

I declare the motion carried. The next item of business is the election of the Board of Directors of Profound Medical. Profound Medical has nominated 6 directors for election and did not receive any other nominations from shareholders in accordance with our bylaws. Accordingly, Mr. Tinaz would you please nominate Profound Medical Director nominations?

Mr. Chair, I nominate the following: Arun Menawat, Brian Ellacott, Cynthia Lavoie, Murielle Lortie, Kris Shah and Arthur Rosenthal.

Thank you, Mr. Tinaz. May I have a motion to elect those nominated.

Mr. Chair, I move that the corporation's director nominees be elected as a Directors of Profound Medical to hold office until the close of the next annual meeting or until their successors are elected or appointed.

Thank you, Mr. Tinaz. Is there a seconder.

Mr. Chair, I second the motion.

Thank you, Mr. Johnstone. I have been advised by the Secretary that based on the proxies received in advance of this meeting, each director nominee has received at least 92% of the total votes in favor of their election. Accordingly, for purposes of today's meeting, we will forgo individual director voting and proceed with a vote on all director nominees. Is there any discussion? All those in favor of this resolution, please signify by raising your own hands. Contrary? [Voting]

I declare the motion carried. The last item of business is the approval of all unallocated stock options under the corporation's share option plan. May I please have a motion for such business?.

Mr. Chair, I move that the resolution on Page 9 of the information circular be approved.

Is there a seconder.

Mr. Chair, I second the motion.

Thank you, Mr. Johnstone. Is there any discussion? As stated, we will proceed to vote by ballot. The scrutineer will deliver ballot forms to all registered shareholders and proxy holders with all persons entitled to vote in their own right or by proxy, please identify themselves to the scrutineer. The motion is the approval of all unallocated stock options under the corporation's share option plan. Please vote to make impacts opposite for or against and complete your ballot. [Voting]

I see that the scrutineer is ready to report. The Secretary has reviewed the scrutineer's report and has reported that the motion has been carried by the necessary majority. The votes cast in favor of are 68.3%, vote come against are 31.7%. I declare the motion carried. Now that concludes the formal business of this meeting. I declare the formal part of the meeting terminated and thank you all for attending the meeting. Now that the formalities are completed, I'm happy to take or respond to any questions from the shareholders or proxy holders who are physically present here today. Okay. If there are no questions I'd like to move to the next phase of the meeting. I'm delighted to tell you that Dr. Hong will present to the shareholders positive experience in the evolution of prostate care. For those of you who are not physically present, please log into the webcast to listen and launch his presentation. Dr. Mark Hong is the Founder of Integrative Urology in Phoenix, Arizona. Upon graduating Summa Cum Laude from Rice University, Dr. Hong attended Stanford University School of Medicine, earning research scholarships in prostate cancer and tissue engineering with artificial nerve grafts. Dr. Hong completed general and urological surgery residency at Brigham and Women’'s Hospital and Harvard Medical School, publishing research in prostate cancer outcomes as a prestigious national CaPSURE scholar along with researchers from Dana-Farber Cancer Institute and the University of California, San Francisco. Dr. Hong's research on prostate cancer and the fear of cancer recurrence remains one of the first works of its kind in the published literature. . Then Dr. Hong completed a robotic and minimally invasive surgery fellowship at the George Washington University. With a deep background in robotic prostatectomy, cryotherapy and high-intensity focused outer sound. Dr. Hong is recognized as one of the first adopters of TULSA-PRO and has performed over 150 TUSLA procedures independently without radiologist involvement. I have personally had opportunity to watch Dr. Hong at work with TULSA-PRO. He won't tell you so, I will. He is one of the most caring surgeon that I know. He spends a lot of time educating his patients and their families. I watched him doing cases, TULSA cases and he is incredibly meticulous and his outcomes are amazing. I'm very proud of having Dr. Hong as our early adopter. And now I'm going to turn it over to Dr. Hong to present his experience. Dr. Hong, please take it over.

Hello. This is Mark Hong, and thank you, Arun. I am, of course, honored to speak at this event. And yes, thank you for the time. I've caught myself kind of thinking back to my time in Silicon Valley during the dot-com boom. Before going to residency, I actually worked at a startup during medical school. And I was -- I have to admit, I was tempted to escape the industry at that time as many of my closest friends actually did. But I stayed in medicine, and that's because I always have really wanted to help people. And I also became a surgeon because I really want to make a direct impact in patients' lives for the better. So I want to share with you today why this matters to me and hopefully to you as well. Next slide. When we look at the technology life cycle, which I think all of us are probably familiar with, it's kind of interesting to think about in the traditional life cycle, of course, you have a scent maturity decline. And really, the takeaway here is most great companies that we know of actually have a beginning and eventually have an end. So we might think of companies like Sears or Yahoo!, IBM, perhaps one day, Apple or Amazon. And next slide. The -- if you look at kind of the technology adoption curve, which, again, many of us are familiar with, where you have adoption of new technologies, you'll see that the adoption curves don't just stack up neatly going from one technology to another. There is, as you see on the right side of the slide, a discontinuity or really what we call a disruption, right? And for example, if you were to take Tesla, we just know that it's a very, very different car. Sure, it's a car, but it's actually a new technology. That clearly is a disruption. It is very different, and it's clearly not your father's Cadillac. As Harvard Business School Professor Clayton Christensen teaches us, what's important about disruption here is not just that you're introducing new technology, but you're tapping into new customers. You're tapping into new markets as Tesla did when it first came on the scene. Next slide. And therefore, what we see here currently in the prostate care landscape is a very disjointed environment. And I'm talking about for both prostate cancer and for BPH. So take prostate cancer, for example. Traditionally, we've been talking about radical prostatectomy, which is to take the whole prostate out, now done robotically, so robotic prostatectomy RP or radiation therapy for decades. Nowadays, of course, you have actually a plethora of options, if you know to look for them, by the way, because, of course, you're going to be led to certain options based on how your diagnosing physician tells you, usually a urologist. A patient actually told me yesterday that he did use AI to help them find out about some of these different options. But while it did help him get educated on options beyond just that of robotic prostatectomy or radiation, it still didn't know how to weigh the different options. And this is actually where the role of the physician or the provider is still quite important in the world of AI. The dilemma, of course, that all patients seem to face, and I see this over and over again, is that whomever the patient ends up going to, whether that be a surgeon, radiation oncologist, et cetera, it kind of feels like whatever that physician does is what they recommend to do. And that is a very confusing and ultimately frustrating place for a patient to be in. It really seems like you got diagnosed with prostate cancer, and there doesn't seem to be an objective truth to what you should be doing in that situation. By the way, the same thing is happening on the BPH side. It used to be you can't pee and now you're going to get your grandfather's TURP or kind of the Roto-Rooter. Now we see a bit of a virtual dogfight in the literature on which technology is best to help America pee again. And we've got certainly the TURP, but you've got laser, you've got UroLift, HoLEP, waterjet ablation. Look, I think that it's fair to say that uncertainty in the marketplace means that there is a great opportunity for disruption. Next slide. So when we look at the evolution of technology in this world of prostate care, we can think first about we used to do all our prostatectomies in an open fashion, and that means making a decision and taking out the prostate. Of course, there has been a clear shift to robotic surgeries where over 90% of prostatectomies in the United States are now being done robotically. And that clearly was a disruption. So why was the robot so disruptive? In my opinion, it's because of the promise. The promise of less blood loss, less hospital stay, less pain, improved recovery. And these are all true. These have been borne out. For example, we routinely used to lose quite a bit of blood in a prostatectomy. It's just a very bloody operation. That's kind of a thing of the past in the robotic era. However, I want to also share with you that the real promise of that technology, meaning the robot really was the promise of less incontinence or leakage of urine and less erectile dysfunction. Everybody has known for ages that those are major, major long-term side effects of getting your prostate taken out. And these are the things that people care about after caring their cancer. The reality of wearing diaper socially or not being able to perform sexually are quite important to people once they have gotten over the elation, of course, of having cured their cancer. And if we look at the American and European long-term literature, it has clearly shown that there's really no benefit in terms of leakage of urine, incontinence and erectile dysfunction in the robotic era versus open prostatectomy. So think about that for 1 second. We've had this disruptive robotic technology take over our field yet we still have guys who leak urine and guys who are impotent after we take out their prostates. So in my opinion, there's still an opportunity here that is ripe for a change to be able to get even better outcomes than what we have achieved in the robotic era. And believe me, whatever advances we've made in the robotic area, we're kind of at the end of that life cycle. In my opinion then, that future is an MRI-guided robotic ablation. That is the natural evolution of that. Next slide, please. I just want to tell you a little bit more about myself in this context. I run the most experienced urologist-driven TULSA program in the country. And well over 150 cases that we have performed, there has been no radiologists in the room. And why is this important? Well, first of all, it proves that a urologist, a surgeon can learn how to interpret imaging such as MRI to achieve an excellent surgical outcome. So believe me, only a few short years ago, this was not a given. I was routinely told that you needed a radiologist to provide the image interpretation in order to treat it effectively. Second, the reason why this is so important that urologist is involved is that I know from my own experience that I'm fully responsible for my results. So if any of my patients have complications or even incontinence, erectile dysfunction, I know that instantly because I hear about it afterwards, for example, in the office. That also means that I'm a lot more careful to spare the nerves or make sure I got the answer because if I don't do it right, I'll be the one answering to that patient face-to-face first. And if any of those complications do happen, I go back and I analyze what happens, kind of like Michael Jordan or Diana Taurasi watching tape after game 1 of the finals. In doing so, I've established a protocol to get better with each case experience so that 150 cases in my hands may be much different than if I were involved in 150 cases watching over the shoulder of someone else actually doing the treatment. So over time and careful experience, I've been able to improve the efficiency of what we do while maintaining quality outcomes. So I am now currently the only TULSA surgeon in the world to have performed 5 cases in 1 treatment day. Why is that important, by the way? Well, all 5 cases, you should know, were whole gland prostate treatments, meaning they were -- really were not cherry-picked for efficiency to be able to say that I did 5 cases. But I do believe that if we are to achieve scale in this technology, then all surgeons will eventually learn what I have learned, which is to be efficient and excellent. By the way, certainly, I've treated a variety of cases as well. And of course, that's mostly prostate cancer, but also pure BPH, noncancerous enlargement of the prostate. Salvage situations are also very interesting. These are radiation failures and a very, very delicate careful situation. You got to do that very well. And of course, when we're talking about treatment, we're talking about mostly whole gland in my case, but also certainly have done a lot of subtotal or hemi ablation, meaning not treating the entire prostate or even very focal treatments. So certainly, a full breadth of the experience. Let me -- let's go to the next slide. I wanted to give you a real-life example and present to you a patient to show that this TULSA-PRO is not just a disruptive technology. It actually changes people's lives in a meaningful way. Now I do want to caution you that what I'm presenting to you is not necessarily considered the "standard of care" in the guidelines for the situation. Therefore, this is not something that the -- let's say, the average surgeon should just try at home, so to speak. It's kind of like having an F1 driver like Lewis Hamilton show off what your Ferrari can do. I'm just kind of showing you what the TULSA can do. This is an understanding that the average Chevy driver can take inspiration from this, but they actually might destroy themselves doing the same thing without some proper training. I want to present to you the 61-year-old male, a real patient of mine who actually works in health care, came in diagnosed by another urologist, had a PSA of 6.92, really wasn't terribly high. A nodule on his rectal exam. We still do those, by the way. But of course, rightfully got MRI that did show a PI-RADS 4 lesion. We can actually see it here. And of course, the PI-RADS 4 lesion led to a biopsy. That biopsy ended up showing Gleason 4 plus 5 and 4 plus 4 prostate cancer. Just so you know that puts him in a very high-risk category, very, very different from your average prostate cancer where you can be told to watch it forever, that type of thing. He also rightfully got a PSMA PET/CT. That's the image on the right side. And basically, where it lights up kind of like blowing like a sun, that's where the cancer is. That does correspond to where the MRI showed the cancer as well. Now I will actually say something about these images. What we're not showing you is that some of these other slides actually showed that there actually could be some cancer trying to leave the prostate, what we consider possible extracapsular extension even though the actual official radiology report didn't mention that. That is why he -- this patient had rightfully been advised to get a radical prostatectomy or radiation with hormone therapy, meaning taking your testosterone down to 0. And his diagnosing urologists had also told them to get a HIFU, high-intensity focused ultrasound probably because of the posterior location of this tumor, which really could have been appropriate. But again, if you have extracapsular extension, you got to be careful with that. So even I sort of balked at doing a TULSA for him initially because, look, we really can't give guarantees in this type of situation. But he did tell me that he would rather die of the prostate cancer then undergo a radical prostatectomy or get radiation. And he certainly did not want to have hormone therapy, which, to be honest, everyone kind of knows is really not good for your well-being. It kind of sucks. So we ended up performing a whole gland ablation. Next slide, please. And of course, when I say a whole gland, we're treating the entire prostate, both the areas of concern on the left side, but also doing a proper treatment on the right side, but also doing a fairly complete nerve sparing on the right side, which is the side of the cancer that is not aggressive. So of course, we were able to perform it safely. But the other part of this technology is that in the area that I suspect that there could be extracapsular extension, we are allowed to let that beam of energy, the ablation go beyond even the capsule of the prostate, the outer margin. And in doing so, if there was any microscopic cancer that was trying to leave the prostate in that part of the prostate, we were able to destroy that as well. And frankly, that is something that you can't just easily assume will happen even with robotic prostatectomy. So I'm happy to say that we were able to treat him safely. And next slide. He's actually now almost -- well, about 1.5 years postop, meaning we've now been following him for over a year. His PSA dived down to 0.33. That's a 95% PSA reduction. And that's been stable ever since postop. And of course, given the high-risk situation, we want to watch him very closely. So we've been getting regular MRIs at 4 months, at 10 months, and it has shown 0 lesions. Also, by the way, we've had an 81% reduction in the size of this prostate. Now by the way, in the clinical trials, people were getting routine biopsies, for example, a year out from their TULSAs. And he was certainly offered a routine post-op biopsy. But since I sort of live and practice in the real world, I have to admit patients don't want biopsies. That's kind of -- they kind of all don't want it. So if your PSA is at 0.33 and your MRI is negative, this patient particularly flat out, refused to get a prostate biopsy. And you know what, I'm okay with that. I think we could presume that his cancer is cured just based on this PSA and MRI findings alone, although certainly, again, we wouldn't be able to prove it to him unless we did a biopsy. Now I do, of course, have several high-risk patients who have been in this exact situation who have also insisted on doing a biopsy, and I can happily tell you that all of those patients -- their biopsies have been negative as well. What I wanted to kind of stress here is that the most important thing here is that the patient himself is just super happy and grateful 1.5 years out. And he's so happy that he pretty much regularly does something to just crack me up in the office, like he just up like a prostate blower figure one day. He sent over urology themed, totally anatomically inappropriate cake for my staff. So the key here is that every time he's coming in, we're kind of just laughing about how good life is instead of, by the way, talking about incontinence or how much he's leaking because he's had 0 leakage or other quality of life issues that he would have had, had he undergone prostatectomy or androgen deprivation therapy, radiation therapy for that matter. So that, to me, is the reason why I have dedicated my focus to TULSA-PRO. Next slide, please. Because I will say that hands down, TULSA is the most versatile prostate treatment that is currently commercially available. And we can think of this in many ways. So first of all, for prostate cancer, we can go super focal all the way to whole gland treatment that can replicate what you can do with robotic prostatectomy. And then in the BPH side, you can treat that. By the way, you can treat both BPH and prostate cancer at the same time. You could treat post-radiation failures in cases that you wouldn't dare try a salvage radical prostatectomy. So these are all, by the way, indications that are backed by multiple publications, not just my own experience. Now next slide. By the way, I'm also known in my local community for doing a lot of robotic prostatectomies. I've been able to perform 4 radical prostatectomies in 1 treatment day. That's actually one nursing shift, for example, 7:00 a.m. to 3:00 p.m. So imagine treating 5 or more patients in 1 day with TULSA-PRO, but still recreating the outcomes that we get with radical prostatectomy without significant risk to the patient, without making the decision. And by the way, if we're doing BPH or focal therapies, we could easily be treating more than 5 patients a day with the proper support and training. Well, how does this happen? Next slide, please. You just have to have focus. And not just the surgeon, but the entire team needs to be focused on patient care. That means, sure, I always want people to talk about their weekends and whatever it is. But at the end of the day, there's really good communication between what the surgeon is doing, what the anesthesiologists, the MRI technologists, and we have a very methodical workflow. We don't rush anything. We just make sure that each of the steps that we need to do are being performed and where possible, to perform them in parallel. The goal, of course, is to minimize the time that the patient is under anesthesia. This ethos also leads to a reduction of complication. It just puts everyone in the right mind frame to make sure that we are all there to do a great job for the patient, and that's it. That, I believe, is the key to doing 5 cases or even more a day. Now again, why is this important to be able to do 5 cases a day or more? Well, again, if we are going to scale this technology, then one day, what I do as a, let's say, F1 TULSA Formula 1 driver, we got to make that accessible to the community urologists, the average urologist in every city and in every town in the nation. And that's just because the community urologist is going to want to offer the best thing for the patient period. So next slide. Make no mistake that the growth and the promise of TULSA of the future is with the urologists. And that is because we own the prostate treatment pathway. I'm talking about from diagnosis to treatment to postoperative care. And we own that patient experience. And we're talking about just both for prostate cancer and for BPH. So what I've described to you today, I'm just the tip of the spear along with others who are early adopters. Once we move from the sort of innovator super early adopter phase where we are right now into the ascent phase of technology adoption, of course, I will be deeply involved in the training and the preparing of the next generation of TULSA urologists to meet the demands of our patients because that's where it's coming from. The patients demand us to do better. They want me to cure their cancer, but they don't want me to ruin their life in doing so. And that message is very clear. So by the way, the newest urology graduates that I talk to at AUA, for example, they already get it. They're not wowed by the da Vinci robot the way that I was when I started my robotic fellowship. And they're already used to reading MRIs for diagnosis. So it's a natural evolution to MRI-guided surgery. Next slide, please. Speaking of the American Urological Association, we saw a significant attention being paid to "focal therapy" this year. And that's great because, again, I think there's an evolution in our thinking pathway on prostate cancer, especially where instead of just having these blunt tools like taking out the whole thing, we can think about more selective treatment. So definitely, I think that attention is good. But I also have to admit, I can't believe that we're still talking about decades old technology. The marketplace is clearly getting increasingly crowded. And now you really have what I consider to be like an alphabet soup of focal technologies. You have existing treatments that are looking to gain market share. So each one is really positioning themselves as the next equivalent to prostatectomy. Well, while I believe that there's clearly a role for these focal therapies, I don't think that any one of them is capable enough to replace the prostatectomy similar to what we can achieve with TULSA-PRO. And that's just because of the unique ways that TULSA-PRO is set up, the inside out, the MRI guidance, all of those things. By the way, on the BPH side, there's also been an explosion of choices in the last, let's say, decade. So now even BPH therapies are looking to gain indications to treat prostate cancer. Well, again, none of these are MRI guided. None of them are as versatile as TULSA-PRO. None of them are as precise. And so therefore, in my opinion, I see TULSA-PRO as a center of these different Venn diagrams because none of these other technologies can single-handedly disrupt and replace the existing technologies for prostate cancer and BPH the way that TULSA-PRO can. Next slide. So what's exciting here is that we're really in our infancy of image-guided surgery, particularly MRI-guided surgery. Again, MRI is the most sophisticated of the imaging. So -- and we're not just talking about prostate now. If we allow ourselves to think of the future and the technology life cycle, really every major organ system is going to be affected with -- and therefore, major advancements are going to happen with that same vision of cure without side effects. This is exciting, and this is the disruptive future that we live in today. So in conclusion, I -- first of all, I wanted to just thank Dr. Arun and his team of professionals at Profound Medical, especially the scientists and the engineers who have created the best-in-class Ferrari of medical technologies in the world and are enabling F1 type surgeons like myself to impact people's lives every day in the best way possible. I also wanted to thank you, the investors and shareholders of Profound because supporting this company, after all the analysis balance sheets and income statements, you have to understand that your investment creates meaning and value for thousands of patients worldwide. Thank you for your time and your attention today.

I would now like to turn the call back over to Dr. Arun Menawat. Please go ahead.

Thank you. Is there any questions. If there are any questions, please, from the webcast.

At the moment, we have no questions on the webcast.

Okay. Thank you. I think we're all good. Thank you so much for being here today. A very good meeting. Thank you.

Thank you very much, everyone. And ladies and gentlemen, that concludes all our conference call for today. All participants may now disconnect. Thank you.