Curvebeam AI Ltd

ASX:CVB

Earnings Call Analysis

CurveBeam AI's Major Advances and Strategic Highlights

In Q1 of fiscal year '25, CurveBeam AI maintained its deployment of HiRise devices, achieving FDA clearance for its robotic surgical systems, marking a major milestone. They successfully processed four patient scans, enhancing project confidence. They raised $11.5 million and cut expenses to $17 million, aiming for efficient cash management. The company anticipates $13.15 million in pro forma cash, aided by an expected $2.5 million in receipts. CurveBeam is focused on validation steps for its HiRise system, which promises to significantly improve workflow, potentially leading to market growth.

Quarter Overview and Placement Activity

In the first quarter of fiscal year 2025, CurveBeam AI placed three HiRise devices, matching last year's performance despite seasonal effects in the U.S. and Europe. The management expressed confidence in their pipeline for the remainder of the fiscal year, driven by positive feedback from upgrades and successful patient scans that have been processed.

Regulatory Milestones and Technical Achievements

A significant achievement was receiving FDA clearance for the redesigned HiRise device. This approval marked a substantial technical milestone, allowing CurveBeam to position the device for point-of-care settings. During this quarter, the company also upgraded three U.S. sites to the enhanced HiRise version, which has received encouraging imaging and CT quality feedback.

Financial Health and Cost Management

The company raised $11.5 million in capital during the quarter and has substantially reduced expenses from $24 million to approximately $17 million. This strategic cutback aims to ensure readiness for future demand stemming from the successful validation of robotic surgical systems. The pro forma cash position stands around $13.15 million, not including an anticipated $2 million from a KPRX investment and about $1 million from tax returns.

Progress on Robotic Surgical Systems Validation

CurveBeam has successfully processed the first four patients through its robotic surgical systems project, which was a crucial step in de-risking the initiative. Following discussions with their vendor, they are now resuming scanning after a brief pause and expect to complete two validation steps for further validation of the HiRise device. The management remains optimistic about achieving the next milestone.

Market Opportunity and Competitive Landscape

CurveBeam's partnership with Stryker in the foot and ankle division provides access to a well-structured pipeline, with the potential to integrate into the knee and hip sectors, adding 10,000 businesses to their addressable market. They uniquely position themselves to address workflow pain points that other competitors still struggle with. The main competitive threat identified is the Planmed device, which has challenges in gaining FDA and CE clearance.

Guidance for Future Performance

While the company did not provide specific sales forecasts for HiRise devices for the upcoming quarter, they maintained confidence in the overall pipeline for the fiscal year, thanks to ongoing development and validation efforts. With a clearly defined pathway to achieve validation milestones, moving forward could significantly enhance the revenue from CT scanning procedures, shifting this revenue into the site’s channels.

Conclusion and Next Steps

The management underscored the importance of cash management and operational readiness for success in meeting future demand. They are keen on resolving the final administrative steps necessary for validation and plan to update the market on any new timelines post the upcoming updates from FDA discussions regarding the BMD SaaS product. Their pathway seems optimistic as they work towards addressing all outstanding validation concerns efficiently.

Earnings Call Transcript 2025-Q1

[Operator]

Welcome to the CurveBeam AI Investor Webinar for the quarter ended September 2024. [Operator Instructions]. From CurveBeam AI, today we have Managing Director and CEO, Greg Brown; CTO, COO, Arun Singh; and CFO, Ura Auckland. The presentation will last approximately 15 minutes, then we'll take any questions. I'll first hand it over to Greg. Please go ahead

[Gregory Brown, executive]

Thanks, Ben, and thanks, everyone, for attending our 4C conference call. Just like to bring everyone's attention to a summary of the key activities for the quarter. For the Q1 of fiscal year '25, we placed 3 HiRise devices. That was level with the prior corresponding period from last year. We did flag the seasonality of Q1, and that's largely due to the summer months in the U.S. and Europe. We remain confident in our pipeline for the remainder of this fiscal year, and that's a point that I really wanted to emphasize. The company announced also in the quarter the FDA clearance. That was becoming together of a lot of events in the redesign, which is where all the risk on the project for doing our validation on robotic surgical systems really was lying for us, was in the ability to redesign the enhanced HiRise to have the energy source able to hit the landmarks for submitting the images required by these vendors for those surgical cut drives. 



And a lot of that technical challenge was a major technical challenge that the team has met, and we were validated through the FDA clearance in the quarter. So that was a major leap forward for us in being able to deliver a product that put us in a position to be able to offer this in a point-of-care setting. We did a capital raising in the quarter of $11.5 million. We upgraded 3 U.S. sites during the quarter to the V2 or the enhanced HiRise, and 2 of those sites were the sites that are doing the scanning for the validation of the robotic surgical system custom cut drives. The feedback that we had on the imaging and the CT quality was very positive, and that was really encouraging to have such positive feedback on the quality of the image in that new enhanced HiRise.



Now the biggest step forward in de-risking the project was all of the first 4 patients that were processed, that were scanned and processed through the vendor system were successfully processed. That was a big step forward in de-risking this project. And while there still remains risk, there's a huge step forward that the first 4 patients that were submitted from this platform all met their requirements. Now during the last 6 weeks, we've been working closely with our vendor in removing -- we report in scanning to work through what was needed to complete the validation process and what final actions were needed. We've had very good interaction. In fact, we're very happy with the partnership that we're building with this vendor and this division, which is the knee and hip division. And we are now able to resume scanning. 



So, we will come back with what steps are required, and I'll go into that in a bit more detail on the next slide. And then once we have nailed down some of the specifics, we'll be able to give the market a revised time line shortly. In addition, with these delays, we still remain on pathway for our BMD milestone, and I'll explain the revised strategy that we're moving forward with on that further in the presentation. Last from the IPO, we had about $24 million of expenses in the company. We reduced that down to around $20 million in December of '23. And this week, we made the difficult decision to implement significant reductions right across the company, and we've reduced our expenses now down to $17 million. And we're making sure that we are still able to make those cutbacks, but be ready for the success of achieving our validation on the robotic surgical systems and the type of demand that, that might create going forward. 



So, it's a fine equilibrium that we're working there, but we've made the difficult decision to manage that. Now I think that's important and leads into the next slide. When you're looking at the 4C, you're going to see it's showing 2 quarters of cash. It's not as ominous as what that may look. I think there's other things to factor in here. First of all, the pro forma cash is around $13.15 million. So, the cash figure does not account for the $2 million from the investment from KPRX, and it also doesn't account for about $1 million from the tax return. So, when you look at that and the pro forma cash position, and then you look at some of the other major steps in managing the capital that we've implemented, the first item to be aware of is that we were taking our subassemblies for the new enhanced fiber lace at 1 per week.



Now this was gearing up for the impact in demand that we were expecting. And so why we were taking that 1 per week inventory in this first quarter. Now we have now stopped as of last week that inventory for this quarter. So, there was about $1.2 million of that inventory that was recorded in Q1 as we were gearing up our stocks to be able to meet the requirements of passing a validation of a data set. And so, that inventory will reduce our burn for this quarter that was fully accounted in Q1. So be aware of that, that has a significant and material impact. The HR-related adjustments that we did across the company this week to the tune of around $2 million or $1.9 million. That too will be factored into this quarter. And then, another very important point beyond the additional $3 million in cash that's not accounted for, that is now in the company bank account, the reduced inventory, the restructuring. There's also about $2.5 million in receipts from Q4 of last fiscal year that we anticipate coming into this quarter as well. So, there's some significant data points in how you assess that cash position. And I think in the next 4C, you'll get a better assessment of our cash position based on this data. 



The HiRise project for robotic surgical systems. This is what we are all focused on. Six weeks ago, we explained that we had to pause scanning. The key validation steps for that system. We had installed 2 sites. We had processed 4 patient data sets successfully. It was a major step forward in derisking the project. We remain very confident in our ability to meet this milestone of the validation with robotic surgical systems. We're working very closely with the vendor and the interaction with the vendor has been very positive, especially over the last 3 to 4 weeks. We're really building a strong partnership with this division. This division also has knee and hip. When you factor in, there's 11,000 targets between hospitals and group surgeon practices. There's only 1,300 foot and ankle surgeons, and we presently have an agreement with Stryker Foot and Ankle for accessing that target market, but now building a partnership in knee and hip, that's another 10,000 sites that become available. 



So, it's an important partnership that we're building. The company has now received those instructions from the vendor, and we're now just agreeing those final actions to complete the process. And we see there's 2 concurrent steps to finalize the validation. One of those steps is going to require matched scanning of patients. So that will be a patient that's been scanned by the normal CT and by the HiRise. And we already have 6 patients that have matched scanning available and accepted by the vendor, and we need to collect an additional 5. Now with that clinical data, there is also an administrative step that they're going to have to change in their scanning protocol, some of the labeling around the use of scanning versus lying down, and then the use of a motion line. 



So, this is pretty much an administrative step that they take to make the changes in that protocol. And it's the final plan that we're now working and finalizing. So, we hope to be able to nail down some of those specifics in the coming week. And we look to update the market on the revised timeline as soon as we can nail that down. So very encouraged by the progress we've made both from completing the design and development of the new system. Getting it installed, running it on large patients. Being able to show that we hit the landmarks, being able to show they could segment those images and that they processed well within the time limits of processing these data sets. So that was a huge step forward. We remain very confident and encouraged by this. We're very happy to announce that the scanning has been lifted from the pause. We can now start scanning again, and we look forward to getting this milestone achieved as soon as possible.



In closing, again, just highlighting the progress that we've made on that. And the fact that we're getting very good interaction with the vendor. I can't speak more highly of the work Arun has done in building that relationship and having very good interaction with the vendor. And we're now making some very big steps forward in moving this through to a solution. I also want to bring up the fact that we're very prudent around that cash management, as I articulated in that second slide. And finally, on the BMD SaaS module, we do have a new regulatory strategy, and we are remaining on that targeted timeline. So, within that new strategy, we will now do a BMD SaaS product that will be for a multidetector CT, which is the CT that everyone uses today. That opens up 11,000 targets to us, 5,200 in the hospital segment, and of course, the 5,800 in the group surgeon settings. The NDCT and the hospitals already exist. It opens up a faster way of building access to a BMD market.



That would be the first step that we do in validating a BMD module. And then we are looking to do a 510(k) special for expanding that BMD modules access to a HiRise. And that's how it allows us to stay on the timeline while expanding our opportunity for a BMD SaaS model. So, we have an FDA pre-submission meeting to discuss the MDCT to NDCT program in December, and we'll update the market on the progress from that meeting in January next year. So that brings my presentation to a close. Ben, if we could open it up to Q&A, that would be great.

[Operator]

Yes. Thank you, Greg. We'll now move on to the Q&A session, as you suggested. So, these are based on those that have already been sent through via e-mail, and we'll also take some live questions. [Operator Instructions]. The first question is, what is the risk the robotic surgical systems validation did not achieve?

[Gregory Brown, executive]

Yes. Look, we did cover off on this in the presentation, but I'll separate it again. The biggest risk was in the actual design and redevelopment of the HiRise. Could we get the energy source and still offer it as a point-of-care, and still meet safety and efficacy and the reduced radiation of existing CT. That was where the biggest risk was. I think getting it through FDA for safety and efficacy with the 510(k), that was a major step forward, and that was announced in the quarter. So, we got the FDA clearance in July. Then we upgraded two sites, two actual sites that run these patients for the surgical cut guides. The first four patients that were run and processed through the vendor for doing this all successfully got processed. They hit the landmarks. They were able to do the segmentation. They were able to get their cut guides well within the time limit. So that's a huge step forward in helping us to derisk the project. So, we remain very confident that this will be met. There are still risks, but we feel that the risks are well and truly derisked at this point.

[Operator]

Have you received the balance of the cash, around $2.5 million from the 10 purchase orders from last quarter this month, given the quarterly noted 2 to 4 months cash receipt term?

[Gregory Brown, executive]

I'll turn that over to Ura of the $2.5 million carryover from Q4.

[Ura Phillip Auckland, executive]

Sure. I guess we can't give forecast, so I'll limit my comments somewhat. We've received some of it. We expect to receive some more of it this quarter, but some of it could go over into the following quarter. It very much goes side by side as to what the timing is for them to have rooms ready and those kinds of things. I don't know if there's anything you want to add to that, Arun?

[Gregory Brown, executive]

Are you on mute, Arun?

[Arun Singh, executive]

Sorry for that. Yes, so that's correct that the timing of installation is based on the room being ready and everything else being in place. And some of those sites are not quite done yet, and there's some variability depending on the construction and the permitting of construction. So, that's why we foresee some of those could spill over into the next quarter.

[Ura Phillip Auckland, executive]

So we should probably be a decent chunk?

[Gregory Brown, executive]

Yes. That's what I say the majority will come through in this quarter.

[Operator]

Next question. Stryker approval timing aside, does management believe the additional five patients and admin steps could be delivered within this quarter from CBB's perspective?

[Gregory Brown, executive]

It is possible. But right now, until we nail down just one or two more specifics around match scanning, we'll be able to give more clarity on that timeline. But yes, it is possible.

[Operator]

Next question. Can you elaborate on the reasons for the pause?

[Gregory Brown, executive]

So the pause -- so the first four patient scans went through for processing, were processed. We then had the discussions with the vendor around what was needed to complete the process. And this is where they felt they needed matched scanning. There was two concurrent steps that we really needed, which were doing the match scans, not just HiRise scans and processing, but doing match scans. And with those match scans of how they do a CT today with the HiRise, they're able to compare the two. And that is required to complete their validation and then to make the administrative steps that changes the labeling on their CT reading protocol. So, while that's an administrative step, it is required, and hence, why we were asked to pause the scanning was really so that we collected the data they needed to make that modification.



One other point. Please note, there are six already matched scan patients that the vendor has accepted that we can send through, but we do still need around another four to five.

[Operator]

Just a question on HiRise sales for the second quarter. How many are you expecting?

[Gregory Brown, executive]

We can't give forecast. What I can say is we remain confident in the pipeline for the remainder of this fiscal year. I mean, it's a very healthy pipeline just with our partner in foot and ankle for the U.S. market. And they're accessing 1/6 of the total market with foot and ankle. And even with that well-qualified pipeline, we remain confident in this fiscal year's placements.

[Operator]

What are the benefits for Stryker for having a HiRise validated for the Mako?

[Gregory Brown, executive]

Look, there's a lot. And what we've picked up is that with the robotic surgical system and the vendor that we're working with, the biggest benefit, and I think it's one of the reasons they have a vested interest in helping us to get this validated as quickly as possible is that other robotic systems out there are now trying to position their robots because the vendor we're working with has a very dominant market position. But there's a pain point. And that pain point for anyone using imaging, CT imaging is they've got to refer out that patient. They've got to bring that patient back. Their reps need to go and collect those scans and upload it into their processing cloud for their data sets. It takes a lot of time out of their sales team. It creates a real workflow nightmare for the group surgeon settings.



And so, with the validation of a point-of-care device like HiRise, we immediately improve the workflow of that practice. We take out all those pain points that other competitors are trying to offer with X-ray doing 2D to 3D projection as best guess of a 3D to try and remove the pain point. We actually removed that pain point down to one visit, one scan through 3D imaging and the benefit of that with bilateral capabilities in better planning the surgery. But at the same time, it really depositions what their competitors will be doing with their product today where they can offer this point-of-care one visit, one scan and then upload directly from our device into their lab for processing. It's a huge saving for them on their rep time. It's a huge saving in the workflow of this, and it takes away a major pain point that their competitors are attacking them on. So, this is a big step forward for them, and why they have such a vested interest in our successful outcome here.



I think the other point is the user. The user gets that workflow benefit as well. But all that CT scanning revenue, and we're talking significant -- I mean, material revenue for a knee and hip setting. All of that revenue now becomes part of the site's revenue. So, on multiple levels, this validation process has a huge impact for the vendor and for the user.

[Operator]

I think probably the next question has been answered. But is there a risk to the size of the pent-up pipeline if approval drags on, i.e., are there other devices that you know of that are aggressively competing for the same clinic space at this point?

[Gregory Brown, executive]

Look, at this point, our pipeline with the foot and ankle division of Stryker is well-qualified, and we have a lot of people waiting on this announcement. And on that announcement, I think we will see a very positive for sports and a potential step change in expectation and demand. From a competitive position, the only competitor that we're aware of is the Planmed. They have a foot and ankle -- sorry, an ankle and knee device, which is unilateral. And then they have a very large solution that is not FDA cleared. It's not CE mark. It's a major piece of kit that is going to be very hard to fit into a group surgeon setting where the HiRise is ideally positioned for that. They don't have FDA. They don't have CE. It's still very much design and development. We don't believe that, that is even maybe in the process, but it's still very early on. I think we will be the first company to have this capability, and I think we'll be able to place quickly after achieving it.

[Arun Singh, executive]

Just a quick add on there. So, we have some intelligence in the market that their super version of this device is the only one there advancing at the moment. And in fact, there's a couple of sites that they have data sites that they placed a supine version of the device that cannot do standing CT. So, we can only speculate that there's been some issues with the standing version because of the size and other imaging issues. So, it looks like there's a supine version is the only one that's going to come to the market first, and the outright will be delayed by an amount of time.

[Gregory Brown, executive]

And it's just important, when we say supply, that's like with an MDCT, it takes up a much bigger footprint in the roof. And in these group surgeon settings, is limited. And HiRise, that's a huge asset for us with HiRise, and the height restrictions too. That is why HiRise is well-positioned even if they can get the standing device to work, they've got to get an FDA and they go do the same validation themselves. So, I think we've got a really good head start here. So, I don't feel it will impact our prospects less materially at all.

[Operator]

So, following from that. So final steps in validation about supporting the vendor in completing labeling change around how HiRise is used with their robotic system.

[Gregory Brown, executive]

Sorry, could you say that again?

[Operator]

So final steps in validation about supporting the vendor in completing labeling change around how HiRise is used with their robotic system.

[Gregory Brown, executive]

Yes. Look, it's a very straightforward process. We just need those matched scanning samples that 6 already done and ready to go, 5 more to be completed. And then with that, they'll be able to look at both the normal CT and with the HiRise CT, show that the protocol for utilizing scanning requirements, both from standing versus lying down, and with the use of motion rod is equivalent. And at that point, we are then validated. And then it becomes an administrative change to then change the labeling within their internal system. And once that's completed, then it gets upgraded into the protocol. The thing the market is waiting for is that the HiRise was validated. That right now would help close a number of accounts. Labeling can come later. But the #1 requirement, a lot of these accounts that are prospects today, they're all waiting on the fact that there can be a guarantee that the robotic surgical cut guides will be available off our platform. And that, I think, is the first step that can be released through their foot and ankle division.

[Operator]

A follow-up to that one was, is it as simple as labeling setup for supine versus HiRise, which is standing?

[Gregory Brown, executive]

Well, I think there's 2 steps. It will be one word change, supine and standing. And then there might be a difference on how the reading work is done as part of the protocol. That's it.

[Arun Singh, executive]

Yes. The main labeling change is to add the standing CT option in addition to the supine CT option. So, they have a standard scanning protocol that they released to all the sites, imaging sites and orthopedic groups that have their own imaging systems that define what the CT scan need to be. And they just need to add to those instructions, the standing version of the scan. So that's the labeling change.

[Operator]

Next question. European customers also waiting for the enhanced HiRise and Mako integration?

[Gregory Brown, executive]

To a lesser extent, there are Mako users also -- sorry, there are robotic users in Europe as well. But there's a lot more augmented reality systems in Europe where you put on the goggles and surgeons can be guided through augmented reality for surgical processes. So, Europe is not as big into robotics, but still have robotics. And I think that in Europe, we can still place a lot of accounts even without the validation. I'll hand it over to Arun to give more specifics.

[Arun Singh, executive]

Only U.K. has a larger Mako dependency. The number of Mako users in U.K. is quite large. It's somewhat similar to the U.S. in terms of the market share. So that's where the Mako will make a difference. But the rest of the Europe is much smaller impact. So, they use other systems, a couple of European systems for [ Medacta ] and [ SymBio ] are quite popular there. So Mako doesn't have as big a footprint. They're trying to grow there though, but their footprint is smaller. So, it's less of an impact there as it is in the U.K.

[Gregory Brown, executive]

And we've got a big focus in Europe, and now we have those direct capabilities in Germany and France. So, we're very focused on closing those non-Mako dependent -- sorry, non-robotic system-dependent sites.

[Operator]

Okay. Thank you. That concludes the Q&A segment of the webinar. I'll now throw back to Greg for closing comments.

[Gregory Brown, executive]

Yes. Look, thanks, everybody, for your time today. We are available for calls if needed post the webinar. We've made some big leaps. We've had a setback with the pause, but the pause is now lifted, and we've got a pathway that we're nailing down as quickly as possible to move forward in meeting this milestone. We remain very confident in meeting the milestone, and we'll come back with that time line as soon as we can. So, thank you very much for your time, and we look forward to reporting on the next 4C in January.

[Operator]

Thank you. That does conclude our presentation for today. Thank you for participating. You may now disconnect.

[Gregory Brown, executive]

Thank you, everybody.