iCAD, Inc.
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Greetings, welcome to the iCAD, Inc. Fourth Quarter and Full Year 2020 Earnings Call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I would turn the call over to your host, Jeremy Feffer. Please go ahead.

[Jeremy Feffer:]

Thank you, Stacey, 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.

[Michael Klein:]

Thank you, Jeremy, and good afternoon, everyone. I’d like to begin by highlighting a few financial highlights with a particular focus on iCAD’s top-line revenue momentum. iCAD’s fourth quarter total revenue of $10.5 million represents a 47% sequential growth over third quarter. We are pleased to report that revenue growth as our flagship high-margin ProFound AI offering grew by 70% over our third quarter revenues. To further punctuate the performance of ProFound AI in the U.S. almost profitable market, total sales of AI and services collectively grew on a sequential quarterly basis by an even greater amount, 72% from Q3 to Q4. It is also noteworthy that this substantial quarterly growth also represents a 21% increase in detection product revenue over the fourth quarter of 2019, which was the prior high watermark for ProFound AI sales. In our detection business, we recently achieved a critical milestone, the installation of our 1,000 ProFound AI system since our product launch in early 2019. We believe it is particularly noteworthy that nearly 40% of these 1,000 installs have been installed during the course of this pandemic. We share ourselves currently in an enhanced position to offer a steady flow of new AI offerings, product offerings that we anticipate bringing to market with an accelerating cadence. iCAD’s newest offering, ProFound AI for risk assessment is a product that looks into the future and provides unique and personalized probability score for potential future breast cancers.

[Scott Areglado:]

Good afternoon, everyone and thank you, Mike. I’ll now summarize our financial results for the fourth quarter ended December 31, 2020. As I have mentioned previously, we believe it is useful to compare our sequential revenues from the prior quarter in addition to our year-over-year comparisons. fourth quarter 2020 total revenues were $10.5 million, representing a sequential increase of $3.4 million or 47% as compared to $7.1 million in the third quarter of 2020. detection revenues were $8.1 million in the fourth quarter of 2020, an increase of 53% driven by a 70% increase in detection product revenue. looking at our Q4 revenue on a year-over-year basis, total revenues for the fourth quarter of 2020 increased $1.1 million or 11% with detection revenues increasing $1.3 million or 18%.

[Stacey Stevens:]

Thank you, Scott, and good afternoon, everyone. Although COVID-19 continued to impact many companies in Q4, including ours. We continue to be encouraged by the overall performance of our company. Despite unforeseen challenges brought on by the pandemic in 2020, our team continued to advance our innovative solutions in a rapidly evolving marketplace. We believe our dedication to providing precise, powerful healthcare solutions that are expertly engineered to optimize operational efficiency, clinician confidence and patient outcomes, will continue to enhance our competitive position in both segments of our business. While the COVID-19 pandemic introduced practice changing challenges on many facets of healthcare, including cancer detection and treatment, there has never been a greater need for our cancer detection and therapy solutions. The World Health Organization recently announced that breast cancer has overtaken lung cancer as the number one diagnosed cancer globally. This is compounded by the fact that medical care was severely disrupted in many areas at the height of the pandemic, resulting in an enormous backlog of mammograms, which is now estimated to be as high as eight million to 10 million as a result of decreased cancer screening last year. given these circumstances, we firmly believe that our technologies offer a unique value proposition that is exceptionally timely and positions the company and our technologies for success as we look ahead in 2021 and beyond. let’s begin by highlighting the success of our company’s latest advancement, ProFound AI risk. This first-in-time technology, uniquely combined age, breast density, and subtle mammographic patterns, including those that may not be apparent to the human eye, to yield a highly accurate and personalized two-year risk assessments. We are excited about the benefits that software can offer to both clinicians and most importantly patients, and we are continuing to drive forward several key initiatives relative to expanding our clinical validation on a global basis, including developing KOL research sites and clinical centers of excellence with multiethnic multi-geographic data diversity, all aimed at driving adoption globally and ensuring product efficacy across a diverse range of patients. We are working to finalize the risk algorithm for 3D breast tomosynthesis. This process requires the collection of 3D cases for both training and validation. We have made significant progress in collecting the cases needed for each of the DBT systems to be supported and the preliminary performance results with the 3D images are very promising. ProFound AI risk will be particularly well positioned for success in the years ahead, as mammography begins to transition from what is an age-based screening paradigm today to a risk-adjusted screening paradigms. This technology offers a practical solution that empowers physicians to offer more personalized screening, truly individualized for each woman. We believe this technology may ultimately, lead to supplemental screening, being applied to a smaller but correctly targeted percentage of women and to lowering total cost per patient spend over time. expanding the body of clinical evidence, supporting our technologies with high impact clinical studies remains an important focus area for us. ProFound AI risk is already supported by a recent study, published in radiology. And in Q4, we continued efforts to initiate a multicenter European initiative to conduct a global retrospective analysis of 2D risk. We are continuing to work with a number of highly influential thought leaders in Italy, France, Spain, and Germany, to refine the study protocol and ensure multi-geographic data diversity. As we have previously stated, our U.S. retrospective analysis study of risk 2D and 3D will also be led by Dr. Emily Conant, Professor of Radiology at the Hospital of the University of Pennsylvania, whose data also reflects an ethnically diverse group of women with a special focus on genetically predisposed women of high risk, such as younger African-American women. We are currently identifying additional sites for inclusion of other ethnic groups, including Southeast Asian American and women of Hispanic origin. It is our hope that this research will contribute to the growing body of evidence supporting our technology and potentially, paved the way towards more personalized screening recommendations in national clinical guideline organizations, such as National Cancer Institute and the National Comprehensive Cancer Network, high impact clinical studies also have the potential to feed healthcare economics and payer relations studies, which could validate economic benefits of the model improved savings to the health system. In summary, we continue to see tremendous interest for risk in the market and remain very positive about the impact our innovative risk solution will have on our business moving forward. I look forward to providing further updates on ProFound Risk in the coming months. In addition to our focus on ProFound Risk, we are continuing to advance ProFound AI for DBT, our flagship breast cancer detection algorithm. In late 2020, we finalized the development of the third generation release, which demonstrates improved clinical performance, especially related to specificity or false positives of the algorithm versus the current commercial product. The new version was submitted to the FDA and our notified body in Europe for CE Mark and it’s currently under review by both bodies, and we anticipate receiving clearance to market and sell in the U.S. and Europe in the coming weeks. The new ProFound AI release will also be accompanied by an updated platform release, which will further reduce the time it takes to process images, as well as introduce the ProFound AI index card, which will provide our customers with a simplified summary of all iCAD AI results in a single view. Additionally, the release will offer enhancements to how our AI integrates with path and mammography workstations to further improve reading workflow and efficiency for our customers. I’d now like to review our strong overall performance internationally. Our total ex-U.S. revenues of $2.8 million for full year 2020 represented a 20% increase over full year 2019. in a year, significantly impacted by COVID-19, we are extremely pleased with these results. Let me review some recent international achievements. During Q4, we sold our first ProFound AI system into Israel and shipped two evaluation systems to the largest medical group in that country, where 70% of Israelis are treated. for the first time, we participated in the Israeli radiology Congress with our own KOL speakers, providing us the opportunity to introduce our suite of products to this large target market. France continues to be a key market for us. We completed our first installation in the south of France, which has generated extensive TV, radio, and print coverage, as well as an installation at one of Francis’ best-known hospitals in Paris, Pitié Salpêtrière. In addition, we signed an exclusive commercial contract with a leading private clinic group. Our sales channel investments in 2019 and 2020 are generating results and we expect continued growth in this geography in 2021. Now, let’s quickly switch gears and discuss our Xoft business, which has demonstrated important progress in multiple areas during a period of uncertainties due to COVID-19. As I stated on our last earnings call, we have brought in new senior leadership and Jeff Sirek and the business has seen some significant changes from an operational and strategic standpoint. We have implemented a two-tiered strategy to drive revenues around the current applications while developing the new indications, neuro and rectal through our clinical trials, registry, KOL sites and pre-commercial efforts, which we’ll talk a lot more about in a future innovation day. in Q4, there were seven systems sold worldwide, including our first neuro commercial site in Germany, Tasou Hospital , which will be using the system for multiple applications. Additionally, the skin business was restarted in Q4. Do you see some favorable reimbursement changes? And we received an order for several systems. These purchases for KOL users were for own multiple dermatology sites in both the West and South Eastern U.S. areas. in the OUS business, including China, we have seen consistency with controller placements and source usage. We had two milestone wins in China, in Q4, including union hospital in Beijing, one of the most influential hospitals in China, and they will be treating multiple applications. moving on to the new clinical applications. The protocol for treating recurrent GBM has been approved and now resides on the clinical trials.gov website as Mike mentioned. this is a milestone and it’s vital as we finalize the first treatment sites and gain IRB approval from individual hospitals. in the EU, we have focused effort and hospitals identified to join our trial and begin treating GBM patients. Some of these sites are current users and others are completely new healthcare systems that we are targeting. We expect to be treating GBM patients in two to three sites in the second quarter. So in summary, we are excited about the progress and accomplishments. We have driven across both sides of our business, and we look forward to providing you with further updates as we continue to advance our business forward in 2021, drive sustain leadership and create additional shareholder value. Now, we will open the call for questions. operator?

[Operator:]

Thank you. Our first question comes from Kyle Mikson with Cantor Fitzgerald. please go ahead.

[Kyle Mikson:]

Hi, guys. Thanks for taking the questions. Congrats on this great quarter here. So, I want you to talk about the sequential detachment business, its growth. It was obviously stronger than it was in 3Q and I was kind of wanted to break it down to a couple of categories. So first of all, which of the sales channels was the most successful during the fourth quarter and then secondly, were a number of those insults detection the way from previous quarters and finally, we’re doing any types of customers that bought the software. Thank you.

[Scott Areglado:]

So Kyle, how are you doing? This is Scott. most of the growth in the revenue was from the direct – our direct channel versus OEM growth and it was primarily around 3D and risk.

[Kyle Mikson:]

Okay. But was there anything push out from previous quarters or anything like that? Because it was obviously a really impressive number.

[Scott Areglado:]

So, we had a big enterprise sale, we’ve referred to it a couple of times, those things take awhile to develop. So, it’s hard to it happened in the fourth quarter.

[Kyle Mikson:]

Okay. Got it. Thanks, Scott for that. And just I want you to also touch on the entrant of the new competitive product in the fourth quarter as well. I know it’s going to two months, but just wanted to get an update there. So obviously, it’s only going to affect customers with a certain type of camera, but just was curious if there was any changes in the competitive landscape and how that’s kind of impacted the way you’re going to market or the customer response to your products then of course, how does risk kind of play into that kind of have your strategy there?

[Scott Areglado:]

Mike, do you want to – Mike or Stacey, do you want to speak to that?

[Stacey Stevens:]

Yes, sure. I’m not sure if we lost mic there.

[Scott Areglado:]

Yes.

[Stacey Stevens:]

Is that mic? No, okay. We might have lost him. Yes. So yes, with the new competitor in the space that you’re referring to, we really feel a lot of confidence and our ability to win deals in those accounts. And we have a lot of evidence so far given that the large accounts that we have landed even in Q4 that were, that had that imaging equipment, we really have stronger clinical claims. If you look at the claims from sensitivity to specificity to reading time, these types of things if you look at those all together, our clinical claims are far superior. Mike?

[Michael Klein:]

Yes. I think, can you hear me? This is Mike.

[Stacey Stevens:]

Yes, we can, we can. And so if we go from a competitive standpoint, Kyle, we feel very good about our ability to compete on the clinical performance elements. And then I would say remember, we’re on the third generation of our product, right. So, as new entrants are coming into the market, they’re coming in with products that are in the first generation. Not only are we already on the third generation, which we expect to come out of the FDA and a matter of weeks that we’ll have further improved clinical performance. We also are now increasingly including risk as part of all of these deals and there’s tremendous interest in risk and in fact, it’s actually driving the customer’s choice of ProFound AI in many cases. So, the combination of superior clinical claims and having risks that nobody else has a short-term risk algorithm at this point, I think puts us in a very strong position competitively.

[Michael Klein:]

It’s Mike. I don’t know if I’m alive now. I think like somehow my line went hold there for a moment. But I think those points were well-established, but I would just say that was one of the benefits or just unanticipated consequences of COVID. It’s very hard to launch into a market, especially for an – for new players out of the market. And I think we thought we were going to have that dynamic at some point this year, but the competitive dynamics we anticipated seeing both from international and domestically, we’ve just not seen emerge. We continue to only see in the U.S., our 3D AI system solution for detection. and certainly, on the risk side that sort of puts us at – on what do we call it the extra mile, where we think there are a few elements. So – thanks for the question.

[Kyle Mikson:]

That definitely answers the other question. does have a couple of questions. So, I’ve been thinking about change obviously recently with the optum acquisition and it’s our view that change is it imaging businesses really fit into OptumInsight’s main business areas, and honestly when the United could be better off investing the business. So, I just wanted to ask how that would be affected if that were to happen. In other words, if the imaging business was kind of separated from change, would you be better off or worse off, if one of the other PACS vendors kind of added the change assets and had that larger scale.

[Michael Klein:]

we’re sort of agnostic on this stuff and in that the business would change. We have great expectations for that business as it continues to gain traction. If they merged with another flag player, that would be fine as well and you were already working with the majority of them. And I will say, if they continue in the current cancellation there that they’re in – with as part of United, we think that that is actually very exciting, because it provides data to a carrier – an insurance carrier. That’s going to actually be used to make positive determination, so that the economics of care. in some ways, it gets us in the door that we are longing to get into and I’ll have data from their own sources in terms of the efficacy of care or the – where the disease was found; at which stage, disease was found. So, we kind of like where it is now, and we’re fine if it happens to attract itself or attract itself to another real tax or an approximation either way, it’s – I feel like it’s a win-win.

[Kyle Mikson:]

All right. Got it. Thanks, Mike. And just one last question, hopefully, it’ll be quick. So, you actually mentioned repeatedly, recently that both sides of the business should grow at really strong rates going forward over the next few years. last week, earliest recently you mentioned, I think 50% growth. So, I know you’re not providing long-term guidance, but we maybe see that in 2021 or possibly in 2022, I’m just trying to think about the roadmap in the near-term as you kind of drive more success in both segments?

[Michael Klein:]

Yes. We do see significant growth. And in fact, collectively in both sides of the business. you may have heard me talk about this frictionless procurement, which means multiple channels. It can be purchased through as well as frictionless purchasing, which allows it to be acquired either as upfront purchase with recurring revenue service, subscription, or SaaS. And because of that, there’s going to be some undulations in terms of which channels it comes in. Some of these channels actually might, just as an example, take $1 million of sale instead of getting it upfront with some service, it might come in at 400,000 this year of 400,000 in next, and continue to give us 400,000. So – because of that, we’ve been a little bit – we’ve been – we feel it’s a little bit premature to provide firm guys, because we – our goal is to be able to meet the market where it is, but in some ways we know that if we take $1 million off the board and do it in a fast model. it’s going to help margins. It’s going to help occurring revenue and be predictable, but it could have some effect on the – on this year’s round. there’s – to the extent that occurs, there’s no doubt that any deal we take today will not only have an impact this year, we’ll have an even bigger impact for the year in the years to come. So back to your point, we do think that the growth can accelerate it in every year if we take subscription deals or SaaS deals today.

[Kyle Mikson:]

Thank you.

[Operator:]

Our next question comes from Frank Takkinen with Lake Street Capital Markets. Please go ahead.

[Frank Takkinen:]

Hey, congrats on a good quarter and thanks for taking my questions.

[Michael Klei:]

Hi, Frank.

[Frank Takkinen:]

couple’s here on Solis to start off. Obviously, this is a giant win with it being a very, very clear indicator of it being the most superior technology on the market, given us a Hologic account. So, I wanted to ask a couple more questions here and see if we can get some more color. First, can you give us any color into the expected rollout ramp into Solis locations; two, any color on whether or not these will be upfront purchases or subscriptions; and then three, as you spoke to tripling, I believe you said tripling installed base over the next five years, whether or not ProFound would be almost a standard option as they roll out these new installs.

[Scott Areglado:]

Yes. So, it’s a perpetual license sale. So, we delivered a significant portion of the system to Solis in 2019 – in 2020, and then the rollout and the installation of that into Solis will happen on their timeline in 2021. So, it’s a five-year agreement for the majority – we recognize a significant amount of revenue in 2020, and then the remainder will generally come in ratably over the remaining four years, just tied to the service and some installation. And then as they grow and as they add more ProFound locations, more locations, they would add ProFound into those locations and we would get additional incremental revenue when they add them. Does that help?

[Frank Takkinen:]

Yes, absolutely.

[Michael Klei:]

And I’ll add to that – if I can just add to that one piece on the going forward, the reason there’s a particular reason this was made, as a five or structure as a five-year agreement, which is also consistent with your point about tripling and they do an easy ProFound, both detection and risk as a clear differentiator. So, it is integral to the growth equation in markets as they move forward. In fact, there are some anticipated additions to the Solis universe that we expect to hear in Q2 and later this year. And we believe we’ll be a part of those deals as per the agreement.

[Frank Takkinen:]

Got it, helpful. On the Solis – sorry, on the ProFound gen 3 that you spoke to Stacey, is there potentially a commercialization strategy change as you’re going to your already installed users with gen 3, something along the lines of, we are going to continuously roll out new generations, maybe, there’s an interest in converting over to a subscription model, where you can be a part of these updates without having to purchase new every year or am I overthinking a little bit here?

[Stacey Stevens:]

No, I mean, it’s a great question. And we already have customers today that are buying service plans that enable them access to all of the generation software afterwards it get launched in any given year. So, we have some experience doing this. So, I don’t think it’s going to change our commercial model at all. We are seeing at this point, some customers, who are expressing an interest from moving from a capital model to a SaaS-type model or a subscription-type model. usually, that’s customers that may not have budget in 2021 and may not just getting budget until next year, but really, urgently want to acquire the technology this year, right. So, I think we’ll see a mix of models and we’re prepared to offer the customer the ability to purchase it any way they want, whether it’s a perpetual license or a subscription-based model or a monthly fee of financing. We have the ability to offer all of those different ways and that’s what Mike sort of referred to as a frictionless sales model. We can adapt to the customer’s needs from a budgeting, and we are seeing customers want to accelerate the acquisition of the technology regardless of whether they have the budget today. So that’s a dynamic that has caused us to be able to offer that flexibility to customers.

[Operator:]

Thank you. Our next question comes from Per Erik Ostlund with Craig-Hallum. Please go ahead.

[Per Erik Ostlund:]

Thanks. Good afternoon, everybody. I want to come back to the notion of Genius AI since it was introduced and cleared kind of around RSNA there, given that your two big announcements commercially for the quarter were sizeable Hologic sites, is it a reasonable conclusion to think that in a way Hologic’s FDA clearance sort of represents a bit of a damn breaking if you will. Maybe, the market was a little held hostage while sites were sort of waiting to see what Hologic actually had, and that now that it’s sort of out there and would seem to be clearly, inferior that sort of driven folksier direction.

[Michael Klei:]

Yes, that’s a very good question. There’s no doubt and it’s pretty typical for large market players to want to “freeze” the market or say, we’ve got a solution, we’re coming out with and we got to look at the solution ourselves in side by sides with other – with some of these deals that matured in the fourth quarter and to not get into too much granularity, I would say, there’s three things that sites need to see in an AI solution. One is that you want to have, you want to make sure the detection is high. You want to make sure it doesn’t come at the expense of false positives and you want to make sure it comes that all of this happens without the expense of increasing reading time. And we use the calculation, which is called AUC area under the curve, it’s basically the miles per gallon for AI and in the release, which is published. You can’t hide these things. The FDA publishes them on the FDA side, on Hologic sites, the area under the curve, which is sort of a by-product of sensitivity and false positive, what you catch versus what you caught, but you shouldn’t have. We have a number that’s double that of the competitive offering of a largest offering. further to the point is that you want to make sure one of the reasons for using that one of the reasons people bought 3D was that it reduced false positives. So, you don’t want a product that actually increases false positives, especially during the pandemic, the data on the Hologic site to get out. I typically like to speak this way about competitors, but it’s just on the site actually increases false positives. And the third piece, which is probably one of the more challenging elements is that when you got the four images, the 300 to 400, do you want software? That’s a workflow productivity tool that reduces the amount of time and we do that to the effect of 53% and almost 58% for complex images. And in the case of Hologic actually results in increased amount of time and that’s all on the site. So, I think you’re correct. People sort of awaited, took a look at that. And then it’s – basically, they come back to us and we say, here’s a product, and it’s not only where it is today, but it’s going to get it moves to the third generation and the weeks ahead, and it has risks. And I think, given those dynamics, it’s created a very favorable set of circumstances for us.

[Per Erik Ostlund:]

Okay. That makes sense. Since GBM hasn’t been brought up in the Q&A, I think it – like to do that. Far be it for me to fast forward beyond the trial that you’re just embarking upon now. but let’s stipulate that the data that the trial that you have being led by Dr. Kesari, more or less matches that of the Kurdish app in data out of Russia. Mike, you’ve talked about potentially partnering with another player in this space potentially to act as a bit of a selling arm for you – for IORT. Is that still something that’s fine your radar? Is it something you would consider sort of a bifurcated commercialization effort where you do some direct through your existing channels and partner with somebody else? How could that look?

[Michael Klei:]

Well, it is interesting, Per and it’s a really good question. How do we optimize the value of that? We see that’s falling into a couple of buckets. One, you just mentioned is off neuro is – also is off, you might say one itself that is off derm with Stacey dermatology, and then there’s off GI. in each of these areas, it’s pretty clear to us that adding our own sales forces in each of these areas, since they’re all unique markets, may not optimize the technology in that this technology will give them the pricing of the x-ray sources and the technologies, and the reimbursement in these areas can allow for distribution partners that even if they took 20%, 25%, 30% revenue would still provide very, very favorable returns to this business, perhaps even greater than the returns today, because the reimbursement profile is hot. So, when you look at neuro clearly, it makes sense. Well initially, we’ll have, perhaps you have two or three reps that’ll be working to seed the market, because this product is for sale right now. but we’re not positioning ourselves competitive to any choir, but we see ourselves as additive or adjunctive. And that sets up a framework for us to be able to partner with other players out there. We may have 30 to 50 people out there and maybe, an excellent deck to diffuse the technology and still provides very, very handsome, gross margin returns. And by the way, we think that could be the case for not only neuro, but for other areas as well. So somebody as you could see that we have sort of a hybrid, we nurse the product along, and then we’re to break that opportunity. We might add some dedicated capability or rather some partner capability to diffuse it into the appropriate channels and do more challenge.

[Per Erik Ostlund:]

Thanks.

[Operator:]

Thank you. Next question is...

[Michael Klei:]

You bet. Yes, yes. Go ahead.

[Operator:]

Dave Turkaly with JMP securities. please go ahead.

[Dave Turkaly:]

Great. Thanks and congrats. Mike or maybe even Scott, if we look at that $6.6 million detection product revenue and I don’t think you broke out sort of the 2D risk from the ProFound AI, but I’d love to get any color there that you might be able to give us. And maybe, on the 2D versions, even if it could be sort of a geographic split, but I know you mentioned the three ways you’re going to price this, I assume in this quarter that most of it was licensing like the ProFound in the past. Would that be a safe assumption and any color you could give us would be great?

[Michael Klei:]

Well, let me get to the macro picture and I’ll let Scott color in with some numbers. people mind that we launched it, first in international. And we trained the distributors and we didn’t launch it until September. Then we had sales training for four reps and distributors in October. So, we only had a couple of months, but it was a very meaningful couple of months. And then in the U.S., we also launched it in a soft launch towards the middle of the fourth quarter. And this was designed to across our plan with risk is to also, we’ve learned from detection to try to get it out to the major sites that are going to publish the data. And if we then have a hard launch with the data published and all these luminary key opinion leader sites already out there, it’ll strengthen the launch, a stronger launch, although with maybe, proceeded by a software launch. Having said that, the product has had unexpected outcomes for us in terms of it aligning very well with reimbursement dynamics outside of the U.S. and it actually was a key swing factor with some of the deals. So Scott, do you want to comment a little bit on some of the elements in the mix with risks that we saw in the fourth quarter?

[Scott Areglado:]

Yes. So look, it was, primarily licensed sales as we’ve been selling historically here. And risk was a big part of the offering for both Solis and for Wake. So, we got some significant revenue. We’re not breaking it out, but to just say that it’s an embedded piece of the overall sale and it was certainly a big value driver in getting both of those sites.

[Dave Turkaly:]

Got it. And I guess you mentioned the license. I imagine it’s a similar price point, I guess my follow-up question would be, if you sold some ProFound AI to some of these accounts now, and obviously, through 2020. as a whole, can we think about adding maybe, risk to some of your already ProFound accounts and maybe putting some sort of a – I don’t know, $30,000 or whatever license ASP might be. looking ahead, even on some of the places that you’ve already put ProFound this year, what do you think the propensity upgrade is? And would it be a fee like that?

[Michael Klei:]

Yes. I would say Dave, that certainly when you got now north of 1,000 installs into a market in the U.S. that in the high teens and worldwide to be $35 million to $40 million. And we have, as I said, $55 million on the 2D sites and 1,000 ProFound sites, the first place you’re going to go is to see your own sites for both 2D and 3D. What I would say, however, is that, and we’re being intentionally, Dave on this point, by design about switching over to a model, where at some point this year closer to midyear, we’re going to move from a licensing model for risk to a subscription only model. And there’s a reason for that, and that is that this is an offering that’s going to rapidly evolve in new ways and rather than have to offer – an offering, six months, 12 months with genomics, new risk factors, we want to get people, we’re seating the market and key accounts and it’s almost like the first people that put money down on their Tesla, right? So, we’re key counselor with the market along. And then when we’re hearing, it’s not just our model, it’s that sites are going to want to buy it on a subscription basis, because the product is going to be such that it will be smarter tomorrow than it is today. So, we’re already going to go after the low-hanging fruit, our existing accounts, we’re certainly going after novel accounts, this is a big differentiator. You saw that in Q4 of these deals, and we do anticipate it moving towards a model, where we’ll be on a subscription or a percentage basis. And obviously, we’re going to work with folks that sort of present these models. How would you see them laying out? That’s one of our obligations, sales folks, or investors to build their models. So, we’ll get a proper introduction as we start moving in that direction, but by design, we’re being a little bit a little bit on the quieter side, this one that cut out a little.

[Dave Turkaly:]

No, I appreciate that. I mean, it’s going to have a massive impact positive impact on your P&L. so yes, I think we’re all excited about that. I think lastly, you did get asked something about sort of sustainability here, given I know the first quarter usually is a step down from fourth, but the momentum that you saw in a quarter, that still had some impact. I don’t know, as we look at next year, or I should say late this year now, and vaccines and everything kind of kicking in, and some of those 8 million to 10 million backlogs coming through. I mean, you don’t want to give guidance, but I’m just trying to wrap my head. I didn’t have you doing a $10 million quarter till first quarter of 2021. So, I’ve been a bit of a quandary as to how this is going to play out, but it would certainly seem that there could be upside or it’s said differently that you could sustain this momentum, even – maybe even in some of the earlier parts of 2021.

[Michael Klein:]

I would say, I mean, there’s no doubt this market is in a buying mode and in an adoption, and our approach is to make it frictionless. So as the sites progressing and for example, we’re dealing today with – and I’ll just call it, won’t get into the account. But as an example, we’re dealing with an account that could be a $1 million deal, but it could come in as $40,000 this year, next year, and for three years thereafter, right? So, while it could be an amazing deal, it could also take a $1 million set of this year or this quarter, put it into $400,000 spread out over the year, but yet, we’re going to love that we did this deal and then we’ll have higher marks. So that’s make – makes it a little bit tricky, but it’s the important thing is, our mantra is if people want to buy the product anyway, anyhow, anyway they want to pay for any channel, we’re going to be there, because we do feel like we have a only first mover, but it’s kind of at the moment, almost the sole mover advantage. Certainly that’s the case with risks and we’re going to keep moving quickly. But you made the point that this is one of the reasons we like the subscription model is that there are episodes during the year when people do their buying, just like people buy cars at the end of the year or the end of the month, the SaaS model allows us to smooth that out over the course of procedures, but there is this hard coded pattern of when people buy. And it typically is the end of the year, and they typically kind of fixed to get ready in the early parts of the year. So that pattern we look to smooth out over time.

[Dave Turkaly:]

Got it. Thank you for that.

[Operator:]

Next question comes from . Please go ahead.

[Unidentified Analyst:]

Good afternoon. And thanks for taking the questions as well as my congrats on the very great quarters happened.

[Michael Klein:]

Thank you.

[Unidentified Analyst:]

My first question is that given that you have two major accounts signed in the fourth quarter, even they are not fully – not all the sides are purchasing, but is that – do you consider that a little bit lumpy type of events that make a jump on the revenue and should we think about – think about that way for forecasting going forward or this is really a starting point for already higher baseline moving forward.

[Michael Klein:]

There’s a clear tells that a lot of this hit in Q4, but not all of it. And in fact, it’s, Scott will say, the first things get shipped or hardware and some software, and that’s often can suppress the gross margins as they have been seen in the fourth quarter. But then there are cells that kind of spill out over the next quarter or two. And then of course, all service revenues hit 12 months – 12 months and let’s say the first day of month 13, where the service revenues kicking, it should be noted that these deals also have service agreements in them. So, I think that there’s going to be a certain degree of lumpiness and that will combine with a certain amount of a certain amount of seasonality in the procurement cycle and some of that is leads us to the conclusion that, that we want to move quickly. And we’re going to take on sites that want to buy, even if it means that we have to take them any creative ways, such as fast ways, because in the long run, that’s a great opportunity. So we’re still going to have a little bit of this lumpiness and the seasonality for this year and it’s going to get mitigated over time. But it’s clearly good news. And there are other big deals in the pipeline that are triggered by these other – but it is important to know that all of these supertanker deals the selling cycle, which is typically now only 90 to 120 days at most, but for these larger sites, they’re more – they’re close to the four to six months. There’s just so many more people that have to be involved. So those deals tend to push out a little bit and take a little bit longer. Okay. I’ve been able to help you.

[Unidentified Analyst:]

Yes. That’s very helpful. And maybe you follow up a little bit on that, which is that both for the Solis and Wake at least on the fourth quarter that that the sites actually make the purchase among all the sides say under their management. Is that a very small portion of that? I know it’s a five-year deal for Solis, but how should we think about at least on this particular vendor?

[Michael Klein:]

Yes, I’d say in general, you should take the – fore Solis’ turn accounts you should think of it as mostly all Solis deals we’re captured in the forecourt to some extent, in other words, not every piece of revenue, but the super majority of revenue in Q4, it’s certainly the hardware and software and a big deal – and a good amount of the software. Wake has more momentum as not all of their sites will be up and running and that’ll be something that will slow over the next six months. You may have noticed that even when we did deal a year and a half ago with SimonMed. we announced the big million dollar deal that took three quarters for that to be fully implemented. In the case of Solis as much of that has already been captured in the fourth quarter with a certain amounts that are a little through as stated in Q1 a little bit Q2, and also noticed that that we’ve not included the service revenues, which are to give again, that won’t kick in until 12 months after installed.

[Operator:]

Thank you. Our next question comes from Gene Mannheimer with Dougherty & Company. Please go ahead.

[Gene Mannheimer:]

Thanks. Good afternoon. And congrats on the strong finish to 2020. On Wake a nice agreement there. I just wanted to clarify they committed to buying the risk product at this point, although, so when it comes generally available or is that going to be a separate sale? Thanks.

[Michael Klein:]

I’m going to turn this one over to Stacy, because she brought this deal live with Scott, so she knows all the details. Stacey?

[Stacey Stevens:]

No, this is actually a team effort on the part of our sales team and many people in the company. But to answer your question, Gene, they are trialing our risk product and making a decision on how much they would like to deploy that throughout their sites. So this is a little bit of a sort of half purchase trial scenario here, and we got the first part of the purchase, and now we have some products on trial and then they’ll make a decision on acquiring the rest of the solution. But we’re very hopeful that they will see the value in risk.

[Gene Mannheimer:]

Okay, excellent. Thanks for that color. And Scott, your OpEx was down 3% in the quarter as you called out. I’m just curious if that’s a representative of the go-forward cost structure or do you expect expenses to tick up as travel and hiring kind of kick into gear this year? Thank you.

[Scott Areglado:]

Yes. It looks clearly with a bigger revenue quarter, there’s one time expenses in the quarter. So, I would say on Q4 OpEx wouldn’t be your opening run rate for 2021, for sure. And as far as travel and the rest of the stuff, Gene, we’ll see how it goes. Obviously there’s not a lot of people traveling yet and we’ll just – we’ll build those expenses in is as we start to – isn’t start to unfold.

[Gene Mannheimer:]

Okay.

[Michael Klein:]

Thank you. Scott. Just going to add one piece to that team, it’s been really, really interesting. I think all of us always where we show that we have to show up and do that because it was the norm, right, to show up, you have to, when I say show up, you mean you got to be there to finalize TLs and all that. Certainly my 90% travel supports that, but we’ve been amazed in how much we can get done there because the norms have change. Just vial all these Zoom and teams, et cetera. I would say that in this year the – we’ve looked at it. And since that, most of the conferences this year are still going to be pushed out that we’ve converted to far more cost-effective ways of using online tools. Because start these conferences can cost $3000, $400,000 to attend the travel and meals and all that stuff. We’ve been able to get the same kind of space time through internet tools and webinars and things such as that. So, we think carefully, before we add that to those full expenses. And the other thing I’ll just add to that is that in terms of productivity, this is one quick anecdote I said to one of our software engineers, who’s had the whole software team set a very productive year. I said, yes. So, you’ve done incredibly productive sheet like did like two years of work in like half a year or nine months. A thoroughbred self-proclaimed introvert said, Mike, I’ve been waiting my entire life for this moment, where it can just code, code, code and few other had business trade shows et cetera. So, I think we would get the duel productivity increase and cost savings for this year. And I think we’re going to have to figure out what the right blend will be going forward. For example, we’re going to be taking a look at downsizing facility sizes, travel, all these things. We’re going to have a new reality of work and it’s going to be more costly.

[Scott Areglado:]

Yes. And I think fortunately for us, Stacey’s team had the marketing team, had the vision to be out in front of this before the pandemic hit. So, we were really able to kind of capitalize on that and get through 2020 with some of the investments we had already made.

[Gene Mannheimer:]

Okay. Very good. Thank you for that. And last thing for me on the GBM side, how far are you along in recruiting those 80 to a 100 patients? I’m just curious how difficult it is to maybe identify the patients that are be best suited for this trial? Thank you.

[Michael Klein:]

Well, the good thing is we have eight sites, right? And at each site we’ll probably see five or six patients that are candidates and no need 80 data patients, right. And we think we can and we’re – we expect to actually treat our first patients and at least two likely three of those sites in the next 30 to 45 days. So once we get going COVID slowed things down a little bit, but not much because after all single fraction, radiation therapy has great appeal during COVID, you’re not going to get six to eight weeks radiation therapy. So, we’re recruiting, we’ll have three sites up to three sites actively treating. We believe, it’s – let’s say late March, April, and then we’ll have all sites by in Q2. Can’t exactly say how long it’ll take us to get to 80, but it’s not a big number. If you can get all sides treating, we could be 12 to 18 months and that’s pretty useful because a lot of the survival time for patients can be measured during that time. And one of the reasons we say you’ll see information towards the end of the year is that even if we have a dozen patients done by midyear, we’ll track them at six months. And by that point, we will have been beyond the control groups, recurrence rates, and we’ll be able to see some meaningful data, even the latter part of this year. We’re super excited about this, not really expensive trial and that they already had the equipment. And it’s just a little, it’s really what we’re paying for is the imaging. And people can also use it commercially. So, we hope to get some commercial sales since it is an FDA cleared product and we can’t, they can’t use it commercially and get reimbursement if we’re also giving them the balloons, which are not very costly or, and paying for the interview. But I think we’re going to see a lot of developments in Xoft this coming year. I think that as a guest for midyear on GBM.

[Gene Mannheimer:]

Great. Thank you. Appreciate it.

[Operator:]

Next question, Andrew DeSilva with B. Riley Securities. Please go ahead.

[Andrew DeSilva:]

Hey, thanks for taking my questions and sorry. I was hopping between calls. So, just let me know if you answered any of these, but really wanted to delve a little bit deeper into the Solis when is it just fair to say that the overwhelming majority of the revenue related to that contract was already recognized in the fourth quarter? And if so, could you kind of let us know how much of the fourth quarter year-over-year growth in Detection would you say would be attributable to that?

[Michael Klein:]

I’ll answer the first part, I’d say that a significant, a very significant part of that hit Q4, and Scott, you can give the breakdown of this 21%, because you heard this comment Andrew, about 21% year-over-year Q4 product sales. So that’s what you’re looking for is the subset of that that would Solis, right or how much Solis representative of that.

[Scott Areglado:]

Yes, we’re not – I’m not going to break it out specifically hearing any, right? But it’s a significant portion of the year-over-year growth.

[Michael Klein:]

And just to put some color behind this, right. We had a pretty significant Q4 kind of one-time Q4 deal last year as well. I know you weren’t here. So fourth quarter is certainly the time when we get both years compared to when we’ve had some big deals, but this one was a bigger percentage of the quarter than it was last year.

[Andrew DeSilva:]

Okay. Well that gives a good context. I’m kind of thinking about how to mark sequentially in your data?

[Michael Klein:]

Let me just say one thing, Andrew, and that is that if you look, if you Google, so let’s tell some, I would say, you’ll see that they did an acquisition even in Q1, after this deal, 17 systems, right? So, we don’t have the exact closure date of that and there may be a lag between that and when orders are placed, but that’s an example of this is an account that’s under 60 sites that wants to go to under 60 cameras that want to go to 500 and wants to go from 80 locations to join the 50, and get there with us. So there is this deal and then there will be – and there’s – the revenues that may follow as Scott said, the majority of it is going to be in Q4, but some of it will hit the in the early part of this year more modest amounts, but then there’s the service revenue. And then there is again, the adding to the Solis mammography universe, which is a very aggressive private equity backed company.

[Andrew DeSilva:]

That’s very useful context. Thank you. And just given Solis historic equipment base and how that can ties into the competitive landscape with Hologic. Now that Genius AI has released their data and you have a very notable win subsequent to that. Can you – maybe talk about the sales and pipeline traction and what the cadence looks like subsequent to that have you seen a material change in any sort of at least inbounds or just conversations that are starting or decision making process in any color there? I think it would be very valuable given the equipment market dynamics that exist out there right now.

[Michael Klein:]

You’re in a sales process and somebody says, look, I want to – I’m obligated to check out what my mammography then would bring it to market they feel a sense of having to do that. In some ways, the fact once the – it’s almost like something like the misery of uncertainty is worse than the certainty of misery. Well, in this case, we have certainty and the certainty here allows our situation to be actively compared. So that’s your question. It’s helping us, it’s helping us. And it does take away the obstacle of something and it turns into a known and something that was unknown, and that combined with any other competitive threats that we may have seen from abroad has put us in a situation that two years in, we still have not seen a competitive system in the market and we don’t foresee C1for the near future that could obviously change, but it is – this is one of the things about AI is that your results are published. It’s there for everybody to see it’s black and white. So there’s no selling around that. And that’s all we ask for as an – our whole approach here is educating customers and we sell through education and that we’ve done from day one. And as long as we’re on that path, I think we’ll wind up in a strong position and pitch your question. This scenario does in fact play to our advantage.

[Andrew DeSilva:]

Okay. So fair to kind of highlighted as the cadence of the business has materially improved as far as it relates to a step ProFound AI traction, subsequent to what happened in December. That would, I mean, if I were to highlight that as a point that that makes sense.

[Michael Klein:]

It it’s fair to say that if a sale was taking 90 to 120 days, and there was another player they were considering, then they’ve added another one or two months to that sales process. But if they look at the data and say, okay, I’ve seen it. Or if they look at other flagship sites, I mean, this is, what’s so emblematic about this. Some of these sites are converting that sort of like, okay, I get it, I’ve been watching them. So, people watch other vendors, but they also see where the big movers, the big chains have gone. So with SimonMed, which is right behind Solis side and with that and of course, Solis, and then big groups like what we’ve seen in Wake and with MD Anderson, which was another big site, which we had at that point. We couldn’t really talk a lot about when you start getting the supertanker sites converting it starts giving people an indication of where sort of the alpha product is.

[Andrew DeSilva:]

Okay. Very useful. Thank you again. Last couple of questions for me just can be related to the glioblastoma opportunity. So obviously you’re doing a much more substantive trial right now, but you had earlier data that was very favorable. Can you talk about what your sales and marketing initiatives are at the early data stage? You said that you can actually still sell the product as a DRG out there. That seems to be favorable when you utilizing your systems. And then I would just be kind of curious if things related to the APM, benefit or impact, how that’s perceived in the market right now.

[Michael Klein:]

Yes. Well, let me do it in reverse order. On the APM side, I know, you know this area well, the APMs only affect breast cancer. They also affect Tyler’s radiation therapy. So if you’re going from, let’s say $20,000 of reimbursement for external beam radiation therapy for brain, and now you’re getting reduced from 20,000 down to 12,000, you are going to try to find a way to shorten the radiation therapy cycle to two to three weeks, which we expect will happen in all areas of radiation therapy, which by the way we call it – we call that the Canadian model, because that’s how they typically treat the fractioning. And they do that in Europe. The fact that you could deliver a significant portion of the dose, if not all the dose during, during surgery allows for a model where people can actually reduce external beam radiation therapy and do so in two weeks. And the fact that we’re coming under a DRG means that you can get the radiation oncology code after the DRG. So that definitely benefits this one.

[Andrew DeSilva:]

Okay. I didn’t know that last part, that that’s useful. Okay. And just last thing as I think about the glioblastoma opportunity if you end market can be just overwhelmingly neurosurgeons or is some portion of that, should we still think about, is that like the traditional radiation oncology market?

[Michael Klein:]

I think it’s going to be – it’s going to be neurosurgeons who are going to have to pull, it’s going to be both the neuropsych, I look at the neuro-oncologists. So like the air traffic controller, he’s going to pull everybody together. It’s going to give the medical oncologist stuff as well. The neurosurgeon is going to do the cutting and radiation causes them to do they treat radiation the therapist. The radiation oncologist is super interested in this because the standard we’re comparing to is called RTOG-1205, which is a six to eight week radiation therapy regimen. They use Avastin to prevent radionecrosis. And basically what this study is designed to do using the people who are the study leaders for that radiation therapy protocol that are in this study, if can we beat, can we beat the established protocol and radiation therapy, which is patients live 13, 14 months. If you treat with the radiation therapy and they go four or five months between radiation – between progression, these are rough numbers. So this is where and so that is the control arm of our study. So, the evaluation arm is can levy established protocol. So the radiation therapy community is very, very excited to be able to say, if this can beat that control, this doesn’t mean it replaces radiation therapy, nor would it replace temozolomide or the Optune helmet from Novocure, but it may make them better. Instead of having to wear that homeless for 20 hours a day may only need to work five hours a day. You might get better results with temozolomide. You make it better results with radiation therapy in a shorter period of time. So that’s what we’re looking for. We’re excited of that. And it’s all because, we’re treating – we’re denaturing, producing double-stranded DNA breaks real time at the time of surgery, we actually produce an immune response and we’re doing the four to six weeks. And if you wait four to six weeks after surgery, and you’re growing 1% a day, you’re already trying to beat back disease that’s regrown over the course of time.

[Operator:]

Thank you. I would like to turn the floor over to Michael for closing comments.

[Michael Klein:]

Well, I want to thank everybody for hanging in there with us, and I’ll quickly summarize and thank everybody for joining us. And for those who hung in the full-time, which I believe is the largest kind of people, it has been our pleasure to share our full year 2020 earnings. And again, to summarize the highlights around a card business and I’ll just iterate a couple of key points. One is the sales momentum, you’re saying driven by ProFound with significant growth in Q4, and then on top of significant growth in Q3, a significant near-term commercial opportunity with the launch of ProFound AI Risk, a product that’s a giant leap forwarding has missed two shots on goal and accounts in a growing market of not only 3D, but 2D sites. Technology that’s been validated with major deals it’s Solis Mammography and Wake Radiology. And finally, a very, very significant opportunity in the high-value indication of glioblastoma with an FDA cleared product that can be used real time is Xoft IORT and is one that’s actually treating patients as we speak and can be found on clinicaltrials.gov. So, we look forward to providing you with further updates on our progress in the coming months. And we want to thank you for your continued interest in iCAD, and please enjoy the rest of the day and please stay safe.

[Operator:]

This concludes today’s conference. You may disconnect your lines at this time. And thank you for your participation.