Profound Medical Corp. (TSX: PRN) has reported a significant increase in revenue for the second quarter of 2024, with figures reaching $2.23 million, marking a 39% rise compared to the same period in the previous year. The company, specializing in medical technology for prostate diseases, anticipates its full-year revenue to fall between $11 million and $12 million. Despite the revenue growth, the company experienced a net loss of $6.9 million during the quarter. Profound Medical is also making strides in clinical trials and collaborations to bolster the adoption of its TULSA procedure, a non-invasive treatment for prostate disease.
Key Takeaways
- Q2 2024 revenue increased by 39% year-over-year to $2.23 million.
- Full-year 2024 revenue projected to be $11 million to $12 million.
- Gross margin stood at 64% for Q2 2024.
- Operating expenses rose by 24% compared to Q2 2023.
- The net loss recorded for the quarter was $6.9 million.
- Positive physician feedback and proposed CMS rules are expected to drive TULSA procedure adoption.
- The company aims to install 275 TULSA systems within the year.
- Collaboration with MR companies is enhancing treatment pathways and expanding options.
Company Outlook
- Revenue growth is expected to continue, with a forecasted range for the year.
- Installation of 275 TULSA systems anticipated to contribute to future revenue.
- The company is preparing for increased adoption of the TULSA procedure through additional sales personnel and collaborations.
Bearish Highlights
- The company reported a net loss of $6.9 million for the quarter.
- Operating expenses have seen a significant increase from the previous year.
Bullish Highlights
- Strong revenue growth indicates increasing market acceptance.
- The TULSA procedure's cost savings and efficiency are seen as advantageous for hospitals.
- New collaborations with MR companies are expected to enhance the treatment experience and drive further growth.
Misses
- Despite revenue growth, the company has not achieved profitability this quarter.
Q&A Highlights
- The CEO discussed the potential for the TULSA procedure in treating a broader range of prostate diseases, including BPH.
- Profound Medical is exploring various economic models to demonstrate value to hospitals and physicians.
- The company is working on integrating diagnostic and treatment options into a single MR product with AI technology.
Profound Medical's second quarter performance reflects a company on the rise, with substantial revenue growth and strategic initiatives poised to expand its market presence. The TULSA procedure is at the core of the company's growth strategy, with the potential to revolutionize prostate disease treatment. Despite the current net loss, the company's collaborations and clinical trials are laying the groundwork for what could be a transformative period in prostate care. Investors and industry observers will be keenly awaiting further updates on the company's progress in the coming quarters.
InvestingPro Insights
Profound Medical Corp.'s recent earnings report highlighted a significant uptick in revenue, yet it's important to consider the broader financial context provided by InvestingPro data and tips. With a market capitalization of $245.31 million, the company's financial health and future prospects can be further illuminated by key metrics and expert analysis.
InvestingPro data shows that the company's revenue for the last twelve months as of Q1 2024 stands at $7.25 million, with a modest revenue growth of 1.0%. Despite the increase in revenue, the company's gross profit margin is robust at 61.22%, indicating a strong ability to control costs relative to its revenue.
However, it's notable that analysts, as per an InvestingPro Tip, do not anticipate Profound Medical will be profitable this year. This is further evidenced by the company's negative P/E ratio of -7.77, which suggests that investors are currently valuing the company on factors other than current earnings, possibly future growth potential or technology advancements.
Another InvestingPro Tip worth mentioning is that the company holds more cash than debt on its balance sheet, which is a positive sign for financial stability and operational flexibility. This is complemented by the fact that the company's liquid assets exceed its short-term obligations, ensuring that it can meet its immediate financial liabilities.
For investors looking for a deeper dive into Profound Medical Corp.'s financials and future outlook, there are additional InvestingPro Tips available on the platform. These tips could provide valuable insights into investment decisions, with a total of 6 additional tips listed on InvestingPro at https://www.investing.com/pro/PRN.
The InvestingPro Fair Value estimate stands at $8.04 USD, which is below the current price, indicating that the stock might be trading at a premium compared to the platform's valuation models. This aligns with the tip that the company is trading at a high revenue valuation multiple, suggesting that investors are paying a higher price for each dollar of revenue compared to other companies in the industry.
In summary, while Profound Medical Corp. is making significant strides in terms of revenue growth and clinical advancements, the InvestingPro Insights suggest a cautious approach to the company's stock, considering the lack of near-term profitability and the current valuation multiple.
Full transcript - Profound Medical Corp (PROF) Q2 2024:
Operator: Welcome to the Profound Medical Second Quarter 2024 Financial Results conference call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Stephen Kilmer, Investor Relations. Please go ahead.
Stephen Kilmer: Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include forward looking statements within the meeting of applicable securities laws in the United States and Canada. All forward looking statements are based on Profound's current beliefs, assumptions and expectations, and relate to, among other things, any expressed or implied statements or guidance regarding current or future financial performance and position, including the company's 2024 financial outlook and related assumptions, the expectations regarding the efficacy of Profound's technology in the treatment of prostate cancer, BPH, uterine fibroids, palliative pain treatment and osteoma and its future revenues and financial results. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. No forward looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this conference call. Profound undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events, or otherwise other than is required by law. Representing the company today are Dr Arun Menawat, Profound's, Chief Executive Officer, Rashed Dewan, the Company's Chief Financial Officer, and Dr. Mathieu Burtnyk Profound's, Chief Operating Officer. With that said, I'll now turn the call over to Rashed.
Rashed Dewan: Good afternoon everyone, and welcome to our second quarter 2024 conference call. On behalf of the management team and everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Mathieu in a moment to provide updates on TULSA clinical publications, utilization trends, the CAPTAIN clinical trial and reimbursement. However, before I do I would like to provide a brief summary of our second quarter 2024 financial results. To streamline things all of the numbers I will refer to have been rounded so they are approximate. For the three month period ended June 30, 2024 the company recorded revenue of $2.23 million, with $1.46 million coming from recurring revenue, and $773,000 from one time sale of capital equipment. Second quarter 2024 revenue increased 39% from $1.6 million from the same period in 2023. Looking forward for the full year 2024 based on the company's current business planning and budgeting activities, we continue to anticipate revenue to be in the range of $11 million to $12 million. Gross margin in Q2, 2024 was 64% compared to 66% in Q2, 2023. As we mentioned on our last call, we expect gross margin to vary some quarter over quarter but just as we delivered about 60% margin in 2023 we continue to expect to deliver that or better in 2024. Total operating expenses in 2024 second quarter, which consists of R&D, G&A and sales and distribution expenses were $9.3 million, an increase of 24% compared to $7.5 million in the second quarter of 2023. Breaking that down further expenditures for R&D increased 33% on a year over year basis to $4.2 million. G&A expenses increased by 1% to $2.1 million and sales and distribution expenses increased by 32% to $3 million. Net finance income for 2024 second quarter was $934,000 compared to net finance expense of $884,000 for the same three month period of 2023. Overall, the company recorded its second quarter 2024 net loss of $6.9 million or $0.28 cents per common share down from a net loss of $7.3 million or $0.35 cents per common share for the same three month period in 2023 As of June 30, 2024, Profound had cash of $34.1 million. With that, I will now turn the call over to my Mathieu.
Mathieu Burtnyk: Thank you, Rashed and hello everyone. In the second quarter, real world utilization trends from TULSA providers continue to demonstrate the unique and unrivaled flexibility of the technology to become a mainstream procedure in the treatment of prostate disease, approximately three quarters, or 73% of the procedures were for the primary treatment of prostate cancer, 15% were hybrid patients suffering from both cancer and BPH, 8% were salvage treatments, and 4% were men with BPH only. Half of the procedures were prescribed whole gland treatment plans, 29% sub total, but more than half the gland and 21% were hemiablations or focal therapy. Prostate cancer patients across all grades of disease were treated primarily intermediaries patients with 84% being grade group 2 and 3, 5% were low risk grade group 1 and 11% high risk grade group 4 or 5 cancer. Similarly, patients with all prostate shapes and sizes were treated from less than 20 CC to over 100 CC. This quarter, about one half or 51% had prostate volumes under 40 CC. Another 30% had a prostate volume between 40 and 60 CC, and the remaining 19% had prostates over 60 CC. We continue to see TULSA as the only treatment modality which can be used across the entire spectrum of prostate volumes and disease with clinical evidence in patients with cancer or BPH, as well as the only option for hybrid patients who have both prostate cancer and BPH. The workflow step of creating the treatment plans within this spectrum of prostate diseases was recently made faster and easier with the release of contouring assistant, Profound second TULSA AI module, which received FDA 510k clearance in May. Since its release, early physician feedback in the form of post treatment surveys, has confirmed that prostate segmentation with the TULSA AI module had excellent accuracy in real world cases with decreased treatment planning time. In fact, in nearly all cases, urologists reported that Contouring Assistant improved the accuracy of their treatment plan information that we're planning to publish in conference presentations later this year. I would like to now shift focus to reimbursement and highlight some of the key aspects of the new TULSA category one CPT codes included in the proposed rules issued last month by the U.S. Centers for Medicare and Medicaid Services, or CMS, for short. These new codes have been designed to reflect the unique aspects of the TULSA procedure with respect to location of service, number of physicians performing the procedure and intensity of post procedure follow up visits. First, the TULSA codes have been approved for use in all locations of service. That means TULSA can be performed and billed in hospitals, ambulatory surgical centers or ASCs, and interestingly, within the physician owned, non-facility setting, which includes office based lab or OBL, a physician office, a lugpa [ph] office or an imaging center. The spectrum of location of service provides not only a broad install based opportunity, but also allows for maximum patient access and physician preference. The proposed rule has established TULSA as a level six Urology APC, with the hospital national average Medicare payment just over $9200 which is on par with all other comparative prostate cancer procedures. However, with TULSA's faster intra service time, the payment rate per hour within a hospital will actually be similar, if not better, to comparable procedures. Additionally, within the ASC environment, the proposed national average Medicare payment for TULSA of $7195 has been set significantly higher than the $4715 assigned to another longer ablative procedure. In the non-facility setting the proposed equivalent national average Medicare payment for TULSA is even higher at over $9400 which creates a unique and interesting opportunity within the physician owned office setting Second, the TULSA codes have been designed to optimize physician time for maximum efficiency. Unlike other comparable procedures, three TULSA codes enable the procedure to be performed entirely by one physician or two physicians, working together from different or the same specialty, these physicians can share the procedure and bill for their own work performed optimizing their RVUs per hour. The third key point is the zero day global assigned to the TULSA procedure, which is unlike any other comparable prostate procedure that includes a 90 day global period. This allows flexibility for physicians to bill separately any additional services for each patient visit following the TULSA procedure at the appropriate level, based on EMM guidelines, complex visits can be billed at a higher level, and this mitigates risks of variable or complicated patient follow up demands that a 90 day global code creates. Following the publication of the proposed rule, CMS is accepting comments until September 9. They will then issue a final rule, likely in November this year, before the new codes and payment rates go into effect on January 1, 2025. Finally, with the new CPT codes becoming effective in 2025 I wanted to provide an update on our ongoing CAPTAIN study, designed to support positive coverage from private payers in the US. The CAPTAIN trial is the first and only level one study comparing head to head, a new technology to robotic radical prostatectomy. It is powered to demonstrate non-inferior efficacy with superior quality of life outcomes such as urinary incontinence, sexual function and penile length, among others. We continue to see strong interest in joining the study, given the high level of impact it is expected to have urology community. In the last quarter, we have onboarded three additional sites, including Stanford and the Mayo Clinic, adding to the top hospitals in the world participating in CAPTAIN. We are pleased to reaffirm that the rate of recruitment remains well positioned to complete enrollment of the captain study this year. I will now turn the call over to Arun.
Arun Menawat: Thanks, Mathieu and good afternoon everyone. Our message remains clear as we approach 2025 when we will start competing on a level playing field for the first time with respect to reimbursement, TULSA increasingly has the potential of becoming a mainstream treatment modality across the entire prostate disease spectrum, raising from low, intermediate or high risk prostate cancer to hybrid patients suffering from both Prostate Cancer and BPH to men with BPH only, and also to patients requiring salvage therapy for radio recurrent, localized prostate cancer. There are several reasons driving our confidence, which I would like to highlight. TULSA is an incision and radiation free one and done procedure performed in a single session that takes a few hours. Virtually all prostate shapes and sizes can be safely, effectively and efficiently treated with TULSA. There is no bleeding associated with the procedure. No hospital stay is required, and most TULSA patients report quick recovery to their normal routine. Also tthe TULSA procedure is done with real time imaging in the [indiscernible] for pixel by pixel precision. While some thoughts that might pose a unique challenge when we first introduced the technology to the market, it is now quickly evolving into one of TULSA's most distinct advantages. MR Guidance allows for real time temperature measurement and automated control to preserve prostate disease patients urinary continents and sexual function while killing the targeted prostate tissue we at TULSA's besides sound absorption technology that safely and gently beats it to kill temperature between 55 to 57 degrees, By the way, that's not just what the clinical evidence shows. It's what TULSA patients are saying. And as we discussed in the past, [indiscernible] use of MR is steadily growing in urology as clinical evidence continues to point to the benefits of MR Imaging, from early patient screening to diagnosing and treating with TULSA. Accordingly, we are now forging even closer relationships with the three major MR companies to go beyond compatibility of our respective technologies and help maximize the tremendous opportunities that we see ahead to further support this modern treatment pathway. In addition, we continue to innovate with two of the main goals of increasing treatment efficacy and improving workflow efficiency. On that front, we are continuing development work on the third planned TULSA AI module, TULSA BPH, more details on that will be provided later this year. Finally, as you all know, adequate reimbursement is essential to drive forward physician adoption. Mathieu walked you through the proposed CMS rules for TULSA, so I won't repeat this information. However, I think it's fair and appropriate to highlight a couple of factors that we think should help TULSA become a mainstream treatment once reimbursement starts next year. First, while TULSA and radical prostatectomy will provide similar revenues to hospitals. We believe TULSA will be more profitable for them right away. It's often said that a first receipt, and especially a rheumatoid receipt, is really the most expensive real estate in the world. It costs, on average, around $3,000 an hour for a hospital to operate a surgery suite, versus around $800 an hour for an MR suite. So also, as I mentioned earlier, TULSA is a same day procedure that doesn't require a hospital stay for recovery, like RP does. So TULSA potentially represents a lot of cost savings for a hospital on that basis alone. Second, unlike TULSA, RP cannot be performed and is not reimbursed in a wide spectrum of treatment settings outside of the hospital, such as ASC [ph], OBL, a physician's office, a lugpa [ph] office, or an imaging center. So while we are working with our major MR company partners to improve the treatment experience for urologists and their patients to ensuring health can be readily accessed in the most suitable setting. The same cannot be said for RP, and as we help drive the migration of interventional MR from radiology to the surgical department of hospitals, we will be coming to face them while they cannot come to us. To summarize, we continue to believe TULSA has the potential to become a mainstream treatment modality across the entire prostate disease spectrum. Patient enrollment in the CAPTAIN post market study comparing TULSA to RP is progressing as planned. We will provide more details on our next TULSA AI module, TULSA BPH, later this year, We remain on track to grow our TULSA flow install rate, 275 systems. This year. We look forward to competing with other cancer, disease treatment modalities on a level reimbursement playing field for the first time, starting in January. This and our prepared remarks for today. With that, we are happy to take any questions you might have. Operator?
Operator: And our first question comes from Rick Wise with Stifel.
Rick Wise: Let me start off with reimbursement. Obviously, this is a clear and clearly compelling step forward. I guess a couple of questions. Maybe you'll expand on your Mathieu excellent comments and yours several things. One, what kind of reaction are you getting from the physician community, from existing customers, for from potential customers? Are they maybe talk us through? Is this accelerating discussions already, or will you have? Are people saying, no, let's talk once the rule is final, just some color around there, and maybe as well, talk about how you're getting prepared for what clearly will be a meaningfully more compelling reimbursement environment from a sales and marketing and environment.
Arun Menawat: Yeah, Rick. Look, those are great questions. So I think since the proposal have come out, we have been talking with our physician community, and I can certainly already speak in general terms. So the first thing that they are all very appreciative of is the flexibility that this treatment can be used, can be done in almost any setting. And so they're kind of now thinking about, Okay, do I do this at an imaging center, or do I go back to my hospital and have them establish it? Or if I do it, for example, in office setting, have my own equipment. Can I now participate both on the physician payment side as well as the technical payment side, also on that equation? So I think that flexibility, that we talked about, that Mathieu and I talked about, is actually been well received. The second part of the message that I think people are starting to grasp onto is the fact that when we look at this from the perspective of dollars per hour or profitability overall. I think that the numbers actually can come out a little bit better for TULSA in those situations. And so I think that a number of them are going through the numbers with us, but I think the general feedback is that there are going to be certain situations where they're going to be strong winds. So I can give you a couple of actually good examples. So if we look at our private urology practice, OBL, for example, the even the Medicare patient payment, there will be $9800 national average and if commercial payments are typically 1.5x of Medicare, you're looking at $14700 or close to $15,000 So I think as we look at the landscape, there are going to be certain situations where there is going to be a clear win for TULSA from an economic perspective. So I think that, you know, we're sorting through it. It's a complex thing. We're sorting through it. Most people are prepared to talk at the proposal level and not waiting for the final rule to come out. And we are, you know, our team is in the market, talking with the physicians already. With respect to your second question on, how are we preparing for it? I think that our these are, you know, as you know, we do things quite methodically. So we are, at the moment, visiting with our physicians. We have reengaged with the pipeline, which we feel very good about, and that we can now begin to justify the adoption or acquisition of the new device based upon 2025 numbers and so on. So we are in that process at the moment. We do think that we will need to add more salespeople, so we're starting to figure out exactly how and what locations, and we want to do that also, so that part is a little bit earlier stage, but we're absolutely preparing for it.
Rick Wise: Another question, maybe the shorter term, you reiterated your goal of 75 systems by year end, maybe help us better understand your line of sight. That's a big step up from the kind of when you think of as a third fourth quarter run rates. A big step up from the kind of quarterly run rate and again, why are you so confident?
Arun Menawat: Yeah, obviously we completely get the fact that this is a big step up in the second half of this year for us, but in the second quarter certainly. And I think, you know, in the earlier presentation this year, I sort of alluded to the fact that this is going to be a unique year for us as we transition to the reimbursement model as compared to cash pay models. I think that what we did see in the second quarter was people were saying, Well, you know, you're only a couple of months away from getting the proposal. Let me see, you know, just to be sure that we're going to be okay. So I think we did see that, but we have not only not lost the pipeline, we are actually seeing them even more engaged now that the proposed rule is out, and so the first team is pretty confident, and that's the basis that we felt that we should reiterate the guidance.
Rick Wise: Just one last one for me, you talked sort of intriguingly. I think it's the first time I'm hearing you say that you're forging closer, even closer. I think were your words relationships with the three major MRI companies. Maybe you could just dig deeper a little bit there. What are you hoping for? What should we expect from all that? And is that something that's going to take years Arun or something sooner? Just help us better understand what you're working toward? Thank you.
Arun Menawat: As I said in the prepared remarks, the fact that we use an MR. Originally was concerned, you know, is there, are they going to really use an MR or not? But I think with the clinical data and the fact that number of physicians have not actually used the procedure, I think they actually see the value of the MR, they see the fact that this gentle heating, that heating tissue only to kill temperature, that continuous ability to monitor the temperature or make adjustments in the treatment plan if needed. And then with the TULSA AI module that was recently cleared because we have MR high quality MR Images, we were able to develop it. I think the first thing that has happened is people now get it. People now think that, okay, this is not a difficulty. This is something that really adds value to treatment and patient care. And I think based upon that, a number of companies have -- are now also developing real time in-bore biopsy procedures. So there are multiple companies that are saying, Hey, we can do in-bore biopsies, and they can be done in a very timely manner, as compared to historically, where they've taken a lot longer to do so. And so this whole idea that we can, you know, use MR to screen patient, diagnose patients, maybe in-bore biopsy, and then treat patients it is starting to really catch on. And so the MR companies, this is very synergistic to the MR companies. And so the MR companies are working with us to really determine what is an interventional MR as compared to a diagnostic MR and an interventional MR would be, you know, mid-range magnet, rather than a 1.5 it will be a 0.55 Tesla (NASDAQ:TSLA) [ph] magnet, where we can use AI technologies to provide the same high quality images, but we can also provide practical things, where a surgeon can literally walk into the MR and literally put their hand inside, and they can actually do intervention. And so Siemens has already announced that product. They are already publicly announced a leasing model for that product and so I think the synergy is what I'm talking about. And I think you will hear from these companies later this year. I think we will hear about in our RSNA this year and at our own conference earlier this year, that our product, the biopsies, the diagnostic images and the treatment is all coming together, and you'll see multiple companies supporting this effort.
Operator: Our next question comes from Ben Haynor with Lake Street Capital Markets.
Ben Haynor: Just maybe following up a little bit on Rick's questions there, and the relationships that you're performing with the MRI firms out there, what has kind of been their reaction to the proposed reimbursement? Isn't that something that kind of raises a flag for them?
Arun Menawat: Yeah. Ben, I mean, generally speaking, I think people expected that if we could level the playing field and the fact that we have a lower cost system in place, that we're going to be in decent place. And so when these companies are looking at, you know, how do we justify an MR centric prostate care strategy? You know, they're looking at and they're saying, Okay, we already have reimbursement for diagnosis. We already have reimbursement for biopsy. Now there is a level playing field, reimbursement for the TULSA procedure and so they're basically looking at and saying, this adds to their ability to justify it financially, using all of these together. And then the idea is that there are number of ASCs or OBL or lugpads [ph] that have expressed, historically expressed interest in owning MRs and so when you combine all of this together, I think we can put it across the finish line towards a financial model that can justify it. And so I think that's how these MR companies are looking at, is that this is another reason to be able to justify that MR and the [indiscernible] and so on are looking at and saying, Well, this is, you know, going to add to our ability to have full control of the patient from beginning to the end, which means better care of the patient.
Ben Haynor: Okay, that's helpful. And then on the lugpa [ph] specifically, do they look at it and say, well, yeah, the Medicare reimbursement, you know, that looks that looks fine to me, but I really need the commercial patients to be able to make this work or how do they tend to think about that to the extent that you can share?
Arun Menawat: Yeah, no. I mean, we've already been in extensive dialog, and so I think we will have to come up with explicit, customized model for different situations. And I do think that, to the way you're describing it, is in the realm of possibilities, is that they might want to pick, for example, for insurance patients where the payment is pretty good, and if the ASC or the [indiscernible] are owned by the physicians where they have the ability to get reimbursement from both sides of the payment equation that they are likely to take the private payers, you know, to those sites, and the Medicare patients typically go to the hospitals. So I think you will see as the economic models, you know, get developed further, I think you will be able to see that, hey, there are certain types of patients that they will take to one site where it can be more profitable, another type of patient they can take to another site where that can be profitable also. And I also think that the hospital will want to see adoption, because to a hospital, they are losing money on a Medicare patient. So if we can show that, hey, they can actually break even or make some money on a Medicare patient, that's a win for them. In fact, also right? And they already have. You know, robotics is well, highly utilized, so they already have enough of a patient population to use the robot, and if they make some space for that by using the MR for our procedure, they're actually making money, or at least breaking even, on the TULSA procedures, and then they're making money on the other procedures that go on the robot. So I think it's not going to be a simple equation, but I think there's going to be plenty of different ways to be able to demonstrate economic value here and we're quite excited about that.
Ben Haynor: Okay, that makes a lot of sense. I appreciate the color there. Well, that's what for me, just on the TULSA AI clearances that you have now. I mean, it seems like both thermal boost and contour assist are kind of competent boosters for clinicians, but can you share maybe how much time Contouring Assistant will take off of a procedure. I mean, is that 10, 20, 30 minutes, what does that look like? And then anything more that you can share on, you know, the adoption so far of both thermal boost and contour system amongst the folks that have it available to them?
Arun Menawat: Yes. Ben, absolutely. The thermal boost, you know, you we explicitly talk about the wide variety of patients that are treated, and you heard that from Mathieu already, the thermal boost is one of the reasons why we are seeing these later stage treatments now happening with TULSA, because they feel very confident that, hey, if there is a little protuberance of the cancer at the outer edge, they can blast that region. Or if they suspect that there is some involvement to the muscle, they are able to blast into that region. So I think the latest statistic and Mathieu, please feel free to chime in on this. I think it's in the order about 50% of the patients being treated thermal boost is being used.
Mathieu Burtnyk: Yeah, that's correct. About 50% of the treatments we see the use of thermal boost, at least for a portion of the of the treatment plan.
Ben Haynor: So that's highly valued?
Arun Menawat: Highly valued, highly valued. And then on the AI side, majority of our sites now already have the AI they have many, I would say about a third to maybe more than a third have already used it to treat patients. The initial feedback, it is quite positive, as we anticipated. There are two things that we're hearing. One is that the treatment designs are very smooth, so they're not they kind of like the smoothness of the way the treatment designs are proposed, and the confidence that, hey, this is coming from patients who were successfully treated in the past. And then the second thing we're hearing is definitely it is saving time in all these procedures. So I think our goal we will actually present data as we get statistically significant information, where we will present the data. We think the best way to put it is that ultimately, if they're doing two cases in a day, they will be able to do three. If they're doing three in a day, they will be able to do four. If they're doing four, they'll be able to do five. And I think that, to me, is the biggest benefit of this, in the sense that in about the same amount of time, they'll actually be able to do more cases, which certainly not only speaks to the pocket book it also speaks to their whole workflow, their whole day. So that's what you will see. I think per procedure time, certainly it will be several minutes, but I think procedures per day, you will see an increase, and that's going to be valuable to them.
Operator: Our next question comes from Rahul Sarugaser with Raymond James.
Rahul Sarugaser: So Rick and Ben did perfect job asking many of the clarifying questions. So maybe I'll, I'll ask something about as you scale. So Arun, you were just talking about the doc's going from one to two to three to four patients a day. Perhaps you could give us a little more clarity in terms of how the three codes can be leveraged for doc's to potentially stack procedures and essentially increase the profitability per unit time, either by using residents or just creating efficiency in the system to make it more profitable for them.
Arun Menawat: Yeah, Rahul, I'm happy to. So, as I was saying before, the flexibility and the fact that we have multiple codes allows each site to effectively determine what is the best way, or the most effective way and efficient way for them to treat the patient. So I'll share a couple of examples. So if I'm a teaching site and I have a resident, I could have the resident do sort of the initial workup of the patient, which will include putting the patient on the MR table, inserting the catheters, putting attaching the table to the MR suite, being with the patient during the time they're being anesthetized, and that we call sort of medical device management, and a resident could easily do that. And so the primary physician could then come in, really at the time when they need to start the treatment planning, which now is AI based, but they can start to do the treatment planning. Then they can stay for the treatment itself, which from beginning the end is even based upon the CMS numbers, is less than 90 minutes total time for the physician. Then they can leave, and then the President could come back and, you know, unhook the patient's table, and go with the patient to wake him up and remove the catheters. So it's an efficient process. It brings the primary physician only for the core part of the procedure. It would be less than 90 minutes. And if they do that, the resident could be using the medical device code, and the physician could be using the treatment part of the code and if they did that, I think per hour basis will be almost, not quite double, but certainly 50% to 70% better. On a per hour basis for the physician, whereas a resident, it will make less money but in comparison, will also do very well. That's just one example. In another setting, you could have a urologist and a radiologist both sharing the procedure. And in that case, they can sort of, one person is doing the treatment plan, the other person is planning the next patient. And this is also why, you know, we talk about, you know, number of patients per day rather than the time per procedure. So I think those are a couple of examples of how they will be able to use these codes to be able to optimize the workflow that will be most efficient for them.
Rahul Sarugaser: And so perhaps continuing on this theme and broadening into BPH. So sort of a two part question. One, is there any update on Profound's aspirations around BPH? And very specifically, are the codes that are currently issued applicable in BPH and how do you see the BPH strategy playing out, particularly again, in this in this stacking, in this procedure, stacking scenario?
Arun Menawat: Sure, yes. So great questions, Rahul. With respect to DPH, we kind of see ourselves in steps also. So the starting step for us is to focus on those patients where the prostate are larger than 100 CC and/or they have not only BPH, but they might also have some form of early stage disease. And so that patient would particularly benefit from our therapy, those, that group of patients, because if they have, you know, large, very large prostates, we can still treat them very quickly and we can, you know, basically ablate the transition zone in some cases the medium will if it is needed. And still, we can be a relatively fast procedure for them. And because our prostates shrink, we're shrinking a very large prostate, and think that should lead to durability over time. And in those cases where there is some form of early stage disease, or even, you know, internally, we caught them, call them hot spot, because in these diffusion images of the of the MR these bi-parametric images, you can actually see zones of the prostate where the cells look unusual. And so those patients where they see not only the BPH, the problems with the transition zone and the median lobe, but they also see those hot zones, they can actually go ahead and treat them to some extent before they develop into cancer will become bigger. So I think that subset of the market, we think is at least about 400,000 patients, and we think that is where we want to start. The procedure will automatically have the AI technology right off the gate, because it is being developed off of that platform and so we think that it will also be a lot faster procedure than a typical cancer procedure is because we're not ablating the whole prostate. We're typically maybe 30% of the prostate, which makes the treatment part also very fast. So AI based treatment design that will be customized to each prostate and then a much less amount of ablation, we think we can be fairly competitive in the market in terms of the time of the procedure. And then to your second question on the reimbursement the way our FDA clearances, it says that the clearance is for ablation of prostate tissue. So it does not specify whether it's good tissue, bad tissue, causing BPH or causing cancer. And the reimbursement code are against the this FDA clearance. So you know, we will confirm it in the end, but at the moment, we think these codes should be good to go. So I think next year, not only that, we have this momentum towards reimbursement based model, but we also think that we will introduce the BPH module as well.
Rahul Sarugaser: And I'll just, I'll flip in one, one quick last question, and then will get back in the queue. Given all the talents [ph] we talked about today, how is the Profound team feeling? What is, what is the sentiment in the company?
Arun Menawat: I mean, you know, the Profound team, I think the senior team has really gelled nicely. I think the goals are crystal clear for us. We know what we need to do. And I think the general mood of the team at pretty much every level is, let's go get this done and I feel pretty good about that.
Operator: And our next question comes from Michael Sarcone with Jefferies.
Michael Sarcone: Just to start, you know, just on the non-recur I mean, the recovering non capital revenue, it looks like, you know, that was, that was down over year-over-year, and maybe flat versus the prior quarter to maybe just, you know, talk about what you saw in the quarter there. And then maybe give us some color on TULSA utilization or procedure growth for the quarter.
Arun Menawat: Revenue comparing to the year-over-year, I think we were 39%, the number of patients that we treated in Q1 is higher than the number of patients we treated in, sorry, in Q2 versus Q1. I think that, as I've said before, the fluctuation that you see in dollars is, you know, in 1000s of dollars, and it more relates to shipment of the product to the sites as compared to the number of patients being treated. And as I had sort of alluded to earlier, we do see that capital revenues are coming in this year because more and more hospitals are saying, you know, we do have funds for products like these. And now that the reimbursement picture is becoming even clearer, I think you will continue to see this mix changing and so I think that in some of those situations where we do sell the capital, we will reduce the dollars the perp case for them, because today we charge everything in a bundled payment, we will start charging in a unbundled way. So you will see these fluctuations but I would not read anything beyond that into these details.
Michael Sarcone: Understood. That's helpful. Thanks, Arun. And then, you know, you added four TULSAs to the base in the quarter. Can you give us any color on how that broke out between capital sales versus just pure placements?
Arun Menawat: I think most of these are placements today for now, I did, you know, as I was saying before we did see that, you know we were, I wasn't sure how this year was going to unfold. To some extent because of the reimbursement news being the 800 pound gorilla, and I think in the second quarter, we did see a little bit of that sort of discussion with the hospital. To say, let me just wait until I get at least the proposed rule out before I sign on the dotted line. But as I was saying before, I think that is now everybody is back on and which is why we think we have a high bar to come in the second half but our team seems to be very confident about that. But I wouldn't read I mean, majority of the 2024 will still be placement based and I think what you will see over time is that the placements will convert into capital as they start using it, and they start to develop the economic models. I think you will start to see them convert so that they can reduce their per case cost and they can use other buckets for the capital dollars and service dollars.
Operator: Our next question comes from Scott McAuley with Paradigm Capital.
Scott McAuley: Most of the questions have kind of already been asked, but just following up on the last one around the capital revenue. Because you did have, I think it was 700,000 plus this quarter in revenue from capital equipment. So is that, you know, sales in Europe or elsewhere, versus as kind of you're alluding to before us, capital placement models?
Arun Menawat: It is a North American sale. So for Europe or Asia, we would break it out but this is a North American sale.
Mathieu Burtnyk: Let's call it this river shed. So like it's already detailed in our segment report. So if you look at our financial statements, shows under North America.
Operator: Our next question comes from Brian Gagnon with Gagnon Securities.
Brian Gagnon: I know it's not really fair to ask about procedures per day with real reimbursement yet, but your highest level users, maybe your top four or five guys or gals. How many procedures are they doing per day now? And where do they think those procedures per day will move to once reimbursement begins?
Arun Menawat: Very good question, Brian, we are, so we have Mathieu, what 8% of the sites are doing four procedures per day already?
Mathieu Burtnyk: Yes, that's about right.
Arun Menawat: And I think, Mathieu, how many sites, what percent are doing three per day today?
Mathieu Burtnyk: We're seeing about I'd have to pull up the exact figures here, but we're seeing over 10% maybe 20% of the sites doing three procedures per day.
Brian Gagnon: That's actually much better than we thought it would be.
Arun Menawat: Yes. So about a quarter of the population is in the three to four procedures per day already. We think once this AI is fully in place, that pretty much every site, we will be able to increase one more patient and we're going to do our own conference shortly, and we will ultimately publish the information on the number of procedures, I think in general, our expectation is that we think we can provide up to a 20% advantage in terms of time against [indiscernible].
Brian Gagnon: That'd be great. On the MRIs and expanding relationships are the 0.55 Tesla interventional MRIs. Are they easier to install and operate, and what does it take for a facility to install a regular MRI today versus installing one of these interventional MRIs?
Arun Menawat: So Brian, today's MRIs typically are 1.5 to 3 Tesla, and they use a lot of helium and so on and so hospitals typically put them on their main floor or their basement floor, because they weigh something in the order of 30,000 pounds, and they will require, especially rebuilding the foundation of the floor and the new ones the 0.55 have multiple advantages. Number one, they weigh, typically about 8000 pounds. So, you know, I kind of tell people that you can take a Ford (NYSE:F) F250, easily. Actually, you could take Ford F150 tow them one place to the other. But the most important thing is, with that less weight, they can actually replace them, basically in the room of any operating room, and you can place that system in there and the magnetism, because they are 0.55 Tesla, normally these hospitals have to provide significant shielding, which cost the $1 million per magnet because of these high strength magnets versus with this the shielding, the magnetic strength is typically about 5 feet from the edge of the MR itself, so literally almost no shielding required which saves a lot of money in terms of installation costs. And the reality is that physicians can literally stay in the MR suite during the procedure, because there's no issue related to magnetism. So the number of advantages, the one that I talked about before that physicians can literally put their hand in the bore, and literally see their hand, see the cancer inside the patient, and put the needles in the right places. The fact that they are smaller, they can be moved easily. They can be put in a normal operating room, size room. And when you think about all this, and then you combine with the fact that TULSA is the only procedure where it will be reimbursed in a doctor's office you know, that starts to become a pretty compelling proposition. The caution, obviously, is entirely new and it's going to take some time to deliver all of this, but I think this is why we are quite excited about the new MRs that they can literally be placed and they can they can be operated. They're much simpler to operate. They don't have multiple buttons, because they're designed for intervention only and then combining the economic models, as we talked about before, I think that is likely to be a winning combination.
Brian Gagnon: Okay, so this should be a big deal for adoption of these new systems, which in turn will directly benefit this whole continuum of MR prostate diagnosis, treatment and post treatment visualization that you guys have talked about for the last year or two.
Arun Menawat: That's exactly where we're going. That's exactly right. This is why I think MR companies have invested a lot of money to commercialize this type of a product, because they see that whole thing sort of converging towards an MR centric prostate care strategy.
Brian Gagnon: Okay, last one for me, you mentioned the commercial reimbursement was higher than CMS patients. And I guess the one thing I didn't realize, and maybe you can expand on this, is that today, radical prostatectomy doing CMS patients, is not profitable for a hospital system?
Arun Menawat: That's right. So in the hospital doing robotic prostatectomy in a typical hospital does not pay enough to cover the cost of the hospital, so it may actually lose money doing it. And we think that with the way our reimbursement is working, and the fact that there's lower the MR suite is far less expensive, and the fact that there's no hospital stay, we think we can show them a model that, in the worst case, will breakeven for even the lower cost hospitals.
Brian Gagnon: So at a minimum, you should get a lot of the Medicare patients as your patients in the future, assuming they can figure out this MRI logjam?
Arun Menawat: That's exactly right. And so we are in dialog with them to confirm everything. We want to make sure they can use their own data to see what we are describing to them. But I think based upon the numbers that we see, based upon the robotic prostatectomy data that is in the CMS databases, we think what we are seeing makes a lot of sense, and it will make a lot of sense for the hospital to make that transition.
Operator: And this does conclude the question and answer session. I would now like to turn it back to Dr. Menawat for closing remarks.
Arun Menawat: Thank you so much, and thank you for the vibrant questions. And we're really looking forward to providing another significant update at the Q3 call. Thank you.
Operator: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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