iCAD, Inc.
Q2 2020 Earnings Call Transcript

Published: 5 Aug 2020

[Operator:]

Greetings and welcome to the iCAD, Incorporated. Second Quarter 2020 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I'll now turn the conference over to your host, Jeremy Feffer. You may begin.

[Jeremy Feffer:]

Thank you and good afternoon everyone. Thank you for participating in today's call. Joining me from iCAD are Michael Klein, Chairman and Chief Executive Officer; Stacey Stevens, President; and Scott Areglado, Chief Financial Officer. Earlier this afternoon, iCAD announced financial results for the three months and six months ended June 30, 2020. Before we begin, I would like to caution that comments made during this conference call by management contain forward-looking statements, involve risks and uncertainties regarding the operations and future results of iCAD. I would also note there are certain non-GAAP financial measures. Management believes that these measures provide meaningful information for investors and reflects the way that they view the operating performance of the company. You can find a reconciliation of our GAAP to non-GAAP measures in today's earnings release. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, Forms 10-Q and 10-K which identify specific risk factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 4, 2020. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, it's my pleasure to turn the call over to Michael Klein. Mike?

[Michael Klein:]

Thank you, Jeremy and good afternoon everyone. I would like to process today's Q2 earnings report by articulating the three key themes that we continue to operate under at iCAD. These are as follows; theme one, is unlocking and extending the embedded value of iCADs detection and therapy business, particularly be accelerating key value drivers that may indeed be enhanced by current market dynamics. Theme two is driving towards profitability and positive cash flow by optimizing our overall high gross margin offerings and by optimizing our balance sheet, allowing for enhanced flexibility. And theme three is rapidly advancing the validation and introduction of our IntraOperative Radiation Therapy offering into the very large and opportune market of treating glioblastomas or GBM. Now, to get more specific on our first theme that of accelerating value, we clearly see a steady improvement in ordering patterns, and a customer base that has successfully adopted safe screening measures. 90 to 95 of sites are now open for screening. And this environment where productivity and efficiency are not only valued, but are now demanded. Our ProFound AI capabilities are even more essential. The value of reducing radiologists reading time by over 50%, finding more cancers than without our AI software, and avoiding unwarranted callbacks is absolutely on our customer's radar screens. Productivity has become equal to and in some cases has emerged as even more of a sales driver in clinical performance. Delays in screen mammography for perhaps 90 days has been considered by many to be somewhat tolerable and all often patient dependent. Now however, almost five months into this pandemic, screening delays and defaults are widely seen as problematic. The rate of breast cancers detected is broadly acknowledged to be about six cases per 1,000 screens. Screening delays have clear implications as cancers progress and grow in severity. The number of detectable cases per 1,000 also increases with time delays in screening. This is a secondary and concerning effect of this pandemic. A good illustration of the essential need for ProFound AI for both the above-mentioned productivity and clinical performance is our June sale and shipment of 50 licenses to SimonMed, a nationwide medical imaging provider and among the largest physician radiology practices in the US. SimonMed provides real time screening feedback while patients are on site, vastly improving the patient healthcare experience. This Q2 order is particularly noteworthy in that shipments were made to hotspot areas at a peak time in the course of this pandemic. As John Simon, Founder and CEO of SimonMed, expressed in recent press release of earlier – of several weeks ago, "iCADs technology empowers our radiologists to read cases with improved accuracy, reducing the rate of false positives and unnecessary callbacks, which can be stressful for the patient. Additionally, with ProFound AI, every patient has the benefit of a second reader, whose input has been clinically proven to support the early detection of breast cancers in making 3D mammography at SimonMed even more beneficial for our patients". With what is now evident at all customer sites is that ProFound AI software is being deployed as an essential productivity and performance solution, which makes high end medical capital equipment more productive, more efficient and even more cost effective. We now repeatedly are getting the feedback that ProFound AI is providing an improved patient experience. It also provides sites with a clear marketing advantage and the ability to preferentially attract patients. Given the over 10,000 installed 3D Tomo systems in the US alone, and the fact that 750 ProFound systems have been installed into these 3D systems, we are still at 18 months after launch in the early adoption phase of ProFound AI in the US. With additional and growing market opportunities for 2D and 3D AI offerings outside the US, there are well over 25,000 mammography imaging systems that our ProFound AI offering can be installed into in the United States and in Europe. And on a total worldwide basis, the number of potential installation opportunities is even greater. The recent launch of our mammography for Risk offering could not be more timely. This new Risk offering is distinct from iCADs software that detects cancers on the day of the screening. It will serve as an additional revenue driver and an extension of ProFound AIs offering. Furthermore, the next generation of an even more precise AI software, ProFound AI software is in its final phases of pre-launch evaluation. This generation – next generation of ProFound AI software is designed to further enhance productivity and clinical performance and is based on 300% more data derived from both are recent 750 ProFound AI installations and 6,500 earlier generation software installations. The adoption of ProFound in many large volume screening sites offers us ever expanding access to patient data. This is a key differentiator for us and fuels our ability to rapidly introduce additional revenue generating offerings. Moving on to theme number two, beginning in Q2, we proactively reprioritized, redeployed and implemented appropriate cost reductions to align with what we saw as an ensuing disruption in ordering patterns. This strategy served us well in Q2 as we sequentially reduced our operating expenses 21% from q1 of this year. We continue to diligently manage costs and in fact have become more productive than even before as we focus on near term revenue optimization, return on invested time and appropriate expense management as well as optimizing our balance sheet and having $24 million of cash, which certainly allows us for increased operational flexibility. In terms of product development efforts, it is worth highlighting that before Q2, our technology, research and development team operated predominantly on a virtual basis. The additional time savings of travel time and cost, trade shows and many inefficient time-consuming meetings has given way to higher efficiency work dynamics with shortened deadlines, milestone sprints and production yields that have allowed us to hit aggressive product release timelines. Our new Risk product offering that Stacy will further detail is a good example of hitting aggressive timelines. This takes us to our third and final theme, the exciting market opportunity in Intraoperative Radiation Therapy, with soft treatment of glioblastomas. As previously mentioned, GBMs are the most common and aggressive type of malignant primary brain tumor with a medium survival of 10 to 12 months. With almost 300,000 annual new cases of brain and nervous system cancers, this is a very large and opportune application for Xoft technology. It significantly expands our global addressable market. At the American Society of Clinical Oncology in May, our glioblastoma data was introduced with results in both overall survival and progression free survival that far surpassed the trial control arm. We have been able to cross the two-year survival threshold for a disease that is often fatal in less than one year. Updated results through May have now been submitted for journal publication and embargo data is anticipated to be released this coming fall. The above glioblastoma study results has now attracted the attention of top academicians, key opinion leaders and practitioners from luminary sites around the globe. Just three weeks ago, in a landmark development for Xoft, we gathered 18 highly esteemed positions, represented by top neuro-oncologists, radiation oncologists and neurosurgeons in a coalition of what we call our GBM expert panel. Building clinical consensus and further validation of our GBM capability is a key objective for us. This expert panel will be instrumental in the multi-site US and European evaluation trial that will commence this year. This effort is designed to further validate the efficacy of Xoft GBM capability and is expected to enhance the commercial viability and adoption of our GBM technology worldwide. And it is worth reiterating that our GBM offering is an FDA cleared product and is commercially available today. The commencement of the affirmation study will be an important driver of our go-to-market commercial efforts that will run in parallel with our clinical efforts. We are also very pleased to announce that Dr. Santosh Kesari will be leading our neurosurgery efforts as we drive towards clinical site selection, consensus trial endpoints and patient selection criteria. Dr. Kesari is a neuro-oncologist at the John Wayne Cancer Centre and has been a lead investigator on many brain cancer studies. Dr. Kesari leads the comprehensive glioblastoma and translational medicine efforts for the Providence System in Southern California which is comprised of over 20 key medical facilities. He's also on the advisory board of the American Brain Tumor Foundation, and an alum of Dana-Farber and Harvard University Medical Schools. We are delighted and honored to have Dr. Kesari work closely with us. And let me close by summarizing the above three points at this time. One, we are continuing to unlock the embedded value in our – in both our detection and therapy businesses. We anticipate that our AI detection business will continue to grow in importance as healthcare sites drive towards detection performance, and increasingly prioritize productivity and efficiency tools. The value proposition of iCADs offering is enhanced with these well-articulated customer requirements. Two, as a result of our operational discipline and productivity improvements, we will generate clear leverage as revenue opportunities continue and steadily to materialize, and cost management efforts are sustained. And three, with the strong balance sheet and significant market opportunity in brain cancer treatments, we will continue to both validate Xoft technology and generate high level awareness in the neurosurgery community that will pave the way for both clinical and commercial adoption on a global basis. In sum, we are well positioned with a highly valued software solution in ProFound AI and with targeted therapy investments in key clinical application areas such as glioblastoma that will offer very considerable future growth opportunities and in doing so will enhance shareholder value. I'd like to now turn the call over to our Chief Financial Officer, Scott Areglado. Scott?

[Scott Areglado:]

Good afternoon, everyone and thank you, Mike. I'll now summarize our financial results for the second quarter ended June 30, 2020. As Mike mentioned during the quarter, we remained focused on aligning our operating expenses with revenue expectations. Total revenues were 5.6 million in the second quarter. However, sequentially detection revenues of 4.1 million for Q2 were down 400,000 or 8% from Q1 2020 with overall revenues declining 15%. Importantly, on a sequential basis from Q1 2020, operating expenses decreased 21%. On a quarter-over-quarter basis, second quarter revenues of 5.6 million declined 1.8 million, or 24%, as compared to 7.3 million in the second quarter of 2019. Detection revenue declined 1.1 million from 5.2 million to 4.1 million or 21% on a quarter-over-quarter basis versus Q2 2019, due primarily to stay at home orders and a general shutdown throughout the country that persisted through much of the second quarter. However, the unique clinical and workflow value of ProFound AI continues to be realized by our customers. Moving on to gross profit, on a percentage basis gross profit was 78% for both the second quarter of 2020 and 2019, which reflects the proactive steps we took to realign our cost structure. On a pure dollar basis, gross profit for the second quarter of 2020 was 4.4 million as compared to 5.7 million in the second quarter of 2019. Going forward, we will continue to align the cost of sales with corresponding revenue changes, and we will continue to appropriately manage our cost structure. Operating expenses were 6.7 million for the second quarter ended June 30, 2020, a 7% decrease from the 7.2 million in the second quarter of 2019 and a decrease of two 21% as compared to the first quarter of 2020. As we said on our last call, we executed cost mitigation efforts to align our cost structure in response to the expected impact of COVID-19 on the company, which included salaries, travel, marketing, sales and other targeted cost areas, including costs that may be associated with less immediate objectives. However, these objectives can readily be reestablished as market dynamics improved. Overall, we are pleased with the execution of our cost cutting measures in the second quarter that as mentioned will continue to be managed as we progress. However, as Mike indicated, we intend to continue to appropriately invest in targeted growth initiatives such as brain cancer to generate future opportunities and increase shareholder value. Now, on to our profit metrics, GAAP net loss for the second quarter of 2020 reflects an improvement of 1.1 million to a loss of 2.4 million or $0.11 per diluted share, compared with a GAAP net loss of 3.5 million or $0.20 per diluted share for the second quarter of 2019. However, Q2 2019 includes the loss on the fair value of the debentures. Non-GAAP adjusted net loss for the second quarter was 2.5 million or $0.12 per diluted share, compared with a non-GAAP adjusted net loss of 1.6 million or $0.09 per diluted share for the second quarter of 2019. Non-GAAP adjusted EBITDA for the first quarter of 2020 was a loss of 0.7 million, which represented a 0.3 million improvement compared to the second quarter 2019 non-GAAP adjusted EBITDA loss of 1 million. Again, our net income and EBITDA are in part reflective of our efforts to align expenses with revenue expectations. Moving on to the balance sheet, as of June 30, 2020, the company had cash and cash equivalents of 24.2 million, a significant improvement compared to cash and cash equivalents of 15.3 million at December 31, 2019. As a reminder, in April, we issued approximately 1.6 million shares of common stock with net proceeds of 12.3 million in an equity offering with a group of high-quality institutional investors. With a strong cash balance and operational flexibility, iCAD is well positioned to continue to advance the strategy that Mike outlined. This concludes the financial highlights of our presentation and I would like to turn the call over to Stacy. Stacy?

[Stacey Stevens:]

Thank you, Scott and good afternoon everyone. Well, despite the short-term challenges [ph] posed by COVID-19 in Q2, we continue be optimistic that we will see a strong bounce back in both segments of our business with what we believe will be an enhanced competitive position. Due to the pandemic we are seeing trends emerging that are defining new unmet needs in cancer care. Among these include an urgent need for AI enabled imaging to help clinicians more easily manage the enormous backlog of mammograms now estimated to be as high as eight to 10 million as a result of decreased cancer screening over the course of several months earlier this year. Additionally, the need for our 10 minutes IORT procedure to treat breast cancer has been further amplified during this time when minimizing patient exposure to the hospital remains critical. With that, I'm pleased to provide you with updates around our initiatives which we believe address these unmet needs and will enable us to be successful in accelerating our growth and expanding our global footprint. We continue to experience strong interest and positive feedback from existing and potential customers on the detection side of our business. Demand for ProFound AI continues to grow on a global scale based on the strong clinical and economic value proposition of this leading-edge solution. While in some cases COVID-19 has elongated the sales cycle, our sales pipeline continues to grow with both deferred orders and newly emerging opportunities. With the use of our technology expanding system wide among large customers such as Jefferson Radiology, and SimonMed, which Mike referenced as one of the largest outpatient medical imaging providers and largest position radiology practices in the United States. As I noted on our last call, while the pandemic continues to present challenges with a number of trade shows and other events being cancelled or going virtual, and introducing unprecedented obstacles for our sales force, we have taken a very proactive approach to combat these issues, which in many ways has actually proven to be even more successful than some of our traditional marketing approaches. Our marketing team has continued to step in as a strong sales engine generating qualified leads through a significant number of educational webinars and strategic digital marketing initiatives. These programs continue to succeed in attracting large audiences of attendees, with measurable engagement, including driving increased traffic to our website and social media channels, and resulting in an overwhelmingly positive response among the participants. Our events in the first half of the year featuring leading experts in breast cancer detection and treatment with the goal of highlighting the benefits iCAD technology offers during this unique time period and beyond. I'd like to specifically highlight the virtual roundtable event we hosted for clinicians in early June titled The Impact of COVID-19 on Breast Cancer Surgery and Targeted Radiation Therapy. This free virtual webinar provided a forum for leading breast cancer experts hailing from several leading institutions across the US to share best practices and discuss the emerging need for targeted radiation such as IORT as a way to optimize the workflow and minimize COVID-19 exposure to patients and clinicians. The event was exceptionally well attended with positive engagement among a number of key industry professionals in the days that followed. Importantly, we are now measuring return on investment from these webinars, specifically on revenue impact, with key performance indicators to track through sales force and other platforms. To this end, we now have the ability to track the number of leads generated by our webinars and can actually quantify pipeline dollars attributable to these events. In Q2 alone, we generated more sales leads from our virtual programming, then we generated in all of 2019 at in-person trade shows. So while we are still early in the implementation of these analytical tools, we are clearly seeing a significant impact on our pipeline resulting from these virtual events. Now, looking outside of the US in Europe, most countries suspended mammography screening during April and May, however, a continued push into the public sector of France yielded results as this sector actually continued to purchase during the pandemic. We are also seeing the public sector push to include AI for 3D tomosynthesis in most tender requirements. We are pleased that all of the market development investments we made in 2019 are now bearing fruit. We are executing a multi-channel strategy in Europe, utilizing both OEM and distributors in addition to our direct team and we now have distribution coverage in more than 20 countries, with recent additions in Switzerland and Serbia, and final negotiations occurring with partners in the Nordics, the UK and Germany. In the Middle East, North Africa region partner discussions are advancing in Saudi Arabia and Morocco. In order to manage these flourishing distribution relationships and then so we are proactively leveraging them, we have now hired an experienced individual to manage our distributor relationships throughout this region. We continue to be extremely pleased with our strong performance in these markets. And looking ahead, we expect that our expansion outside the US will increasingly become an invaluable growth driver for the company. I am also so excited to discuss the recent launch of ProFound AI Risk at the virtual European Congress of Radiology meeting. This is the first and only commercially available clinical decision support tool, which resulted from our collaboration with the prestigious Karolinska Institutet in Stockholm, Sweden, one of the world's foremost medical research universities. ProFound AI Risk's uniquely combined age, breast density and subtle mammographic changes, including those that the human eyes just cannot see, resulting in a highly accurate two-year risk estimation. The scores from ProFound AI risk empowers clinicians to truly personalize a woman's short-term screening strategy, moving breast cancer screening from what has historically been an age-based screening paradigm to now a Risk adapted screening paradigm unique to each woman. ProFound AI Risk is now available for 2D mammography, and our initial release is focused on Europe with a follow-on 3D release early and 2021 globally. Now turning to our therapy business, we are really pleased with the progress we have made to expand the Xoft platform into new clinical application areas. And particularly with the milestones we have achieved relative to advancing our neuro strategy that Mike referred to. Clinical studies are continuing to advance, examining the use of Xoft IORT in the treatment of various types of brain tumors at prestigious sites such as the James Graham Brown Cancer Centre at the University of Louisville, and the European Medical Centre in Moscow, one of the largest private medical clinics in Russia and an international leader in comprehensive care and oncology. Along with progressing our clinical study strategy, formulating our advisory board and the continued positive momentum on the data front, I was extremely pleased to announce the addition of Jeffery Sirek to our team as Senior Vice President and General Manager of our Xoft business. I am very confident that Jeff will play a significant role in accelerating our therapy strategy and commercialization efforts globally and as we look to expand clinical research to more leading institutions worldwide, So in summary, in the face of an operating marketplace that has presented many companies with unforeseen challenges, our team remains steadfast in our mission to identify and seize opportunities that continue to position iCAD and its technology as the leading forces within the industry. With trends beginning to now improve, we have multiple growth engines and several key catalysts expected over the coming quarters. And we continue to achieve meaningful progress for creating a sustainable leadership position for iCAD, driving long-term growth and generating significant shareholder value. Now, we will open the call for questions. Operator?

[Operator:]

At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question is from Dave Turkaly from JMP Securities. Please proceed with your question.

[Dave Turkaly:]

Great, thanks. Mike, I just wanted to follow up I think the comment that you made, I heard you say 90% to 95% of the sites are open. I think that's a little above we expect it to be – you commented to someone throughput in the past. I was just curious as to what that is, I guess what I'm trying to sort of figure out is where consumer confidence, where the patient's confidence is at this point? Are they feeling better and returning to get their screens done more consistently now?

[Michael Klein:]

Yeah, it's good question, Dave. The 90% to 95% is a number that we're very confident in and it's been confirmed by others. We're looking at the industry as we are. The way that sites have prepared for screening, it's not only with the appropriate safety equipment, but they've also lengthened their workdays instead of beginning of, let's say eight or nine and go into five, they're starting earlier and going longer and into the evenings and on Saturdays, and they're doing this to allow for patient comfort, safety comfort, so they can treat instead of what may have been a typical case of four patients an hour, maybe down to two or three to provide cleaning and scrubbing and patient comfort and yet still accommodate the patients. So they've extended the work day, patients are feeling as though safety measures are being put in place. And I think that in combination with the increasing concern that the longer this goes, the more at risk one becomes particularly if one is in a higher or moderate to higher risk category has allowed screening to bounce back in a way that we definitely did not say in the, let's say, April and first three weeks of May time period.

[Dave Turkaly:]

So I guess this is a follow up right there. I don't know if you're prepared a couple of queries. Talking about how the other quarter went sort of from a monthly standpoint, but I imagine that the trough was early in the period. I'm curious if you saw improvements say in May and then June, and then if any color you might want to add about those are continuing even into July.

[Michael Klein:]

Well, I certainly can comment on the second quarter, and that is obviously a large recovery and time period, when you have sites that are closed down and are not screening patients and there aren't the physicians at those locations and everybody's kind of scampering to be a first responder. And as we move through April and certainly well into May and started approaching Memorial Day, we started seeing things lightening up and sites were getting their safety practices and measures in place. And the need for productivity and efficiency was leaning towards sort of a resumption in examining the very product that they were looking at before, which was our ProFound product, which can help and stated on a productivity and efficiency side, not to mention the improvements in performance. So we saw a clear upward trajectory. We mentioned from May till the end of the quarter, you saw the SimonMed order, which was a big one, and barring some large-scale outbreaks beyond the regional flops we hope to continue to see the cadence that we saw in the back end of the second quarter. It's typical that the end of our quarters are bigger than the beginning of our quarters, but there is a certain amount of pent up demand, you might say and there are also some additional orders that may not have been in the pipeline at the beginning of Q2 that we added to the pipeline in Q2, and we're unable to get all the way through the sales cycle by the end of June. So I think that largely gets at your question, David.

[Dave Turkaly:]

Yes, thank you for that and congrats on the expense management. I'll hop off. Thank you.

[Michael Klein:]

Okay.

[Operator:]

And our next question is from Per Ostlund with Craig-Hallum. Please proceed with your question.

[Per Ostlund:]

Great, thanks. Good afternoon, everybody. So I'm going to focus here a couple of questions on the on the therapy side actually, if I could. The glioblastoma data that was at the ASCO virtual symposium was, I thought fantastic. And certainly look forward to seeing the formal publication of the May data in the fall. Are there other plans or is there the ability to kind of provide those continued interim looks on say, a three-month basis? Just because as we look at those data, I think that they strike me as very, very potent given that the control arm, the clock has stopped running and, in the doc, arm it's obviously still going most recently for personal half the cohort. So the more opportunities to see that data age out the better just curious to know what your ability is to bring more of that to light as we go.

[Michael Klein:]

Yeah, that's a fair question. And as you know, the results that were presented in Q2 reflected the GBM performance as of the end of December. And all of the patients in the control arm had passed by the end of September. So we continue to extend our lead. And as I know, you'll recall, we did intend to be able to show our results at the end of March. And in fact, we have those results. We continued to gather results, however, in April and May. And when we submitted for publication, and we were going for the most, typically go for the most prestigious peer reviewed publication we can, we have to make a trade off of are we going to release our March information and potentially scoop our own headlines for the May submitted publication and try to get the near term win and potentially risk not getting accepted into the publication. So we made the call to go with our May results and those results have now been submitted and we expect to have them in the fall. Now, I will say Per, on an ongoing basis we're not going to be submitting to prestigious journals every quarter because let's face it. This trial is really designed to get other neurosurgeons involved and we're using it in some ways to help us recruit for the trial. So every 90 days, as we go forward in our trial, we are going to get into results because we are looking at the disease-free progression, which could be measured with MRIs and other forms of PET scans and other form of imaging. So we will have a regular cadence of reporting progression free survival and our anticipated endpoints with the overall survival and progression free survival that we could see at quarterly intervals.

[Per Ostlund:]

Sure. Okay, that makes sense. I know there's been a lot of conversation over the last call this year or so, as to the Alternative Payment Model on the radiation oncology side. Curious as to what the latest you're hearing from your liaisons in industry have to say about implementation and that sort of thing and if sites are beginning to have that on their radar, something that they might have to be prepared for. I think we probably agree that it may not be a must have so much as an accelerator, but it is something that a lot of people do ask about. So I figured I'd take this forum to pose that to you guys too.

[Michael Klein:]

Sure. All of us look at this, literally on a daily basis, sometimes several times per day, but no more than Stacy, who I think has the refresh button on her computer kicking in every 30 minutes, so I'm going to turn this one to Stacey.

[Stacey Stevens:]

Yeah, it might be faster than that Mike, but I – Hi, Per. So a couple of things, we don't –

[Per Ostlund:]

Good afternoon.

[Stacey Stevens:]

How are you? We don't have an update on the timing for publication of the final language of the RO-APM. But we do know that with the release of the 2021 physician rule and the hospital outpatient rules that came out last night, and this morning, we did see the RO-APM reference, right. So CMS indicated very clearly in those rules that they had thought about these alternative payment models in their analysis and they reiterated that they expected there will be APMs in 2021, meaning the one we're interested in the radiation oncology APM, and there are others as well. So we actually think that this gives further validation that we will see it implemented next year, and we're seeing other radiation oncology companies, whether in their earnings reports or other public forums echoing that same sentiment, right. So we do know that ASTRO has sent another letter to CMS in the last several weeks. And basically what it was reiterating the same feedback that they had previously given CMS, right. So it was centered around potentially reducing the scope of mandatory participation, maybe making some changes and some payment methodologies, and some changes to the reporting requirements. So it was basically the same feedback. But they did make one additional request, which was to ask CMS for six months between the time they published the final language of the RO-APM and the actual implementation of it. So we don't know if they will be successful in influencing CMS in that regard. But we do seem to continue to get further validation that this will be implemented in 2021. As of today, it's still fitting in the OMB word since March. But I think as each month goes by, we're starting to gather greater and greater confidence that we are going to see this implemented for next year. Our customers are talking about it. And you can imagine that we're taking a lead role and educating customers about it and what it will mean for them economically and encouraging them to prepare for that scenario. So we started that process a while back and continue to do that, while we wait for that final rule to be published.

[Per Ostlund:]

Excellent, since you referenced other players within radiation therapy, curious philosophically, Mike, if you have a point of view on the tie up with Siemens and Varian and what that might do as far as impacting the space, if you see it having an impact on the space and how you might see that tie up signaling any particular attractiveness, I guess, of radiation therapy and what that might mean for you, as well.

[Michael Klein:]

I will say that this was one of those things I didn't see coming, right. It's that I had imagined Varian was pursuing its own destiny. And would be – was aggregating other technologies and potentially even serving as partners for others in let's say, the radiation therapy ecosystem. From what I've understand and I have communicated with some top people there, they believe they're going to continue to operate as an independent entity. When I was running a portion of the radiation oncology business at Varian, we competed against Siemens and so this acquisition is a little bit ironic, but what Siemens did offer was access to international markets. And I think that what is behind this, in large part is that the growth of international markets potentially with the new reimbursement in place that Stacey was referring to is seen as more attractive than the US market. The goal of these RO-APMs are to take cost out of the system while improving quality or care. And when I look at Varian's presentations, investor presentations, they show and it's been the case for almost a year, they show the volume of radiation therapy and the dollars coming from it flat on a projected basis. And I think Siemens has a very good footprint international and if you also look at Varian, they've made a number of acquisitions under their CTSI operations in India and other parts of Asia, China almost get into the actual delivery of care itself. So I think this reflects a growth opportunity for their international markets. What I find interesting about that is that that is also our biggest growth opportunity for radiation oncology. IORT has actually always found a home in international because we could – the healthcare economics favored it and of course our GBM results were started in international. So I think we may be better aligned with – or I would say that we're moving in parallel with this move towards OUS care while at the same time keeping our eye on the price in terms of the radiation oncology APMs in the US and we're certainly going to focus on glioblastoma in the United States as well as international. But I think we still haven't seen the full ripple effects of this. This is a very seismic shift in radiation oncology and it'll be interesting to see how to learn more about how others are responding. How are other radiation therapy companies are going to respond?

[Per Ostlund:]

Yeah, makes sense. All right, I will let somebody else step in. Thank you.

[Operator:]

[Operator Instructions] Our next question is from Brooks O'Neil with Lake Street Capital Markets. Please proceed with your question.

[Brooks O'Neil:]

Hi, guys. Mike, just following on with Per's line of questioning, with your experience at Varian and your knowledge of the industry over 30 years, do you see that mergers touching off or perhaps follow on consolidation within the industry?

[Michael Klein:]

It's an interesting question. I do see – one of the benefits of Siemens Healthineers and their acquisition of Varian is that you're able to further integrate the imaging aspects that Siemens brings forward with the radiation therapy, the delivery aspects that Varian has. And I think to the extent that that gives them an advantage in the market for what we call see and treat technologies or DXTX technologies to the extent that they could optimize that, that may make others want to pursue a similar path. I could say one of the things that we are – we feel we're in a good position on is that, although we haven't talked about this very much, the AI driven therapy is definitely been on the rise and Varian has been a lead promoter of that basically looking at all the different treatment plans that can be applied, the type of – the stage of disease, the nature of the patient in terms of demographics. And I think as radiation therapy becomes more AI centric and applies it to therapy that puts us in a good position as well and potentially able to play around linking up the therapy side of businesses with the imaging side. But because of the QuickBooks [ph], I do think that this will – this may be the vanguard of the efforts to merge together, whether it's companies or technologies that can both see it and treat it and optimize both to work in an interactive way with AI tools being part of it.

[Brooks O'Neil:]

It's really interesting, as you know, image guided radiation therapy is one of the hot themes out there in the marketplace right now. So maybe this is a move in that direction. Speaking of competition going all the way back to ASTRO in Chicago last year, AI was one of the hot themes. I continue to sense you guys are the only ones with an approved AI detection system in breast cancer, I'm curious you could give us your observations about the competitive environment, AI diagnostic products for breast and then AI diagnostic products for any other type of cancer you see out there that's significant.

[Michael Klein:]

In breast cancer screening, in terms of clearances for the clinical use of AI to read images real time, which is what the physicians want to be able to have to look at certainty scores to be able to have any kind of measurement of sensitivity and detection, et cetera, we stand as the one now of two players in the marketplace. And by that, I mean – of course we got our approval, that'll be two years in December and in the first quarter of this year we saw another player, an international player operating out of New Zealand that is receiving a technology developed from the Netherlands get approval. We have now four months into – or let's say beyond that approval have not yet seen a commercial sale or lost an account and in fact don't really see the competition and I think in part COVID does not help folks coming into the market at the time of a pandemic and we got a headwind out there. So that's what we say out there and we believe our calculations that we have the full – we all know that any other installations fell in the market.

[Brooks O'Neil:]

Great, I have a couple more and I'll try to keep it short and sweet. Stacey, you concluded your remarks by saying you see a number of growth drivers and catalyst in coming months and quarters. But without specifically following up and telling us what you see those being. So I was hoping without going on too long, you could quickly tell us what you think of the big catalysts you have coming up, that you think are going to be significant for iCAD?

[Stacey Stevens:]

Yeah. Sure, Brooks. So I think if you look at our product roadmap, we have some exciting things coming on both sides of the business, right. So I talked about the recent launch of ProFound AI Risk, which initially is focused on the European market. I think we will see some revenue impact from that in the European market in 2020. This will be sold as an additional add-on module to a ProFound AI in that market. And then once we finalize the development of ProFound AI Risk for 3D that will be a global product that we'll be launching in the early part of 2021. And then we expect to see a much bigger impact from that particular product in all geographies that we plan. We're also working on improving the core ProFound AI algorithm itself. So improving the clinical performance even from where it is today, which is already quite effective, but we now have as I think Mike mentioned in his script, about 300% more data to train that algorithm on from when we introduced ProFound AI. So we've been able to make some further improvements in the clinical performance that will over time become a growth driver. And then on the therapy side of the business as we continue to expand into these new clinical applications while we are continuing to collect data and launch a global clinical study for the neuro application, we still have an FDA cleared commercial product that we can begin to sell. And we do have some interest from customers. We're going to be launching our Elekta applicator on the therapy side of the business, right. So as we add new applications to the therapy system, we continue to increase our addressable market globally, right. So we have multiple things happening on both sides of the business and that's only the start of them, there will be more in 2021 and all these collectively will give us a lot of confidence in the growth – continuing growth prospects for the business.

[Brooks O'Neil:]

Glory, that's designated to on SimonMed one maybe for Mike I guess and one for Scott. So for Mike, I was hoping you might just talk about whether you've seen any reaction from other multi-phased radiation operators out there, following on after SimonMed? And for Scott, I'm just curious 50 installations seem like a significant number. Could you just talk a little bit about how you expect to recognize revenue related to that and whether you see it as a material contributor to 3Q or 4Q or sometime down the road? Thank you. Thanks a lot for taking my question.

[Scott Areglado:]

Mike, you want to – you want me to take that one?

[Michael Klein:]

Yeah. I'll handle the first one here and then turn it over to you, Scott for the second, more financial question. Yeah, it's a very good point. SimonMed is unique in that they are an early adopter for novel technologies that are cutting edge and they also are very forthright in presenting those leading-edge solutions in the markets that they operate in. That is indeed their business model. In fact, they actually took our technology and drove it into the on-demand real time reading results. And they do that because they're very patient centric and they inform their communities where they are what they're doing. And as you sort of hinted at, this has a corollary effect in the market. Women can choose where they want to get their mammograms read and especially during times such as these, if you can get results real time if you're going to be having those results read by AI and get them instantaneously. This is a big factor and they use that to their advantage. And we know of many, many cases where they've entered markets and can be other sites have been the first in market. And they have marketed their capabilities as such and its generated corollary sales at other sites. And of course, we do provide material for them to be able to use in the promotion of the technology, but they always like to customize it for themselves. So it does have that effect. That's sort of the back end of that question. I'll turn it over to Scott.

[Scott Areglado:]

Yeah. Hi, Brooks, how are you. So the bulk of that, almost all of that got recognized in Q2 Brooks, so we shipped everything at the time of order, so not a significant amount in Q3.

[Brooks O'Neil:]

Okay, thank you very much. And I thought it's a terrific quarter in light of the pandemic and I can't wait to see the back half results.

[Michael Klein:]

Fabulous, Brooks.

[Operator:]

And we have reached the end of the question and answer session and I'll now turn the call back over to Michael Klein for any closing remarks.

[Michael Klein:]

Well, thank you all for participating on today's call. I want to close by just reiterating the three key themes. And I want to thank everybody for hanging with us for this call, again. We will continue unlocking embedded value in our detection and therapy business. And we do in fact anticipate that the business will continue to grow in importance. And we are clearly seeing that healthcare sites are driving towards improved detection performance and increasingly prioritizing productivity and efficiency. The value proposition of iCADs offerings are enhanced with these articulated customer requirements and shed additional light on our offering beyond even the clinical perform. Two, as a result of the operational discipline and productivity improvements, we will continue to generate clear leverage as revenue opportunities continue to steadily materialize and cost management efforts sustain. And finally, with a strong balance sheet of over 24 million in cash and significant market opportunities in brain treatment, we will continue to both validate Xoft technology and generate high levels of awareness in the neurosurgery community that will pave the way for both clinical and commercial adoption on a global basis. In sum, we're well positioned, as stated earlier with high valued software solutions, such as ProFound AI with new iterations and new products in Risk that go beyond just detection today, and also with targeted therapy investments in key clinical application areas such as GBM that again, will enhance and provide overall considerable growth opportunities and in doing so will enhance shareholder value. And with that, we'll close the call and I'd like to thank everybody very much for participating and being with us today.

[Operator:]

And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.