Profound Medical Corp. (NASDAQ:PROF) Q2 2021 Earnings Conference Call August 4, 2021 4:30 PM ET

Company Participants

Stephen Kilmer - Investor Relations
Dr. Arun Menawat - Chief Executive Officer
Aaron Davidson - Senior Vice President, Corporate Development

Conference Call Participants

Rahul Sarugaser - Raymond James
Neil Chatterji - Cowen
Anthony Petrone - Jefferies
Frank Takkinen - Lake Street Capital Markets
Ben Haynor - Alliance Global Partners
Scott McAuley - Paradigm Capital

Operator

Good day and thank you for standing by. Welcome to the Profound Medical Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your 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 regarding Profound and its business, which may include, but is not limited to, expectations regarding the efficacy of Profound’s technology in the treatment of prostate cancer, BPH, uterine fibroids, palliative pain and osteoid osteoma.

Often, but not always, forward-looking statements can be identified by the use of words such as plans, is expected, expects, scheduled, intends, contemplates, anticipates, believes, proposes or variations, including negative variations of such words and phrases, or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved.

Such statements are based on the current expectations of management. The forward-looking events and circumstances discussed in this conference call may not occur by certain specified dates or at all, and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company, including risks regarding the medical device industry, economic factors, the equity markets generally, and risks associated with growth and competition.

Although Profound has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from most anticipated, estimated or intended. No forward-looking statement can be guaranteed.

Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and 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 as required by law.

For the benefit of those who are new to the Profound story, I would like to take a moment to summarize our business. Profound develops and markets customizable, incision-free therapies for the ablation of diseased tissue.

We are currently commercializing TULSA-PRO, a technology that combines real-time MRI, robotically-driven, transurethral ultrasound and closed-loop temperature feedback control. The technology is designed to provide customizable and predictable radiation-free ablation of a surgeon-defined prostate volume, while actively protecting the urethra and rectum to help preserve the patient’s natural functional abilities. TULSA-PRO is CE marked, Health Canada approved, and 510(k) cleared by the FDA.

We are also commercializing Sonalleve, an innovative therapeutic platform that is CE marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonalleve has also been approved by the China National Medical Products Administration for the non-invasive treatment of uterine fibroids, and has recently obtained FDA approval under a Humanitarian Device Exemption for the treatment of osteoid osteoma.

While we do not expect this FDA HDE approval to have a material impact on revenues in the near-term, it is a significant milestone for our company and we are making preparations for its U.S. commercial launch later in 2021.

On the call today representing the company are Dr. Arun Menawat, Profound’s Chief Executive Officer; and Aaron Davidson, the company’s Senior Vice President of Corporate Development.

With that said, I will now turn the call over to Aaron.

Aaron Davidson

Good afternoon, everyone. And welcome to our second quarter 2021 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 Arun in a moment for an update on our commercial activities. However, before I do, I’d like to provide a brief update on our second quarter 2021 financial results.

As a reminder, we have changed her presentation currency from the Canadian to the U.S. dollar to streamline things all of the numbers we referred to have been rounded so are approximate. For the three month period ended June 30, 2021, the company recorded revenue of $2.6 million, up 156% from $1 million in the second quarter of 2020.

As we mentioned in today’s press release, the U.S. TULSA-PRO business rebound that started in March continued through the second quarter, driving 145% sequential increase in recurring revenue.

Total operating expenses in the 2021 second quarter, which consists of R&D, G&A and selling and distribution expenses were $7.6 million, an increase of 74% compared with approximately $4.4 million in the second quarter of 2020.

Breaking that down further, expenditures for R&D increased 99% on a year-over-year basis to $3.4 million. This was primarily driven by increased new and existing clinical trials, increased spending for R&D initiatives and projects, travel restrictions being removed, options awarded to employees, additional head count and overall increases to general expenses, partially offset by decreased consulting fees.

G&A expenses increased by 49% to $2.5 million due to additional headcount, increased salaries and directors fees, higher NASDAQ and TSX listings fees, increased legal and accounting fees and options awarded to employees.

Finally, selling and distribution expenses increased by 74% to approximately $1.7 million. Overall, the company recorded a second quarter 2021 net loss of $7 million or $0.35 per common share, compared with a net loss of $5.3 million or $0.33 per common share for the same three month period in 2020. As at June 30, 2021, Profound had cash of $73.8 million.

With that, I will now turn the call over to Arun.

Dr. Arun Menawat

Thanks, Aaron. As many of you know, COVID-19’s negative impact in the beginning of 2021 was severe not only for Profound, but across the U.S. MedTech space. That was followed by a late March rebound, which as Aaron mentioned, continued through the second quarter.

On our last call, I focused my remarks on explaining why the disruption in Q1 had not translated into our being any less bullish on our business. On this call, I would like to reiterate that. In fact, in a few minutes, I will share with you some real-world utilization data that I believe really serves to underscore the tremendous opportunity that TULSA represents.

But first, let me update you on our continuing progress in laying the groundwork to drive adoption of TULSA-PRO in the United States. The first pillar of that is building a high quality U.S. installed base, targeting three major types of end users, early adopters, independent imaging center companies, and opinion-leading teaching hospitals. Each of these are expected to play different roles in supporting both short-term and long-term adoption.

Our early adopter TULSA-PRO sites have continued to treat a growing number and an increasing variety of patients. With respect to the imaging center companies, RadNet’s Liberty Pacific West Hill Center in Los Angeles is treating patients using TULSA after initially experiencing delays related to COVID-19.

Midway through Q2, we also announced a U.S. multicenter TULSA-PRO agreement with Akumin, which currently has 79 operating clinics in Florida and a total of 134 sites across its network in seven states.

We expect to install TULSA-PRO systems an up to 10 Akumin men’s health centers across Florida, Texas and Pennsylvania over the next year or so, with the first site anticipated to be operational in the fourth quarter of 2021. Based upon the success of the first 10 installations, we hope to expand our relationship in the future to include additional Akumin centers.

Moving to the third type of end user, as I highlighted in our last call, we now have agreements with renowned institutions like UCLA, Stanford, Johns Hopkins, Yale Cancer Center, WellSpan Advanced Prostate Cancer Center, Mayo Jacksonville and Mayo Rochester and GH Cancer Center, UT Southwestern, Memorial Hermann and Methodist San Antonio.

That list continues to grow nicely. In fact, I am pleased to report that in Q2 our team signed six additional new agreements with hospitals for installations later this year. The price point of all agreements remains the same at $7,710 or higher per patient.

To summarize, the installed base status of TULSA in United States, today we have about 14 installs and 10 of those sites were treating patients in Q2, plus we have enough contracts on hand for over 20 new installs over the next 12 months. Based upon that, we continue to anticipate approximately 25 installed TULSA-PRO systems in the United States by the end of this year.

As we saw previously, doing initial limited commercial launch of TULSA in Europe as U.S. physicians are becoming more confident with and accustomed to the technology, they are using it in a wide range of patients. We believe this confirms TULSA-PRO’s flexibility and suggests that the available market is as large, if not larger, than what we first envisioned.

Based on a utilization analysis, our confidence is growing that TULSA will be adopted as a mainstream technology rather than a highly specialized tool that can only be used in a small subset of patients.

Let me share some of the raw patient characteristic data with you all, of this comes from the U.S. TULSA sites composed of all three end user types that actively treated patients in the first half of 2021. 86% of patients received ablations of greater than 50% of the prostate, 63% received whole gland, 28% partial gland, 6% BPH only and 1% salvage. As an aside and as some of know, I personally make up part of that BPH group having successfully undergone TULSA a few weeks ago.

Of the prostate cancer patients treated 11% were Grade Group 1 or low risk, 53% were Grade Group 2 or low intermediate risk, 28% were Grade Group 3 or high intermediate risk and 8% were Grade Group 4 to 5, which is considered high or very high risk. With respect to the size of prostate treated, 75% were greater than or equal to 33 cc and many were greater than 100 cc.

To put that in perspective, especially with respect to TULSA’s relative ability to become a mainstream treatment, the vast majority of prostate cancer patients and pretty much all prostates of BPH patients are greater than 30 cc.

Summarizing, the analysis shows that TULSA was used in all grades of cancer ranging from low risk to the highest risk patients and the percentages of patients treated in those risk categories roughly corresponded with that what we see in the real world with respect to patient population distribution.

In addition, recent publication on clinical outcomes of patients who have been treated in real-world setting continued to show that TULSA patients experienced minimal side effects, such as urinary incontinence or severe erectile dysfunction.

Coupling the two, we have increasing confidence that of all the emerging technologies for prostate disease, TULSA is the most flexible. It can be used in the widest variety of prostate disease for customized whole or partial gland treatment with demonstrated superior outcomes.

In order to maximize the opportunity that we see ahead of us, there is no question that the successful execution of our reimbursement strategy will be key. To that end, as I mentioned in our last call, we have initiated dialogue with relevant societies, including the American Urological Society and the American College of Radiology to get initial feedback on the requirements to qualify for our CPT-1 application.

Based upon their feedback, we continue to believe that the clinical publications on the Tulsa procedure and the publications that we anticipate later this year will likely be sufficient to meet the requirements for the application by the end of this year. If the adoption of TULSA usage continues to increase as we anticipate, we may get the support that we need to file in 2022.

Our strategy is to not only continue to pursue the CPT-1 application with the combination of clinical data that already exists and that will likely be published by end of this year, but also support a planned level 1 study called CAPTAIN that will run in parallel with the filing of the CPT-1 application.

While the CAPTAIN study is not a requirement to obtain the code, it may further support coverage by insurance payers and will also provide additional clinical data to support significant adoption. The planned CAPTAIN trail will enroll 201 prostate cancer patients across approximately 10 to 12 sites. Patients will be randomized to receive the TULSA procedure or a radical prostatectomy.

The primary endpoints will include safety and efficacy, including measurements of side effects and non-inferior progression-free survival over time. This trial will primarily be run in the United States and we continue to anticipate patient recruitment to begin before the end of this year.

In the meantime, TACT 2.0 continues to progress well and we anticipate that patient recruitment will be completed by the end of this year. We also anticipate that three-year data from the initial TACT trial will be published later this year. In addition, we are aware of one additional level 2a study and two additional level 2b study that will be submitted for publication later this year.

So to summarize, our team has been executing well. We have been signing additional TULSA-PRO site agreements at an increased pace over 2020. We expect to install new TULSA-PRO systems at a rate of four to six per quarter going into 2022.

With that accelerating, once COVID is fully behind us, we are continuing to see broader TULSA adoption both in terms of procedure volumes and types of patients treated, utilization data points to TULSA becoming a mainstream treatment in the U.S., providing us with a large market opportunity and we are progressing TULSA-PRO’s reimbursement strategy by conducting additional studies to apply for a specific CPT code, and ultimately, a reimbursement determination.

This ends our prepared remarks for today. With that, we are happy to take any questions you might have. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Rahul Sarugaser with Raymond James. Your line is open. Please go ahead.

Rahul Sarugaser

Thank you very much, Operator. Arun and Aaron, thanks so much for taking my questions. Congratulations on strong results today.

Dr. Arun Menawat

Thank you.

Rahul Sarugaser

I guess, my first question is just sort of the details -- a little bit more detail in terms of the new sites that you were talking about. So you mentioned 14 installed, 10 treating, we recognize that there are about nine sites listed on the TULSA-PRO website. How should we be thinking about visibility on these sites that are being installed, as well as the ones that are coming online and then also with the total 25 that you expect to come online through -- to be installed through the remainder of the year?

Dr. Arun Menawat

Yes, Rahul. So I think that what we put on the TULSA-PRO procedure website are really those sites where we have permission from the hospital or the imaging center to be able to provide the name in public domain and so there are certain sites which we do not have permission yet.

So in some cases, it can be a leading indicator, because some sites would like to put their name out, so they can start recruiting prior to even installation. And to be honest in some sites, they have a pretty good start and they tend to sort of want to wait until they have treated a few patients before they go there. So, I would suggest that we not look at that site as only as a leading indicator, but as a site that where full commercial activity is taking place at this point.

I did mention a couple of new names when I listed the number of leading hospitals that are either signed up or are using the technology. And I -- to be honest I think that it’s very impressive list, at this early stage of our company and I think what I can tell you is in the second half of this year, you will continue to see and we will be announcing as these hospitals come on stream, other big name hospitals, big name cancer centers.

So as you know, we sort of talked about those three channels. It’s important for us to not just have only the leading hospitals, but these imaging center channels where get off to a good start with the two companies that we have signed up with and with early adopters and you will see additional early adopters also and you will see more sites coming on stream with the imaging center companies.

So, to be honest, clearly, I hate to use word excited all the time or anything. I almost never use it, but I am pretty excited about the fact that we are really marching through the strategy that we have put together. And I think you will continue to see four to six new sites every quarter and that they will be representing the full range of the three channels that we talk about.

Rahul Sarugaser

Terrific. Thanks, Arun. That’s great clarity. I guess my next question is, this is the first time you have really been talking about really broad utility of the device you would initially talked about of course the prostate cancer and then BPH and then salvage patients. But you really are talking about a much broader workhorse type scenario here. So with those numbers you talked about 60% whole, 28% partial, et cetera, et cetera. When should we expect to see some of the data coming out of this to illustrate everything that you were just talking about?

Dr. Arun Menawat

Yes. So as you know, we analyze everything to confirm that, hey, what we are doing is actually producing the kinds of results that we anticipated and if they are not to be able to adjust ourselves to fit better -- provide better execution.

So to answer your first question directly, you will see additional publications that will be coming out within the next six months, which will include this broader variety of patient usage. You will also see that in addition to the CAPTAIN trial, we will announce additional smaller trials that will start focusing on these subset of patients.

Because the data that we see, we are quite pleased to see that we are not only treating the full variety of the patients, but the other part that we are seeing is that our patient population tends to be more on the larger prostate side, which are the more difficult patients to treat. So if we can treat more difficult patients certainly we will be able to treat the average diseased patient.

And so I think not only that we -- when we sort of analyze this data of the last 18 months, we are feeling very comfortable that we can treat the full range of the cancer population and a pretty large subset of the BPH population. But we are also finding comfort in the sense that patients who tend to be more complicated, the larger the prostate, the larger the more complicated the procedure is.

And in fact, if you do an analysis on larger prostates you will find that the side effects become even more critical in those larger prostates where we are delivering, in fact, quite phenomenal results with almost no side effects in larger prostates.

That’s really where the confidence is coming from and you will absolutely see this in publications, and as we begin to unravel more and more of this data, we will in fact support additional specific trials to make sure that our community -- urology community has everything that they need to drive adoption.

Rahul Sarugaser

Great. Thanks, Arun. And if you would indulge just one last question, so given the broaden utility and now that you have essentially 10 treating sites and ultimately initial four of that -- the initial four that have been installed be coming on very soon. Can you maybe speak to utilization rates that you are seeing specifically given the breadth of the applications?

Dr. Arun Menawat

Of the applications? Yes. So, yeah, good question, because I didn’t have that in the prepared remarks. But number one, certainly in the early adopters, we are seeing that the run rate, we have talked historically about 60, we originally thought it would be 40.

But in reality it was pretty good. I can tell you that number of 60 is increasing in those sites. So I think six months from now I anticipate that I will be able to give you a number that will be higher run rate than 60 in those sites.

In the teaching hospitals, one of the things I have talked about in the guidelines that they provide, that are sort of agreed upon in the urology department and they typically will not deviate from those guidelines.

And so, for the TULSA installs, they have sort of developed an initial criteria of what type of patient they will be treating in the beginning. But I can already tell you that they are starting to broaden those, in fact.

And so I think that the rate with which -- as you -- as we have talked about before, in the teaching hospitals we thought the first year will be sort of in the range of 30-ish and maybe it will go to 40, 50 in the second year.

At this point, I would anticipate that we will grow at a little bit better, faster pace, even in the teaching hospitals and couple of the teaching hospitals, as an example, are already doing three procedure in one day, and as you know, longer term our goal is to be at four procedures per day. But within the first six months, we are starting to see that at least a couple of the teaching hospitals are already at three procedures per day also.

So, generally, I think that, again, we wanted to be cautious, we don’t want to overshoot or anything. But I would say, generally speaking, the utilization story is certainly continuing to be better or at least, as good as we anticipated. And I think it is reflecting in the fact that between Q1 and Q2 we saw a certain -- a pretty good increase in the recurring revenue dollars.

Rahul Sarugaser

Great. Thank you so much, Arun, and congratulations on the quarter. I will get back in the queue.

Dr. Arun Menawat

Thank you. Thank you. Thank you so much, Rahul.

Operator

Thank you. And our next question comes from the line of Josh Jennings with Cowen. Your line is open. Please go ahead.

Neil Chatterji

Sorry about that, I was on mute. This is actually Neil on for Josh. Thanks for taking the questions.

Dr. Arun Menawat

Good afternoon, Neil.

Neil Chatterji

How are you and congratulations on the quarter. You talked a little bit about the 60 reimbursement path. Can you maybe just provide a little more detail in terms of what the process looks like with those societies you are talking about?

Dr. Arun Menawat

Absolutely. Absolutely. Part of the reason that it’s an important topic is that, one of the things that we want to convey is that, we are off to a pretty good start from our perspective in the -- with the current situation that we have, but getting that CPT-1 is a main -- a key priority for us.

So with the way the process has been working, that we have had multiple meetings with both the American Urological Association and with the RSNA, which is a radiology association that is a sister organization and we are meeting with the American Urological Meeting is coming up, the annual meeting is coming up in September in Las Vegas this year. We have another meeting planned with them.

And so what we are doing is we are keeping them fully abreast of the progress that we are making to clinical data that is coming out. And we are finding that both of these societies are generally quite positive in the way we are presenting the information, the clinical data publications that are -- that they look -- what they look like. And so at least our interpretation is that both of these societies are likely to be supportive as we prepare the application in the first half of 2022.

And that is in terms of the process, a really important goal, because once the society support the adoption of a new technology, the -- ultimately the decision comes from the AMA, the American Medical Association and that if they look for the support from these societies.

So, obviously, I cannot guarantee that we have it, but certainly based upon our current dialogue, it looks positive, but the process would be that we would then work with the societies, they will either provide a support letter or they may in fact co-sponsor, we will see how that goes. Typically, societies provide support letters, and with that, we would be in a position to file for the June meeting of AMA.

If that decision, then will come in the fourth quarter of 2022 and once we know what that decision is, if it is positive, then it’s sent over to the right committees to determine the RV use and so on and that process typically takes about a year. And so the effective codes if they are assigned will be become effective for treatment by January 2024. So 2023, well, they will do the analysis. So from today it’s about a two and half year process.

Neil Chatterji

Great. Great. Thanks for that detail. Just one follow-up, in terms of the your visibility into the sales funnel for the imaging center site, any updates there in terms of your partnerships with Akumin and RadNet?

Dr. Arun Menawat

Yeah. I think as I have said in the last quarter, overall, our pipeline continues to be strong and the fact that some of the leading hospitals are now treating and giving us good feedback. I think that as you know, urologists will like to talk to their colleagues and I think that dialogue is beginning to sort of take place even though I am covering, as you know, it’s still relatively small, but that dialogue is starting to take place.

And we are starting to see more and more urologist wanting to become what we call authorized users, meaning they want to get trained and be able to start using the technology in existing sites whenever it’s possible, even if they have to travel a little bit in the early days, so that they can get firsthand experience and then be able to then work with their own hospital system to be able to adopt the technology.

So, overall, I would say, certainly, the pipeline is better. Our sales methodology is stronger today than it was six months ago even. And I think that you will see that in the imaging center channel that more than one urologist will start using it, so that the old -- the original concept that we will over the long-term be able to drive adoption without necessarily increasing the number of sites. I think that you will start to see in the next six months will start to become reality.

And I also think that a number of early adopters who have been using other specialized technologies you will begin to see that they will start to gravitate more towards using TULSA as compared to other specialized technology. So I know I am sorry I am giving you a bit of a more general response here, but that’s sort of how we look at the landscape.

Neil Chatterji

No. That’s helpful. I will jump back in queue. Thank you.

Dr. Arun Menawat

Thank you.

Operator

Thank you. And our next question comes from the line of Anthony Petrone with Jefferies. Your line is open. Please go ahead.

Anthony Petrone

Great. Thanks. And Arun glad to hear that everything is going well with your health and good luck and glad to hear all went well with the procedure a few weeks ago.

Dr. Arun Menawat

Thank you. Thank you.

Anthony Petrone

A question on our end would just be when you look at a total of 14 TULSAs installed, a little bit at the midpoint of the year, 11 more to go in the back end. How should we think about installations between 3Q and 4Q, I would assume they would be more heavy weighted toward 4Q. And as you sort of look at the funnel eight to nine contracts you mentioned last quarter that could represent sort of even a multiple of units over a multiyear period. How do you -- how should we think about how that funnel will evolve into the second half of the year and then I will have one follow-up.

Dr. Arun Menawat

Sure. Anthony, these are very good questions. So I think in terms of one of the goals we have talked about is can we get to the 25 and our team has pretty detailed plans in place to achieve that goal and it’s certainly is not unlimited by the contracts that we need to do. We have enough on hand to be able to achieve that goal and we have six more months to go.

So but I think there’s one point that I would like to make, because it’s an important point. We see a big impact of COVID is behind us in terms of driving utilization of sites that are operational. But we do see still a little bit of an impact of COVID in driving the new installed base.

And to give you a just specific example, one of our MR vendors has his back order on some of the routers and we need the router to be able to install the site with TULSA, and so it has caused about a six-week delay for us before we can actually install the site.

And so we are seeing a little bit of that supply related delays and even in hospitals a little bit of slowness or sluggishness in getting the labor content in place to be able to do the appropriate modifications. And so that is one of the reasons why I think 25 is still the right reasonable goal to be, even though in terms of the contract, I think we will have more -- many more than that by end of this year.

To answer your question in terms of capability, so the way we are looking at it is that for the next two quarters at least, I think four to six installs per quarter is still a reasonable place to be. But then I think in 2022, we are looking to add our -- into our resources to be able to increase that capacity perhaps to seven or eight per quarter, and then, ultimately, maybe in the range of 10 per quarter.

And I apologize, I cannot give you specific timings just yet, but that’s the plan is that we do think that the demand we are seeing that even with the current C-code and patient pay there is a robust patient population who is interested in the procedure. So that I do think that we will be increasing that capacity in 2022.

Anthony Petrone

That’s helpful. And then two quick follow-ups and I may have missed this between calls, but the TACT 2 extension study enrollment, it looks like you may have completed enrollment. Just wondering if we should still expect the publication by year end? And then anything of note on the GE collaboration, how should we expect that collaboration to sort of play out over the next couple of years?

Dr. Arun Menawat

Yeah.

Anthony Petrone

Thanks, again.

Dr. Arun Menawat

Yeah. Yeah. Great questions, Anthony. So the TACT 2 trial has been recruiting really well. The only reason we have not closed it is because there are a couple of sites like Yale that we felt would be good to include them into the TACT 2.

So they are now recruiting as well and so this is why we are saying we will more than likely close the recruitment in Q4 as compared to originally we thought we would be able to do it a little bit earlier than that.

But to your question with respect to the publication, a key publication will be coming out at the AUA in September where they will -- the independent investigators will be presenting three-year data for TACT.

And so that three year is considered another milestone and again the focus will be on those side effects and progression-free survival and so those are the three things that we were looking for in the three-year data that will be coming up.

And then the CAPTAIN trial, which is sort of the level 1 trial is actually also moving very well with most of the sites are already identified. The IRBs are generally in good place and so we feel pretty confident we will be recruiting in Q4 for the CAPTAIN trial as well.

Anthony Petrone

Thanks, again.

Dr. Arun Menawat

Thank you.

Operator

Thank you. And our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. Your line is open. Please go ahead.

Frank Takkinen

Thank you, Operator. Arun, Aaron congrats on the progress in the quarter. Couple from me, I will start with first thinking about the mix of procedures in the quarter. Do you by chance on hand have the mix of patients that were purely cash pay versus those who had utilized the C-code successfully and whether or not those were partial reimbursement cases…

Dr. Arun Menawat

Yeah.

Frank Takkinen

… and full reimbursement cases? Just trying to get a feel for the procedures…

Dr. Arun Menawat

Yeah. No.

Frank Takkinen

… that happened in the quarter?

Dr. Arun Menawat

It’s -- absolutely. It’s a great question. And to be honest, we are trying to figure out what that ratio is also. And as you can imagine it’s a very difficult ratio to get a handle on, because we know for HIPPA reasons we don’t have access in every case.

Having said that, I would say as a -- as my -- as kind of an educated guess is, it’s probably in the range of 60% to 65% cash pay and 30% to 40% perhaps or the rest of it perhaps in the C-code category.

We -- what is interesting is we do continue to see patients are willing to travel. We do continue to see that hospital -- the number of sites that are saying, look, we have enough population of cash pay.

We don’t need to bother with C-code, which we are trying to change, in fact, a little bit and we are also seeing -- so we do see the aggregate data. And we are seeing that when they do apply for the C-code or even private insurance where they might use unlisted codes, that generally everybody is getting paid.

So one of our plans, in fact, is to really double up on our strategy to really educate, particularly the hospital systems on the C-code and really encourage them to use it more often, in fact. But at the moment, there doesn’t seem to be -- that doesn’t seem to be the bottleneck here.

Frank Takkinen

Got it. Okay. That makes sense. Thinking about the mix of low to more severe grade prostate cancer, understanding that this is a lot of in the early days, but I was hoping you could just kind of talk to trends -- use case pattern trends you are seeing from when they start to once they are a little bit more established. Are you seeing them start in the lower grade and then move into some of the higher grade cases or is it vice versa? Just how is that trending in the limited data you have to-date?

Dr. Arun Menawat

Yeah. Yeah. No. Very good question. So we sort of encourage them to start with their sweet spot. And for example, WellSpan started with nothing, but salvage cases, because that was their biggest unmet need and now they are moving on to sort of intermediate risk.

And then they -- and so I think every site, we sort of customize the plan based upon their patient population and what they see as the most compelling unmet need. You know some doctors, as an example started with, they wanted to do more focal therapy cases.

What we are seeing from this data analysis that we did in this quarter is that they start wherever they start, but they are starting to gravitate more towards whole gland therapy, which we are really pleased to see.

And that they are starting to recognize that they can literally dial-in, I call it, dial-in because I see it happen pixel-by-pixel to amazing accuracy a 1 millimeter to 1.5 millimeters where they can what to ablate and what not to ablate.

And so when -- just to answer your question regarding for example the higher risk, which we were not necessarily anticipating that would go that there this early is when they are seeing cases where there is external involvement, so there might be some involvement beyond the capsule of the prostate and they are able to sort of incorporate that into the boundaries and be able to ablate. And that ability to be able to really define that boundary is why at least we believe is why we are starting to see that in certain cases they are going after some of the higher risk patients.

And I think that the patient demand even in those cases really is, hey, my nerve bundle. So, we have seen examples where on one side the nerve bundles are involved in the cancer and they are going to ablate it. The other side of the prostate they will save the nerve bundle to make sure that the patient can still have erectile function and so that flexibility I believe is what’s driving this change.

And we have seen quite a few cases now where they can really, really customize that treatment to be able to make sure that the clinical procedure from the cancer outcome perspective is completely intact. But at the same time, they are able to save these vital functions by dialing it in the right places.

So, again, I agree with you that it is a little bit early, but we are certainly encouraged. And as I said before, I think, you will start to see some more attention that we will pay in towards that or over the next 12 months.

Frank Takkinen

Got it. Okay. I will cut it off there. Thanks for answering my questions.

Dr. Arun Menawat

Thank you.

Operator

Thank you. And our next question comes from the line of Ben Haynor with Alliance Global Partners. Your line is open. Please go ahead.

Ben Haynor

Good afternoon, gentlemen. Thanks for taking the questions. First off from me is, I guess, more of a kind of housekeeping one. On the capital revenue, what was that comprised of? I mean is that TULSA-PROs in Europe, is that Sonalleve? And then just from thinking about the capital pipeline what is that look like for the remainder of the year?

Dr. Arun Menawat

Yeah. Aaron, you are on the call. Did you want to take this one?

Aaron Davidson

Yeah. Sure. So, Ben, we don’t provide guidance by policy at this point, because our revenue is not predictable enough. And as such, we don’t provide the outlook for the remainder of the year on capital sales outside anywhere and to-date we have not provided the breakdown of Sonalleve versus TULSA.

Again, when it gets predictable we will do that. At this point, the numbers are too small to be predictable. So we don’t want to get people chasing rabbit down rabbit holes. So we haven’t been doing that and we are not going to start.

Ben Haynor

Okay. I understand. And then the progress that you have made and obviously there’s publications out there, there’s data out there and more to come. But what have you seen from some of the treatment modalities that are out there? I mean what’s been the reaction from the folks that are doing cryoablations or other types of HIFU or things like that to TULSA-PRO?

Dr. Arun Menawat

Sure. Yeah. So, I think, well, let’s start with cryo. Cryo typically is used in salvage patients and we have seen that those who have actually used TULSA for salvage patients are generally quite pleased with that. And so, I think, we were certainly encouraged that I think that, it’s a very niche area, relatively small volumes. But I do think that urologists are gravitating towards the TULSA procedure for salvage.

And the big difference I think here is the control rights. You can literally design the whole -- those prostates tend to be very irregular in shape and quite unique for each patient, because they have been radiated and they behave uniquely for each patient. So the fact that we can draw pretty intricate boundaries and still maintain that precision is one of the things that’s driving them.

And I think that to -- I guess to go to the next one, the HIFU, we are seeing more dialogue going on with HIFU. I understand the companies that are providing HIFU have been marketing quite aggressively.

I think in terms of our technology versus any other technology, and I think, to me, cryo, HIFU and these technologies has been out there for seven years to 10 years in fact. And what -- at least, historically, what you have seen is that the types of prostates that they are treating are in the range of maybe 30 ccs or less.

And the clinical data has to be generally in that smaller prostate space, because for larger prostates because of that distance from the trance -- rectal distance you have to travel, you have certain limitations and that you tend to may -- you may need a TACT prior to that, which sort of defeats the purpose a little bit.

Now the other difference is that, the speed with which we can do whole gland is about 3 times to 4 times faster, because we are right in the center of the prostate. We blast the ultrasound and we can rotate that catheter pretty quickly.

So I think when you are talking about whole gland, when you are talking about larger prostates, I think that TULSA is inherently a technology that I think is superior to a number of these niche technologies.

Now, I think, it’s a marketplace, I think, that technology is evolved and we will see how it goes. But at least historically, I would say, the ability to treat whole gland large prostates, single procedure, high speed, gentle heating in the sense that we are not boiling or charring the tissue, which means basically no -- virtually no pain and literally be able to work the same afternoon, if you are having the procedure in the morning.

I think there are several functional benefits and clinical benefits to TULSA and the fact that you can treat the full range, I just think that the urologist would like to have a technology that has the versatility to be able to treat more of those patients, because they don’t want to learn a tool that they will use once a month or twice a month. They want to have a tool that they can use routinely.

Ben Haynor

That makes a lot of sense. Thanks for the color there. And then, I am just kind of thinking about it from the imaging center standpoint, a lot of these guys are used to doing just a ton of imaging studies relatively low margins, do they tend to grasp the economics fairly TULSA-PRO procedures...

Dr. Arun Menawat

Yeah.

Ben Haynor

... and how does that look -- I mean do you need to kind of lead the horse to water or is that something that they get it immediately?

Dr. Arun Menawat

Ben, that’s a great question actually. Because, you are right, it is a paradigm shift for the imaging center companies. But their mindset historically has been volume, right? They wanted to have more -- they have substantial investment in the ground. These MRIs cost millions of dollars and so on, and so volume is really, really important to them. And so, their margins are thin and volume is how they make their money historically.

And so when we talk about this kind of explicitly now is that, if you are doing a diagnostic MR, typically it will take about 30 minutes to 40 minutes to do it. And typical reimbursement nationally is under $500 now for that diagnostic MR.

So if you do 10 patients, you make $5,000 in 10 patients. If two of those patients tend to also get a TULSA treatment, where they can charge $25,000 per patient, now you are going from 10 patients $5,000 to 10 patients, $60,000. Think about that. It is an amazing paradigm shift.

Ben Haynor

Yeah.

Dr. Arun Menawat

Right. Amazing revenue story. Now they have to invest in putting anesthesia. They have to really change their mindset from high volume to high quality and specialize and really working with urologists for treatment application and then they can bring that patient back for long-term follow-up. So they sort of start to really connect with that patient.

So I think the long-term proposition for imaging center is quite amazing. And yes, the -- I mean that’s one of the reasons why there is top two imaging center companies are working us. And I believe they understand that proposition. They also -- we also think it’s not going to happen in one day. But, yes, I think that, from a financial point of view is a very strong proposition.

Ben Haynor

So it kind of changes everything from a -- kind of a transactional mindset to more of a relationship mindset.

Dr. Arun Menawat

Absolutely. That’s exactly right. Exactly right.

Ben Haynor

Okay. And then just lastly for me, you mentioned that you recently underwent a procedure, and obviously, not to get too personal, but what was your experience as a patient of TULSA-PRO?

Dr. Arun Menawat

So, Ben, I am happy to talk about it and I can get pretty emotional about it too. But there are a couple of things I would say that are really interesting that I went through in my mind. So first of all, I really, really heard about this that patients were saying there’s no pain and so on and that they would go home the next day and have dinner or work in the afternoon. I mean, it literally happened that way.

When I woke up, there really was no pain and really woke up within five minutes after I woke up from anesthesia. I was in the car, 10 minutes later we were in the hotel room. And it really was amazing.

And I did have a UTI, which is -- which happens to less than 10% of the patients. But it really didn’t bother me to be honest. It really has not bothered me at all. Because the mindset that I went through is really what has really given me a lot more conviction about TULSA and the mindset really is, today the paradigm is delay the procedure because the side effects are going to really get you and you don’t want those side effects.

But there is another side of that story and that is, if you can avoid those side effects, you almost want to get it done sooner than later, because what was going through my mind was, if I wait another five years, well, I am going to be aging unfortunately, just like everybody else.

And based upon history, I could be in a more -- some morbidity condition, maybe have some heart condition, maybe diabetes, so these are progressive conditions that people when they age that happens.

So, to me one of the things that really resonated was, my God, I know that I would not have those side effects. Why would I wait? So that paradigm shift from waiting until I absolutely needed to, oh my God, let me get it done sooner than later. That’s the paradigm shift that I am really excited about.

Ben Haynor

Right. And those -- and there’s probably a benefit there. Overall, to see younger patients better outcomes that are working that will show this type…

Dr. Arun Menawat

Yeah.

Ben Haynor

.. it will be good for you guys.

Dr. Arun Menawat

Exactly. Yes.

Ben Haynor

Well, great. That’s all I have. Thanks for the color on both business and personal life.

Dr. Arun Menawat

Thank you. Thank you.

Operator

Thank you. And our next question comes from the line of John Hikey [ph], Private Investor. Your line is open. Please go ahead.

Unidentified Analyst

Hi. Thanks. I viewed your video the other week. It’s fantastic. I am a physician...

Dr. Arun Menawat

Thank you.

Unidentified Analyst

...and I was an early investor. So I am well aware of how the system works. I have been corresponding with some of my colleagues down in South Texas and they are going nuts calling each other’s hospitals looking for ICU beds. And I reflect that with an ageing population, ICU beds were already getting premium before COVID hit. So rather than ask about the system and the installation, I want to ask about the complication rate, because that’s going to be another big selling point to any hospital administrator. So we know that radical prostatectomy and robotic prostatectomy are highly operator dependent and the larger the center they are performed at lower the complication rate. I wonder if you know ICU admission rate and number of admission days that occur when there is a complication with your system as opposed to the other systems or is that something CAPTAIN hopes to look at in more depth?

Dr. Arun Menawat

Sure. John, thank you. Also thank you for the color. I can tell you that the ICU days post-TULSA are incredibly minor, if any, particularly in the commercial settings, we have just not heard that. We have heard of -- the range of patients who end up with a UTI is somewhere between 4% to a maximum of 10%.

And those patients do not need to be admitted. It’s basically identifying which bacteria has been -- has infected the patient and maybe customizing, which antibiotic would work. And typically they go away within five days to 10 days.

So we have not seen patients needing to go back to the hospital. During the TACT trial, which was the original trial. We did have, I would say, 4% of the patients where we needed some care post-treatment, but in commercial setting we are just not seeing that.

So I think -- and I think your other point is really also quite important to recognize that this -- as you said, the procedures that prevalent today are dependent, are quite dependent on the physician.

And there is sufficient data even in robotics that that physicians who have done more than a 1,000 cases tend to have better outcomes than those who have done less. Versus here the surgical planning is really the key part. Once the surgical planning is done, it is an autonomous robot. So and you are actually watching it perform during the ablation process.

And one of the things that a technology that we introduced about a year ago or a little over a year ago is, the ability to change the boundaries, the design of the treatment on the fly. So when there’s edema or some swelling of the prostate because of the heat coming in, they are able to literally erase the boundaries and on the fly change. So that allows them to really have that precision and reduce the impact of newness in this case.

And those who know me well enough know that we will continue to come out with innovations and I think part of our goal is to continue to make it so that if that variability from physician to physician will reduce if any overtime.

So I really appreciate your question, but I think, that to your point, I think, the ICU, you are absolutely right, they are premium and I don’t -- I think we will have an impact on that and I also think that over the long haul, we will continue to be a much more reproducible and predictable treatment.

Unidentified Analyst

Okay. Thanks.

Dr. Arun Menawat

Thank you, John.

Operator

Thank you. And our next question comes from the line of Scott McAuley with Paradigm Capital. Your line is open. Please go ahead.

Scott McAuley

Hi, Arun and Aaron. Thanks again for taking the call and congrats on the quarter. I just wanted to quickly touch on the process from signing an agreement to installation to operation and kind of how you are seeing that kind of the timing between those processes change and evolve as you get more of these contracts signed and get more of these installations in and hopefully as the COVID impact is kind of potentially lessening or going away and how you see them moving forward?

Dr. Arun Menawat

Yeah. Scott, very good question and we think about that every day. So when we started, in fact, I remember talking about it in Q1 last year of 2020. Our anticipation has been that from the time we have the contract to the first patient treated, our expectation was about 90 days and that our plan -- based upon our programs that we were running that we felt that we could reduce that to about 60 days.

At the moment, it is actually running closer to four months and it is related to various factors and they are all like minor things and some of them, if not all of them, are that transitory things that are sort of pop up because of COVID, there is some bottleneck that shows up abnormally, we will not even think about.

So at the moment it is running a little bit higher than what we anticipated and we will overcome that and out team is getting pretty adept at doing that. But I think over the long haul, I think, the original expectation that we will be able to reduce it to somewhere between 60 days to 90 days, perhaps in 2022 is still a very reasonable expectation.

Scott McAuley

Definitely. No. That’s great. And then just to kind of clarify with -- you are mentioning 25 by the end of the year. Do you see that as 25 installations or 25 operational installations, like, operational sites?

Dr. Arun Menawat

I think that -- I framed it as installations. But to be honest that, once we are installed at least the time from the installation to treating the first patient is really -- almost never more than a couple of weeks. So we are probably within the range of the [inaudible] here on that point.

Scott McAuley

Got it. Got it. So most of that four months is the process from contract to installation, once installations end it’s a quick turnaround for succession?

Dr. Arun Menawat

Yeah.

Scott McAuley

Got it.

Dr. Arun Menawat

Yeah. I mean, usually the physicians seem to be -- they typically are pretty interested because obviously they have invested the time, and so they typically, once they know all the dates and so on and they are firm on when the system would be ready.

About three weeks prior to that, they are already sort of starting to screen the patient and usually assign a date, the first patient treated, and that date actually works really well because it focuses the hospital and focuses our team, because that’s the date the first patient will be treated and we really work backwards from that date at that point.

Scott McAuley

Perfect. No. That’s wonderful. And then, quickly, I mean, maybe looking a bit into crystal ball, but in terms of kind of the wiles of the Delta variant and especially kind of in the South Texas and Florida. Are you seeing that impact, any procedure kind of a current procedure volumes like July, August or are things kind of tugging along as they were in Q2 when the numbers are relatively low?

Dr. Arun Menawat

Yeah. It’s -- You are right, Scott. It’s a bit of a crystal ball and Florida, Texas, certainly, I read this morning in the Journal that Florida has more patients at the moment in ICUs and hospitals than ever even in the beginning of the epidemic. So far we have not seen any major impact. But it’s certainly one of the reasons why we are continuing to be cautious because it is unpredictable.

We do see a number of patients who are willing to travel. So, hopefully, if the impact would on the big even if it is patients coming to Florida and we are opening sites in other parts of the country.

So if we do see one region being down, because of that I think there will be some ability to transfer the patients to other areas as well. So we are certainly very diligent in this. Our sales team is really, really pretty -- starting to become really good at managing that situation actually.

Aaron Davidson

And we have a couple of factors working in our benefit is the demographics so far have shown that men of the age of prostate disease tend to be vaccinated. And then to the states where we operate most like Texas and Florida do not seem like they have government’s intended on shutting down the states again for good or bad.

Scott McAuley

Yeah. Definitely. No. That’s all for me. Thanks again guys and congrats.

Dr. Arun Menawat

Thank you.

Aaron Davidson

Thank you.

Operator

Thank you. Thank you. And I am showing no further questions at this time and I would like to turn the conference back over to Dr. Menawat for any further remarks.

Dr. Arun Menawat

Thank you so much and thank you for the questions. Our company continues to rise and we are continuing to gain strength from what we see and I look forward to really presenting to you in Q3. Thank you. Have a great evening.

Aaron Davidson

Thank you all.

Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.