iCAD, Inc.
Q2 2019 Earnings Call Transcript

Published: 3 Aug 2019

[Operator:]

Greetings. Welcome to the iCAD, Inc. Second Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.I will now turn the call over to your host, Jeremy Feffer with LifeSci Advisors. Mr. Feffer, you may begin.

[Jeremy Feffer:]

Thank you, Rob, and good morning, everyone. Thank you for participating in today’s call. Joining me from iCAD today are Michael Klein, Chairman and Chief Executive Officer; Stacey Stevens, President; and Scott Areglado, Chief Financial Officer. Earlier this morning, iCAD announced financial results for the three months ending June 30, 2019.Before we begin, I would like to caution that comments made during this conference call by management that contain forward-looking statements involve risks and uncertainties regarding the operations and future results of iCAD. I encourage you to review the Company’s filings with the SEC, including without limitation, the Company’s 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 contain time-sensitive information that is accurate only as of the date of this live broadcast, August 1, 2019. 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 morning, everyone, and thank you for joining us today. I am pleased to have the opportunity to speak with you today and provide an update on our strategic progress, financial performance and present more specific details on both current and future growth plans.With me today are Scott Areglado, our CFO and Stacey Stevens, our President. To begin, I’d like to reiterate our clear vision for iCAD. In Detection, the company’s unique AI technology has the potential to transform Cancer Detection, enabling iCAD to further evolve into the leader in clinical AI solutions. I emphasize clinical AI as it reflects our continuing long-term expansion of our AI imaging detection capability beyond breast cancer AI. With the December 2018 FDA approval and the ensuing U.S. commercial launch, ProFound AI, our latest deep- learning cancer detection software solution for 3D digital breast tomosynthesis, we expect iCAD’s technology to facilitate vast improvements in workflow, reading time and clinical efficacy.For our customers and their patients, ProFound AI offers the triple win of

[Scott Areglado:]

Good morning, everyone, and thank you, Mike. Before I begin with the financial highlights, I would like to note that during my comments today, I will be referring to certain non-GAAP financial measures. Management beliefs that these measures provide meaningful information for investors and reflect the way that we view the operating performance of the company.You can find a reconciliation of our GAAP to non-GAAP measures at the end of our earnings release. With that covered, I will now summarize our financial results for the second quarter ended June 30, 2019.As Mike mentioned, we are pleased with the results for the second quarter of 2019 with total revenue of $7.3 million representing an improvement of $1.2 million or 19% as compared to the second quarter of 2018. The increase in the second quarter was due to the strength of our detection business, which grew 31% representing the $1.2 million of revenue growth in the quarter. We continue to see success in our direct business with the primary growth driver in our 3D products. The second quarter of 2019 also had increases in our OEM business with the primary increase in 2D products. We expect a distribution and OEM 2D business to continue to be a component of our ongoing revenue, especially OUS with the adoption rates for 3D imaging are slower than the amount of states.Service revenue declined slightly to $1.4 million from $1.5 million in the second quarter of 2018. As I have mentioned previously, service revenue has lagged as the introduction of new products can cannibalize service revenue for customers who receive a one-year warranty when upgrading to our new products. As a result of this effect, we expect service from you to remain essentially flat throughout 2019.In the Therapy segment, revenue declined slightly by 2% to $2.1 million as compared to the second quarter of 2018, decrease was driven by a decrease in product revenue of 23% to 545,000 which represented three control units sold in the second quarter of 2019 as compared to five in the same quarter of 2018. As Mike mentioned, Therapy revenue tends to be lumpy. The product decrease was offset slightly by an 8% increase in service and supplies revenue from $1.5 million to approximately $1.6 million due primarily to increases in disposable balloon volumes and service contract revenues. Service revenue continues to represent approximately two thirds of the overall revenue for Xoft, which can compensate for the effect of timing on product revenue.Moving onto gross profit. On a pure dollar basis, gross profit for the second quarter of 2019 was $5.7 million as compared to $4.8 million in the second quarter of 2018 representing a $0.9 million year-over-year improvement. On a percentage basis, gross profit for the second quarter of 2019 was 78% of revenue, which was flat as compared to the prior year quarter. Detection gross margins were 84% in the second quarter of 2019 as compared to 86% in the comparable quarter of 2018. As I noted in the prior quarter, our margins in 2019 have seen higher direct product costs of our improved server platform to support 3D images and higher costs in our installing clinical operations. This supports our strategy to improve our customers’ experience in these significantly more complex sites. We believe our success in our early installations will translate to reference and testimonial sites to help build our business in the future and enhance the ProFound AI brand.Gross margin in the Therapy segment was approximately 65% in the second quarter of 2019 as compared to 61% in 2018. Therapy gross margins were slightly higher in 2019 due to the mix of higher service revenue in the quarter versus product sales, which have a lower margin.Now on the operating expenses. Operating expenses for the second quarter of 2019 totaled $7.2 million. This represented a $1.5 million or 26% increase from the $5.7 million in the second quarter of 2018. The increase in operating expenses is due primarily to the planned increase in marketing and sales expenses of approximately $1.1 million in G&A of approximately $0.3 million. We continue to invest in the commercial infrastructure to support our sales objectives for 2019 with the primary increases in direct sales personnel, distributor management, service support, and the associated costs as well as trade shows and travel. G&A expense had an increase of approximately $0.2 million due to increase legal and personnel expenses.Looking ahead, we expect that the second half of 2019 will show increases in quarterly expenses as we look to both near-term opportunities to build market share as well as investing in sustainable long-term growth as reflected in Mike’s comments.Now, summarizing our profit metrics. GAAP net loss for the second quarter was a loss of $3.5 million or a loss of $0.20 per share compared to a net loss of $1 million or a loss of $0.06 per share in the second quarter of 2018. This reflects increased operating expenses as well as a $1.9 million non-cash loss on the fair value of the convertible debentures outstanding. As I mentioned during our prior two quarterly calls, we issued approximately $7 million of convertible debentures in a private placement that are convertible into shares of iCAD stock at $40. GAAP accounting requires that the fair value of the convertible debenture, which includes the value of the traditional debt instrument as well as the embedded conversion and redemption features be measured on a quarterly basis and the corresponding increase or decrease in value flow through the P&L.The increase in the value of the debentures from $9.5 million in the third quarter – in the first quarter of 2019 to $11.8 million in the second quarter of 2019 was due in part to the increase in the trading price of our common stock at June 30, which increased the value of the conversion feature embedded in the instrument and forced a $1.9 million non-cash charge to earnings in the quarter.In the future, we would expect that movement in our stock price along with changes that affect the other factors embedded in the evaluation of this instrument, will cause additional changes in the balance sheet liability, which will also flow in non-cash charge to earnings until such time in a potential conversion when the entire then current fair value of the convertible debentures would flow through equity.On a non-GAAP adjusted EBITDA basis, the net loss for the second quarter of 2019 was a loss of $1 million compared to a second quarter 2018 non-GAAP adjusted EBITDA loss of $0.3 million, which reflects the increase in operating expenses.Moving onto the balance sheet. as of June 30, 2019, the company had cash and cash equivalent of $19.6 million compared with cash and cash equivalent of $12.2 million at December 31, 2018. As Mike previously mentioned, in June of 2019 we issued approximately 1.9 million shares for net cash proceeds of $9.4 million, which strengthened our balance sheet to support our commercial strategy. We believe the flexibility this strong financial position provides will allow us to invest in initiatives during 2019 and 2020 to build long-term growth and value. We continue to be mindful of balancing our expenses in cash with revenue growth as we look ahead.We are pleased with the results of our first half of 2019 and continue to work aggressively to execute on our strategy in the second half of the year.This concludes the financial highlights section of our presentation. I’d like now like to turn the call over to Stacy. Stacy?

[Stacey Stevens:]

Thank you, Scott, and good morning, everyone. We are pleased with our overall results in the second quarter and first half of 2019. And as you just heard, our performance was particularly strong in Detection, a clear indication that our ProFound AI product has quickly begun to establish itself in the market. The demand continues to grow as anticipated for this revolutionary product offering and importantly customer feedback continues to be highly positive. In addition, as Mike mentioned, the new proposed bundled payment radiation oncology model in the U.S. could be a significant driver for our IORT business.With that, I’d now like to provide you with an update on our specific activities in both Cancer Detection and Cancer Therapy. Let’s begin with Cancer Detection. We continue to be very pleased with the initial progress and success our sales team has achieved in our first two full quarters of selling ProFound AI. We are utilizing a multi-channel sales strategy and we now have 12 sales territories in the U.S. up from six in 2018, and we continue to see a greater percentage of our overall business coming through the direct sales team. In addition, we are engaged with a multitude of key integrated delivery networks and group purchasing organizations in order to establish beneficial long-term agreements for iCAD.Finally, we continue to focus on integrating ProFound AI with key imaging, OEMs and PACS companies. We are seeking larger deal opportunities and beginning to achieve success, similar to our recently announced deal with SimonMed. We expect to continue to gain meaningful traction with ProFound AI in the second half of 2019. We are pleased with the progress we are making with both our imaging OEM partners in the PACS companies. GE has now fully integrated ProFound AI into their price book and we expect others to do the same in the coming months.Fuji has emerged as a more significant market share player, and we will be focused on our Fuji relationship in the second half of the year as their interest in ProFound AI continues to grow. Also, our PACS integration work continues to advance nicely. We continue to expect that we’ll have multiple formal PACS relationships in place before year end, which will enable us to leverage the large installed base of these companies. We continue to work to mutually align our technical resources and software releases to maximize customer workflow and the value proposition of our combined solution.Turning to Europe. As Mike highlighted, our ProFound AI 2D product received CE mark and has been successfully launched in Europe. Given that the 2D market is still growing in Europe along with thousands of 2D systems in the European market that do not currently have an earlier generation CAD system or a deep-learning AI solution, we believe demand for this product is going to be strong and expect that it will contribute meaningfully to our growth in 2019. In fact, we have already received several orders for ProFound AI 2D in Europe.Moving on our rapidly expanding distribution network in Europe now includes 10 distributors covering 16 countries including our newest geographies, Belgium, Luxembourg and the Netherlands. We have recently recorded sales and Greece, Austria, Taiwan and Malaysia. I’m pleased to report that our French direct team recently completed an important sale into the VD Group in Paris. The VD Group is a premier group of imaging centers in France that includes 24 locations. We will be collaborating with them on a number of promotional materials and PR campaigns highlighting our relationship and we expect that this sale and partnership to drive significant product awareness across France.I should add that we continue to strengthen our OEM relationships in Europe and we were pleased with the performance from this channel in the first half of the year. There are multiple large tenders bidding across Europe in the second half of 2019, and we believe that we are well positioned to compete for these tenders.From a marketing standpoint, I am pleased to report that we successfully executed a soft launch of our ProFound Institute, which I introduced on our last call. This is a premier online educational platform that will include clinical and educational resources for ProFound AI. Specific content includes a podcast, webinars, videos, and clinical resources and additional video content is in development. We intend to continue building our content over the next 12 months. As I stated in our last call, we believe ProFound Institute will play an important role in communicating the benefits of ProFound AI to potential customers. We firmly believe that product differentiation is best established through customer education and this is an area where the recent financing has helped us achieve our goals.I’d also like to highlight that ProFound AI was recently selected as a 2019 MedTech Breakthrough award winner. ProFound AI was selected as the best new technology solution in the radiology category. More than 3,500 global nominations for these awards were submitted to an independent third party organization, so we are quite pleased with this accomplishment.Looking ahead, we have a couple of major conferences coming up. First, ASTRO 2019, our largest radiation oncology show, will take place in Chicago in September. We will be showcasing our IORT solutions across multiple clinical applications, including brain, rectal and prostate treatments, with expert KOLs experienced in treating patients with our platform. We are also planning to host an investor luncheon as well as an evening customer event on Monday, September 16th. More details will be forthcoming on these events in the next few weeks. Later in the year in December, RSNA will take place also in Chicago, we’ll have a significant presence at this event as always, and expect to showcase exciting new technology developments in the AI space there.Now moving on to Cancer Therapy. Product sales in this segment increased 28% in the first half of 2019 as compared to the first half of 2018. This growth was primarily driven by continued strong performance in our breast IORT business. Globally, we placed 11 therapy systems in the first half, which included eight IORT systems and three skin capital systems. We continue to be pleased with our growing installed base, which currently includes approximately 50 U.S. centers and over 50 OUS centers treating patients with our IORT and GYN applicators.We continue to experience strong global market interest in general IORT applications including prostate, brain and rectal treatments as a result of key clinical research being conducted globally. In fact, additional research with encouraging early results is currently being completed for new applications in the U.S., Russia and Canada. Importantly, we continue to expect the completion of additional general IORT applicators in 2020. As you can see, we continue to experience a number of positive trends in our IORT business with the potential new radiation oncology model Mike discussed possibly on the short-term horizon. As such, we continue to view IORT as the most significant long-term growth driver in our Therapy segment.On the skin side, we continue to pursue partnerships with commercial and clinical partners and have a number of compelling new business opportunities we are currently pursuing. I hope to have additional details to share here later in 2019.So in summary, we achieved significant progress on multiple fronts in the first half of 2019 as we continued the successful rollout of ProFound AI and completed a financing that we believe will accelerate long-term growth and help us to create a sustainable leadership position for iCAD for years to come.We will now open the call for questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Per Ostlund with Craig-Hallum. Please proceed with your questions.

[Per Ostlund:]

Thanks. Good morning everybody. Congratulations on the first half results. I want to start with ProFound for 3D, logically, since that has been – obviously, it sounds like a very good launch to date. And I know you don’t really want to get into the habit of providing place from numbers because I think that that, that’s a difficult thing to unring the bell once you do it. But I think that you have spoken a little bit about kind of having a 500 placement target for the year. Is it fair to say at this stage of the game that you’re tracking well against that expectation? And when we think about the sales process, just how much besides the expanded OEM capability? So beyond GE, just how much is the clinical aspect of ProFound AI versus the previous product resonating with customers?

[Michael Klein:]

Yes. On the number of units sold has – on a combined basis, if you look at all 2D and 3D, it has approached the 300 software license level, with the overwhelming majority of those 300 being 3D sales. And you may recall, we had projected a target for 3D units to, in fact, be a majority of those sales, and we are – we have indeed achieved that goal, and we expect to build on that goal for 3D as the predominant player in terms of the mix of those 300 licenses. We do expect that we will continue to see 2D growth or see enhanced 2D growth because of the launch ProFound 2D in the second half and that may compete with 3D growth, particularly in the European market since both opportunities are very large.And then on the clinical aspect of the – your question, we continue to get tremendous commentary and enormous amount of press about the results, but also not only the results of our FDA study, but individual accounts that are beginning to collect and prepare abstraction presentations that’ll ultimately show up in the backend of this year and presented at ASTRO or other shows. And that’ll be a major tipping point there because no matter how good our FDA clinical results are and how much other press and radiology or even RSNA articles or – and many – the most impactful clinical data results are going to come from the individual sites. And since then they have just started ramping now, we’re going to start seeing those results in the back half of the year, particularly in the fourth quarter and be able to substantiate the FDA results with accounts on an individual basis.It is interesting and you’ll see some press on this shortly. There, there’ll be some information coming out not only on the clinical performance of a ProFound AI, but a very specific set of comments that we will likely be issuing a press release on about the importance of time savings, since radiologists and particularly mammographers are some of the busiest professionals. The value of time saving has become a huge issue, not only because the economics of it but for radiology, fatigue and just the burden on increasing number of patients with a number of images that’s a strong multiple of the existing 2D images. So we’re now starting to see data come out and sites talk about the time and workflow reduction in addition to touting the 8% increase in sensitivity and the 7% improvement in specificity or reduced callbacks.

[Per Ostlund:]

Excellent.

[Stacey Stevens:]

I’ll just add. Hey, Per, I’ll just add to that. I think the first six months have been incredibly gratifying for all of us, right, after so much effort put into releasing this product. But we are hearing, every week from customer sites and radiologists who are telling us that ProFound AI found cancers that they acknowledged they would have missed, right? So the patient value proposition here is just so strong. And as you know, there’s never been another product on the market that showed such increases in both sensitivity and specificity. Usually, those metrics go in other directions in opposite directions, right? So, I think, that’s been the real win for us is to really understand the real impact that this is having on patient care in the market.

[Per Ostlund:]

Very good. No, that, that makes sense and it’s consistent with what we’ve heard as well. Stacey, you mentioned 2D in Europe in your commentary, and you touched on a little bit of what I wanted to ask about there, but just curious as far as the early interest in ProFound 2D AI and you’re following the French launch in the CE mark, just how much do you think the AI product tips the scales in Europe toward more CAD use in Europe, because you’ve spoken before about how CAD itself is underrepresented. So when you think about your commercial strategy, and I appreciate the commentary around your – the commercial organization and capability you have there, but from a messaging standpoint, how are you going out to customers and sort of positioning the to the AI product?

[Stacey Stevens:]

Yes, it’s a great question. I think in general, Per, the interest in AI solutions from mammography in Europe has increased and a lot of that has to do with the improving clinical performance, right? So particularly in the area of specificity, right? Some of the older generation CAD products did not perform as well. They had decent sensitivity, but the false positives were relatively high and ProFound AI has a very significant improvement in that area. So that is something that we are really highlighting as a key part of the value proposition. And just the general topic of AI in general has gained a lot of traction in Europe. And as you know, there are over 6,00 2D systems in the installed base in Europe still today. There’s been a slower transition to 3D, so I would say probably only 10% to 15% of those 6,000 systems have an older generation CAD product.So there’s a lot of opportunity here. And as I mentioned in the script, there are quite a few tenders that are going on in Europe that we’re positioning ProFound for 2D. And we’ll also see some impact from customers who will buy combo licenses 3D, 2D combo licenses are still our sites that are in Europe that are doing a 2D imaging in conjunction with 3D imaging as well. So, I think it does have an impact, it’s going to take some time, right, to get all the education out there in the market and their sales cycles and the time that these tenders take to transpire. But I do think that it’s going to have a significant impact on our ability to grow the European geography.

[Michael Klein:]

I’ll just add to that, the 3D tomo market has been used for the most part in Europe for diagnostic use when the patient has called back, not for the initial screening. But we believe that with be reduced reading time and with the success in the U.S. and all the press about increased detection with 3D tomo, it’s going to start moving into the screening regimen itself and slowly starts creeping into the 2D area. But until such time, as that really hits the tipping point and inflection points, we want to be in the market with 2D and ultimately update a folks as they make this transition to 3D. Some accounts may go directly from old generation 2D systems to 3D, but we want to have an opportunity for them to upgrade to a 2D deep learning technology under the ProFound AI name. And we clearly differentiate AI from CAD to reflect the deep learning capability we’re introducing into 2D as well as 3D.

[Per Ostlund:]

Excellent, excellent. Makes sense. I wanted to come to Therapy, but just because it dovetails off of your comment on AI, Mike, as far as ProFound as a platform goes, you’ve talked about prostate MRI as a potential opportunity to extend ProFound into, especially with some non-competes, I think, maybe coming up this summer and also beyond prostate MRI into other cancers and other imaging modalities. Just wanted to see if there was an update on that and what are the chief gating factors, I guess, to extending ProFound into those other areas?

[Michael Klein:]

Yes. The good thing is that we have the algorithmic capability in house to move in this direction. We have images and data, which is key. As far as the gating item, as in almost all areas of AI, it’s all about more data. As I often say, data isn’t it’s the kingdom. We are currently in negotiations with a couple of very large facilities and healthcare system, some in U.S. and international to access thousands of cancers in normal that when run through the algorithm and properly chose [ph] can allow us to move very quickly. So that is the gating item, Per, some of these cancers to acquire them cost some dollars, because people don’t just give it up for free. So the recent financing is also allowing us to move in this direction. Obviously we’re keeping our eye on our core businesses and I mentioned the movement from detection to prediction and in Xoft – on the Xoft side from current indications to new indications.So we have to balance, the extension of AI into these new areas. But clearly since I’ve mentioned that mammography in general only represents a portion, and in fact, less than 20% of all the imaging that can be done in radiology. There’s a huge market opportunity beyond mamo, which is, obviously the reason for your question. So this is a key area for us, but again, we’re balancing this with our expenses, and we are continuing to move it along. So we’re making conservative progress there and we’ll have some more updates on this in the months ahead, because we’re keeping our eye on this very closely while also balancing the businesses of today and the businesses of tomorrow with our cash and with our operating expense usage.

[Per Ostlund:]

Thank you.

[Operator:]

Thank you. Our next question is from the line of Francoise Brisebois with Laidlaw. Please proceed with your questions.

[Francoise Brisebois:]

Hey, thanks for taking the questions. Just a couple here. We touched on a lot of initiatives you guys are taking in a lot of different segments of the business. Can you talk a little bit about what top-line run rate would make you feel comfortable to start looking at getting break – cash breakeven? Or is that something we’re still just trying to fill in and invest in, in growing the long-term business?

[Scott Areglado:]

Yes. I think it’s the latter, Frank. I just – I’m not sure – we’re still, as Mike mentioned, we’re still trying to balance our expenses, identify clinical areas for us to go into, invest in prostate, invest in new applicators, and those have a longer ramp for revenue. So I think, there’s going to be a balance of trying to keep those expenses going for the future as well as looking at our current business. But, right now we’re just focused on executing today and getting through the next quarter.

[Michael Klein:]

And I’ll just add on that, Frank. Obviously, a number of our analysts had projected positive EBITDA for Xoft within the next two – roughly two quarters. And what we effectively did in this last financing was, trade that near-term positive EBITDA for substantial increases in the top-line revenue growth in outlined quarters. So, we’re trying to balance the continued movement of Xoft into a growth business and acceleration of – of our Detection business into prediction and balance that with our EBITDA goal. We have adequate cash to hit those goals, but it is a delicate balancing act, and we recognize that we need to achieve on both fronts. But we have – we are currently in this investing for growth, and we believe that with this recent financing, we have significantly incrementally improved our long-term revenue outlook. Most of that, as stated, is going to come in the back half of 2020.

[Francoise Brisebois:]

Understood. Okay. So the top-line, I was thinking maybe the second half of 2019, we should already be seeing some top-line growth, but a lot of different investing that we’ve been doing is more of a second half 2020 in terms of top-line. Is that correct? I’m just trying to get a feel for the rest of this year, first.

[Michael Klein:]

We’ll see continued top line growth in the businesses that we’re in today, but for the breakout of a more substantial incremental revenues, that would come forth with the movement from beyond detection into prediction and the revenues that would come with that, which should also keep us one step ahead and very differentiated on the detection side and with the new revenues for Xoft, these are going to move current projections to higher numbers, but again in the back half of 2020. So we continue on trajectory with the business we’re in today. So, I want to separate those points, because the business we’re in today is not being compromised in terms of the top-line. It’s just that while we’re building, while we’re carrying forth on the business of today, Detection and all of our Xoft operations on the therapy side, that’s moving forward as previously indicated. And we’re building a second, you might say torque up or incremental revenue ramp, and we’re spending dollars to have that occur in the back half of 2020.

[Francoise Brisebois:]

Okay. No, that’s very helpful. And then just lastly, I just wanted to touch on quickly on the CMS proposal for guideline changes. You mentioned that early July and then 60 days, I was just trying to get a feel for – talked about January or April, 2020, you are heading more towards April. Could you just remind us of if things kind of go the way to basically encourage quality over quantity a little bit here, and everything can go the right way Xoft, when should we expect this to kick in? Can you just remind us of the timelines there with April that you mentioned?

[Stacey Stevens:]

Yes, sure, Frank, it’s Stacy. So the proposal was published in July. We’re in a 60 day comment period now. And we will see the language of the final proposal in November. And in November we’ll find out the implementation date, whether that will be January of 2020 or April of 2020. The buzz sort of around is that it’s more likely to be April of 2022 just by the time CMS completes all of the administrative work and they sort through any issues that may arise during the comment period. So we’re actually expecting that it will likely be April of 2020. But as you know, the way the proposal is structured is that CMS has created this bundle payment system for radiation oncology treatment in seven treatment categories, including breast cancer. So now going forward, beginning likely on April 1st, hospitals and radiation oncologists will get paid the one set fee regardless of which treatment modality they select.So as you know, one of the major factors that’s been holding back more widespread adoption of breast IORT has been that there is a significant difference in the payment value that the radiation oncologist gets paid for treating in the OR in 10 to 15 minutes with breast IORT versus seeing the patient for six to seven weeks of external beam radiation, they’ve been financially incentive to deliver the six week [Technical Difficulty] and the radiation oncologist payment will be the same regardless of which treatment modality they select and those values have been [Technical Difficulty] significantly greater than our reimbursement value today for the procedure. So we need to wait and see how this comment period goes. We know that this is going to end up positive for IORT. It’s more of a question of sort of on that positivity scale, is this sort of incrementally positive or game changing positive. And the reality is it’s likely going to end up somewhere in between. And so we’ll wait until November to see the final language and then we’ll assess the impact on our business at that time.

[Francoise Brisebois:]

Understood. Thank you very much. Then just if I can just state a quick last one here. You mentioned in terms of potential gating factors, the first question about, expanding beyond, I guess, I’m trying to get a better feel for competitively how you feel about, your advantage and obviously the algorithm being in house seems huge. And then other than that it’s, I guess, it’s money to potentially buy out the data for different cancers. Is this something that, in terms of the competitive landscape that you are concerned that others would potentially bigger pockets could go out and just buy this data from cancer clinics to prevent and then develop their own algorithm? Or what is it about your algorithm that you feel so comfortable on the competitive side?

[Michael Klein:]

Well, we’ve been working on this for 15 years, Frank, actually even longer. So we’ve developed, obviously a base of knowledge, it’s real important to have a world class algorithm people. It’s also really important to have a 4,000 units install base and growing. Clinical connectivity is critical. It’s one of the reasons why we formed advisory boards. We keep expanding our advising boards to stay with the clinical thought leaders. And of course, it’s the reasons we’re at all the trade shows, and we have clinical sales people that worked actively. And the other way that one needs to win is to understand all the channels, not only being direct as you can pull it to the accounts, but working with some OEMs, working with the PACS companies that are moving the images in the cloud. So the intimacy of the space, knowing the go-to-market strategy, the depth of experience and having the largest cancer repository of a breast cancer that is of AI, interpreted images in the world is a huge differentiator.But in order for us to stay ahead, we need to continue to press forward. And that’s why the reason we’re moving into production, because we take our large database, which we believe is again, larger than any existing out there of AI interpreted breast cancer images. And then add that to the already existing risk factor databases out there. And the one with Karolinska and then genomic data. We’ve now moved to an entirely different capability. So it’s back to my point that we intend to be on the next generation of technology, not just in detection, but in prediction by the time folks hit by the time competitors enter into the market.We do believe though that will be eventually folks in the market. We intend – it’s one of the reasons we have this direct sales force. We’re working with all channels, and it’s also one of the key reasons for the ProFound Institute, which is an essential branding instrument, because the more people know about why our AI technology is differentiated, and that triple win, I talked about the better we do. And whoever tells the story desks and whoever educates the customers to know the difference and know the tradeoffs between sensitivity and specificity wins the game. So it’s a matter of continued branding, continued differentiation, building the best team possible, getting the data possible, and moving quickly. We’re running just like a startup company, although it’s a public company, that’s the culture that we’re running as if people are right over our shoulders three feet away, even though that may not be the case, that is our assumed behavior in terms of the speed.

[Operator:]

Thank you. We’ve reached the end of the question-and-answer session. And I will now turn the call over to Michael Klein for his closing remarks.

[Michael Klein:]

Well, thank you operator. I’d like to close by reiterating our priorities going forward, all of which are intended to tap into an optimize the previously unrealized value inherently in our Detection and Therapy offerings. One, we want to optimize the commercial success of ProFound AI for 3D breast tomosynthesis on a global basis as well as our recently launched 2D offering. Our commercial efforts are well underway and we are excited about the compelling growth prospects for our ProFound offering. Two, we want to continue to increase our customer base for the Xoft business, specifically focusing on IORT for breasts and gynecology, creating new opportunities for the subsequent introduction, new products such as rectal, brain and prostate, which represent a new application areas, and we want to leverage the continuum momentum derived from the new positive clinical data as well as potentially the emerging new reimbursement dynamics that many have asked about and we’ve spoken to.Third, and finally to achieve meaningful timely progress and expanding our product roadmap and advancing our strategy to capitalize on the substantial growth opportunities we see in clinical AI beyond breast, leveraging our unique set of competencies and allowing us to establish a sustainable and competitively differentiated leadership position in high growth markets on a global basis. With these remarks and a high level of continued enthusiasm, I leave the team here. Thanks all of you for your support and we look forward to sharing our results for the third quarter on our next call.

[Operator:]

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