QT Imaging Holdings, Inc. (QTI) Earnings Call Transcript & Summary

Good afternoon. I'm Neil Chatterji, senior analyst, here covering med tech and digital health at B. Riley Securities. I'd like to welcome and introduce Dr. John Klock, CEO from QT Imaging for joining us today and presenting on the QT Imaging story. Dr. Klock, I'll let you take it away.

Great. Well, thank you, Neil, and thank all of you online for your time today. Just a little bit of background for 2 minutes here. I'm a medical oncologist trained at UCSF and Harvard. I decided to quit academics and start a company because I thought that this would be a better way for me to have an effect on patient outcomes. So please feel free to Google or LinkedIn me. I started a number of disruptive companies, both in the biopharmaceutical and diagnostics and device. QT is my most important venture with -- for reasons that I'll try to explain. Let me start by saying that medical imaging is just a huge factor in health care worldwide. All diagnostic tests and all the new drugs and gene things and advances that you're hearing about in this conference, all rely on body imaging to be effective. So none of them can really be used without the adjunctive body imaging. It's the #1 tool that doctors use worldwide where they have it to decide on treatment. But body scanning has potential health hazards. Sometimes they do more harm than good depending on how they're used. All body scans are cumbersome and expensive and require injections. And they are a major cause of escalating health care costs. Drugs are not the #1 cause of escalating health care costs. It's really medical imaging. All these factors create a serious health care disparity in the world, not just low resource environments, but 2/3 of people in the world have no access to medical imaging. While the origin of the company is sort of interesting, a group of software engineers in the University of Utah took oil exploration technology and applied it to medical imaging. The inventors of CT and MRI, whom I worked with for many years, encouraged me to start this as the next epoch in body imaging because they were aware of the limitations of what they had invented. The National Cancer Institute gave us $17 million to fund building the machine that you'll see in a minute, 400 high-net-worth people gave $100,000 each to fund the clinical trials and 50 radiologists helped with the multiple blinded trials against the current technologies. Finally, the FDA does want this developed and has granted Fast Track Breakthrough Device Designation to this technology. This technology you're about to see is the most accurate body imaging technology ever developed. It's faster and less expensive than CT, MRI and PET. It's 100% safe and the only body scanning usable in healthy people, infants and children. So the final thing I would say is it can significantly lower the cost of health care by being applied as it comes out here. Because I've started a number of disruptive medical technology companies, I'm used to opposition. So there is and will be opposition to what we're doing. But I really think in the end, there's really no way to stop this. It's really a fantastic technology. So let me get started here. It's not traditional ultrasound. It's called ultra-low frequency transmitted sound imaging. And the way this works, I can get my computer to advance here. I guess, I have to do it this way. Well, we are in a quiet period because we're going public through reverse merger. So I've got to put all this legal stuff up here. And you can see this. I'll come to this in a minute in terms of our -- so this is the device that is FDA cleared. It is a sound-based imaging procedure. It's completely harmless. We are cleared for doing breast imaging. That part of the body is cleared. We are merging with this company, New York Stock Exchange: GIA. So if you want to find out about the merger and all the documents that are on the SEC EDGAR website, you can just type in NYSE: GIA. So we're happy to work with these people. They do have a good track record in this area. There's -- we also have a track record here at our company and certainly encourage you to look us up. The bottom line is that we're a broad-based, no radiation medical imaging solution where FDA cleared the technology is safe. We're patent protected. We are working on worldwide distribution through partnerships at this moment. And we are raising capital through this merger to get additional FDA clearances and get commercialization. So this is what we're trying to do. I just mentioned. These -- I won't repeat all of these, but I think that global medical imaging does not happen. There is no use of this body scanning technology in most of the world, out of 195 countries, probably only 35 or so actually have body imaging technology. So it's a huge problem. This is all the money we've been given by the National Cancer Institute. These are available online. Of course, a copy of this will be available of this whole presentation. So the idea here is the basic technology on the left here, the breast scanner and that, that will evolve into these other scanners. Again, it's an open angle design. It's not a tube like CT, MRI and pet. So obviously, doing procedures and doing real-time imaging is a super advantage for this type of technology. It's safe for both the doctor and the patient. So this is really going to be a game changer, I think, in the area of robotics, which is all done using TV cameras at this time. Big markets, obviously, there's lots of big markets in medical imaging. So we're certainly addressing all of those, and I won't go into details about that. The technology you might be interested in. I'll show you how it works. I'm going to show you the images, which are really the bottom line here in terms of why this product will work. Certainly, patients like it because there's no radiation or injection, and they also like it because this can be a direct-to-consumer product because of its safety and very low cost, and it is being applied in that way. Well, what is it that we do? We do something completely different. Everything in medical body imaging today uses very high energy, whether it's x-rays or positrons or signals from the nuclear magnetic resonance, and they shoot through the body like a bullet and then they do backplane projection, basically like a shadow box, looking at what happens on the other side through a detector. We look at the sound scatter that goes through the body part. And as you can see on the right here, it scatters around the part. We look at the energy on the other side. This is very low energy, of course, it's just above the frequency of the spoken word, bats can hear it. Animals can hear it. So it's extremely safe. And we do a completely different image reconstruction than any other type of imaging. So how do we do this? We have a transmitter that is shown here with 64 elements. It transmits a plane wave, very low energy, 300 kilohertz to 2 megahertz, as most ultrasound is in the range of 15 to 20 megahertz. That energy goes through the body part here. The scatter is shown on this side. We have 2,048 cameras on the other side, and this generates between 50 million and 70 million different voxels of data. This is why we have better imaging. And we do more than $150 trillion. We do about 1 quadrillion calculations in just a few minutes to develop these images that you're about to see. Again, this is just technical in terms of the transmitter, the receiver and the other arrays in the machine that you see. I guess, I would say that this is the only imaging that can really see down to level of histology. On the left, this is a whole breast image stained with hematoxylin and eosin. This is the transmission image here on the right. I just want to point out that these are individual cells here along this part -- that it's along this part. So we can see down to the level of cells, we can see down to the level of a single cell. We'll show you some more pictures later. And that is really revolutionary in terms of medical imaging. We're protected by a number of patents. There's no companies doing this. There are no universities doing this. There's no other people doing this anywhere in the world. So we really do have all the patents and the software is the enabling part of our technology. Well, we're doing work in breast imaging because breast imaging is a big challenge. Breast imaging paradigm currently starts with mammography. It's not serving women well. It misses most of the breast cancers in dense-breasted women, which are about half the women in the U.S. and more than half of the women outside the U.S. This is a big problem because it causes missed diagnoses, number one. Number two, because it's basically looking at shadows. There's a number of false positives, lots of recalls and the FDA has asked us specifically to reduce recalls and reduce these false-positive biopsies, which are over 80% of the time. So this is what the technology looks like. This is the QT scan. This is the mammogram in the same woman. She came into our clinic and we found this cancer in just a couple of minutes. Her doctor wanted her to have a mammogram. So she had a mammogram that was negative. And she wanted to have the mammogram with 3D tomosynthesis, which was also negative. A handheld ultrasound was put on a little lump that she had in her breast. They found this, and they did an MRI with gadolinium injection and found this mass here. So all of this took about 3 weeks. It cost her about $3,000 to $4,000 out of pocket. This cost her $300 and it took 4 to 8 minutes. So this is why this technology will work, really can replace a tremendous amount of effort in energy and expense that women have to go through. And this just shows you the differences between x-ray mammography, handheld ultrasound. This is the gadolinium injection that goes into the arteries here. It causes a blush in the tumor. We actually see the tumor specifically. You can see the histologic detail here. So it's quite different. It has 5x the accuracy of MRI. Again, it meets a lot of the criteria for being a safe and effective product of image quality, safety, speed and costs and so forth. Women do really like this technology. We are not ABUS, which is called automated breast ultrasound. Automated breast ultrasound uses the traditional transducer here and motorizes it one fashion or another, and you get traditional B-mode images. So we're really the only true 3D isotropic imaging modality in the world. Well, our clinical results, we're really tremendously effective in dense breast. This is the one with an implant. Patients have big challenges with mammography. Again, her mammogram was negative, but she did have a tumor here right up against her implant. We can see calcification actually better than the mammogram. So that's been a criticism of traditional ultrasound, but we can certainly see the [ calcium ]. This woman had a negative mammogram. She had 11 cysts in her breast. And -- I'm sorry, this patient had 11 cysts in her breast. And this is a missed cancer. We're picking up cancers every month. So it's really a great technology for women with dense breasts. We certainly are clear to do that. We spent millions of dollars doing randomized, blinded studies in radiology field using our technology against mammography. It is superior to mammography and every test we've done and the 2 trials, this one was published in Academic Radiology last year. This one is about to be published. So we do meet the criteria for a general clearance for screening, which will be going to be FDA. We did 85 patients with prostate cancer at the National Cancer Institute against 3 Tesla MRI, which is shown here. And we had 86% sensitivity versus 65% for MRI and high specificity. You can see here, this is the MRI. This is the QT image. This is the pathologic image. So it's going to be a great technology for all different body parts. We have a special relationship with NVIDIA. We do need these processors to do these quadrillion calculations in just a few minutes. So that's how we do it. Again, very, very advanced in terms of AI. I won't go through all of that, just to tell you that we are using artificial intelligence to improve our image quality. We do have 5 FDA clearances. It's important because they're very anxious to help us get this technology out there. There are obviously a lot of hurdles with the FDA. We recently received approval as the only technology -- only imaging technology that can -- as FDA cleared to monitor cancer treatments in women with breast cancer. So we're very excited about that. And we'll be applying very soon under a Breakthrough Device Designation for primary screening for young women who don't qualify for the mammogram because they're too young. That's when they get their cancers. And there's really nothing for these women who have these cancer genes or a strong family history. So that will be coming hopefully this year. Breakthrough Device Designation is a Fast Track process for the FDA giving preferred standards for clearance of Fast Track review and we get our own CPT code at the end of this process. So -- the open-angle scanner is a very important advance for us. This is still a water-based scanner. The water is behind a membrane here, which is in blue. It's an open angle design, so it can be used for any body part from the head to the breast, to the chest, to the abdomen, pelvis, extremities and even whole body imaging for infants. So we think this is going to be a really useful, practically very portable point of care in the office type of technology, which is not really practical for the other body imaging methodologies. We use the same technology that's used in the breast scanner. We basically do this by putting these in this configuration and going around in 2 directions to construct the images. So we've done all the work ahead of time. We're just right now starting the engineering to develop this particular form. So again, it's revolutionary in the sense that it's certainly unlike any other body scanning technology out there. It's completely safe, it's very fast and it's very inexpensive. We published all these things. So you can go on our website or Google me or some of our scientists here. This just shows the pictures of a human knee. This is the MRI. This is the QT scan. Most people don't realize that MRI has image voids of certain areas like tendons and ligaments that show up as black areas on the MRI. It actually cannot see cartilage. So we have a lot of advantages in terms of being able to see things that MRI -- in MRI are invisible. So lots more detail on the soft tissue. You can see here lots more contrast. And contrast to noise is a big factor in terms of doctors being able to make diagnoses. The speed of sound is a biomarker. So we also have what we call functional imaging. We can tell what tissue is by putting a little pointer in the scan. Muscles have different speed than the cartilage and ligaments and fat and so forth. So we can segment things and look inside the bone, of course, which MRI cannot do. Where are the markets for these? I think, very good point of care in the doctor's office, on the sports field or believe it or not, there's no real body imaging on any battlefield or hospitals or ships out there for the military. So this runs on 20 volts. It can be solar-powered, very stable and doesn't require any special maintenance like it required for CT, MRI or PET. So we think this could be a tremendous advantage for a number of markets. The body scanning, I think, is something that we're really excited about because there is nothing for infants. If you have an infant that has a genetic marker or some sort of a test that's abnormal or just doesn't look healthy. Now you can do a body scan. Body scans are done on infants, but usually, you have to anesthetize them. We certainly don't want to be giving injections to them and there -- you can actually cause a lot of problems doing repeated scanning of infants. This is interesting. This is a newborn pig. This is the MRI on a pig. These are the intestines seen by the MRI. Here, you can actually see the lumen or the lining of the intestine, the little muscle groups in the intestine. You can see detail in the kidney. These are the hairs on the outside of the pig. So really, really high resolution technology. Again, just some detail of the bowel, just small bowel loops. Our resolution is about 50 microns. So certainly smaller than the width of a hair. So really nice images. MRI cannot do lung imaging. This is the lung on that pig. You can actually see the bronchi. You can see the small alveoli here in the lung. So really exciting for us because, again, this is 100% safe technology. You can do it multiple times a day. This is interesting. This is the eyeball. Most people don't think eyeballs are very important. But this is what the eyeballs look like in CT, so what they look like in MRI. And look at this picture here, we can see all the layers of the cornea. We can see the retinal space, post-retinal space, the optic nerve. All of these things are just tremendous advances. And just to show you that we can see a single cell. This is a microscopic picture of the cornea. The back of the cornea is a single cell layer thick. That's this layer right here. So it really is a tremendous advance in imaging technology. So we are going to be working very hard over the next couple of years after our merger to develop basically the software for these different applications is the main differentiating feature. So we kind of consider ourselves a software company. So these will be -- this work of software development will enable us to have a scanner in the clinic in 2024. Clinical adoption, of course, is always a challenge because the medical system is very sort of ingrained, but we are cleared for adjunctive to mammography and for monitoring breast cancer and breast cancer treatment. So we are certainly moving into these areas very quickly. Women certainly like it, and there are a number of places in the country where our machines are being used for a direct-to-consumer medical imaging. Obviously, we have a marketing plan, which will start in full after the merger, but these are the places where we're really talking to people. We have both a traditional capital purchase, but we also have a Medical Scan as a Service, where for a very low price, people can get the scanner in their facility and only pay us per scan. So we also will do scan interpretation as part of our service. So we have that advantage of being not just like a traditional capital equipment company. But because it's safe and because it's inexpensive, we have a lot more market models available to us. There are CPT codes already available for our technology, but we will get our own CPT code, which will hopefully be higher than these with our breakthrough device approval hopefully later this year. So -- we are a fully integrated company, having everything that we need in terms of regulatory, accounting, finance and so forth. We have our own manufacturing facility here in Northern California, just north of San Francisco. We make about 50 machines a year. We certainly can OEM this to other people and make more machines later. So I think basically, I'm at my 24 minutes. So I will just tell you that we do have machines deployed, and we are selling machines now. We have a pipeline for this year and working on other arrangements that I can't really disclose now. So I think that's pretty much it. This is the transaction. I'm sure we gave capital people to run this call. So I'm sure they want to have me say that the transaction details are available on the EDGAR website. And all the information that you see here in terms of valuation and so forth, I'm sure you'll want to look at that if you're interested. So I'll just stop there. And of course, there's pages and pages of risk factors here, but I think I'll just stop sharing and ask Neil if there's any questions.

Sure. Thank you Dr. Klock. Maybe just coming back to the -- you had the slide kind of on the pricing model. So maybe just -- if you want to just talk about the advantages of having the flexibility and just if there's any -- from your kind of initial centers, like, if there's any preference that you're seeing kind of in that, I guess, the capital versus the per click model or what are your expectations there?

Well, I think the thing about medical health care facilities is some of them have a capital cycle. They like to do that. Others, they don't want to have a capital, they want to expense all this. So if they -- about 50-50, 50% of people want to buy it, 50% of people want to rent it, so to speak, can do the per click. So I think that we're very excited about the per-click model, and we're very excited about providing interpretation also because it's a turnkey. It's a full service. You can just buy the machine and wheel it in and plug it in the wall, and you're off and running. There's no special room requirements like there are for radiation, for shielding -- magnetic field shielding There's no requirement that the person be technically licensed. Anyone can operate it, it's automated. So that model allows people to then just plug and play and they don't have to do anything, just bring their patients in and, however, they want to do their cash payment or reimbursements. So I think that we're very flexible. It's a low cost of goods, so we can help people in any way, shape or form with leasing or renting, however, they want to do it.

Got it. Got it. Maybe then just on the kind of the sales funnel, just -- you talked a little bit about the kind of the target centers, whether it's the academic centers or community cancer centers. Maybe -- has there been -- any color around like what kind of -- where you're seeing the most interest?

Yes. I think right now, there's big in the oncology area, you probably know that more than half of the -- almost half the oncology treatment in the United States in done in independent oncology own centers or affiliated centers, not in major hospitals and tertiary care centers. So those people really like it because there's sort of a conflict between hospitals and these centers. There are even some threats being made that if these doctors and these oncology centers put too much imaging in there. They're going to have their status with the hospital in jeopardy. So there's a little battle going on there. So we're getting a lot of interest from the oncology centers that want to have this in their centers, so they can get started right away imaging women before and after their cancer treatment. And of course, the hospitals aren't buying this because they have CT, MRI and PET already, and they really get tremendous reimbursement. If you get these scans done, you can be paying tens of thousands of dollars for your scan. So these kind of things that we're doing are several hundred dollars. So there's a battle going on, but I think we're excited about the fact that medical care is changing more direct-to-practitioner and direct-to-consumer coming because that's the only way we're really going to lower health care costs. So we think we're in the right spot for that.