ImpediMed Ltd

ASX:IPD

Earnings Call Transcript 2023-Q1

[Operator]

Thank you for standing by, and welcome to the ImpediMed Limited quarterly results conference call. [Operator Instructions] I would now like to hand the conference over to Mr. Mike Bassett. Please go ahead.

[Michael Bassett, executive]

Thank you, Sari. Welcome, everyone, and thank you for joining us today. We're hosting this conference call to discuss our 4C for the financial quarter ending 30 September 2022. I'm Mike Bassett, Senior Vice President of Corporate and Strategic Development. Joining us today on the call is Dave Anderson, Interim CEO; and Tim Cruickshank, our Chief Financial Officer. We'll be referring to 4C and speaking from the quarterly activity report we launched this afternoon, Australia time with the ASX. This presentation is a summary of a more detailed 4C. After our remarks, we'll be taking questions.

Before I turn over to Dave, I'd first like to bring your attention to the record that disclaimer on Page 2 of the presentation deck, the presentation deck and as mentioned, can be found on the ASX.

Now I'll hand over to Dave and Tim to run you through the presentation. Over to you, David.

[David Anderson, executive]

Okay. Thanks, Mike, and good afternoon, everyone. I will begin on Page 3 with some observations of my first few months as interim CEO and our focus areas. It is coming on 3 months since I was appointed the interim CEO. In that time, I've taken a thorough review across all aspects of our business, and my initial assessment remains intact. In the previous call, I stated in my focus areas would be, number one, utilizing our experience together with the great work of our CAP team to help to obtain reimbursement. Second was cost control. Looking to managing costs, while not cycling growth with a focus on achieving breakeven with our existing CAP. Number 3 was transition in ImpediMed's culture from a continued promise to one of effective execution. And the fourth, the final focus area was stakeholder engagement. Three months on, I'm pleased to report the follow-up. First is reimbursement. It remains the key to unlocking growth. Overall, our core business metrics continue to incrementally improve, but we need more than that. The growth will accelerate as widespread reimbursement is achieved. And as we leverage the work that has been done in establishing the beachheads in Corporate Accounts and IDNs. Specifically in reimbursement, we made strong progress over the quarter. Our focus has changed from a provider of support services unit to working with payers for coverage and medical policy determinations. We had 2 payers currently paying under coverage determinations and 2 others willing to receive a policy determination proposal in the next few weeks. Additionally, as we mentioned in our last 4C, we had 7 payer meetings scheduled, 4 in November and 3 in December. There will be more specifics regarding our reimbursement strategy after Tim's report. In this quarter, we also expect to see updates to the NCCN guidelines. If the BIS technology is included, we expect to see an acceleration in the activities surrounding policy determinations from the U.S. payers. So it's going to be a very exciting quarter coming up for our company.

Finances. The company remains in sound financial position with enough capital to reach breakeven. This is an area of focus, and we have options to dial up or dial down costs subject to the success and timing we see in reimbursement over the coming months. We will take a measured approach to cost and the lens of achieving profitability with our available CAP. Tim will go into the financials shortly. But just quickly, I wanted to mention, there was an increase in cost last quarter but that was expected. And we expect a little more cost rollover in this quarter as we realize some of the areas of the business. Going into the second half of the year, we forecast cash outflows to drop and to achieve a run rate of less than $3 million on an ongoing basis. And I'm happy to be held up with that number, but we would actually like to do better, and our internal target is $2.5 million.

Third is shareholder engagement. I'm extremely happy to say that the Chairman, Don Williams and myself and Tim arrived in Sydney this morning. We are looking forward to a week of meetings with investors in Sydney, Brisbane and Melbourne ahead of the AGM next Wednesday. As I mentioned in the last time, myself and the Board are committed to better 2-way communication with the shareholders, and we are here and very interested to get your feedback and to share our thoughts on the vision for ImpediMed's future with you.

Now I'll pass it over to Tim to run through the financials.

[Timothy Cruickshank, executive]

Great. Thank you, Dave, and good afternoon, everyone. So I'll take you through some of our key financial highlights from the past quarter, which is Q1 FY '23. All figures presented are in Australian dollars unless otherwise indicated. So let's turn to Page 4, go through the top line results. We finished Q1 FY '23 with $2.9 million in total revenue, incremental increase over the prior quarter, but still a continued record result for the business. $2.7 million related to SOZO revenue, which is 8% growth year-over-year. Most notably, our Software-as-a-Service, SaaS revenue from our core business increased by 34% year-over-year. This is a key metric as growth in the core business, SaaS revenue, is expected to be the strongest long-term growth accelerator for the business. We finished the quarter with $34.9 million in cash on hand, based on our normalized recurring cash run rate that equates to over 10 quarters of cash available. This is prior to considering the impact of significant sales growth on reducing the cash burn and moving the organization further towards our breakeven targets.

So 2 quick things to note before we move on in the presentation. First one, all figures stated today are based on the applicable exchange rates from Q1, that being a spot rate of approximately AUD 0.645 for every USD 1 and an average rate for the quarter of approximately AUD 0.68 for every USD 1. So in order to keep the presentation clean and easy to read, all presented -- all percentage changes presented are based on those actual FX rates. But we have included a slide in the presentation that will walk you through the overall impact that FX is having on certain comparable figures and what that means on a constant currency basis.

And then second, Q1 of each year, I'll contain the number of annual fees, and that's the case this year. We've included a slide that discusses cash flow in detail, including an update on our normalized recurring cash flows and what they will look like moving forward, as David has already indicated.

So as we turn to Page 5. Total revenue, SOZO revenue, SaaS revenue, all record results, again, incremental growth but continued steady growth as we work towards reimbursement. Unit sales were below expectations in Q1 FY '23, but the quality of accounts closed remains at an extremely high level. And of note, Q2 is typically a strong quarter for unit sales due to a large number of U.S. hospital systems having a 31 December financial year-end. In addition, the underlying fundamentals and metrics that drive the long-term value of our business model continue to be very strong.

So let's walk through a couple of those metrics quickly. ARR, Annual Recurring Revenue ended at $9.2 million. And within the Core Business, which was up 20% year-over-year, ended at $8.2 million. CRP, Contracted Revenue Pipeline increased at $19.1 million, up 32% year-over-year. The key here with that metric is we're currently seeing 90-plus percent gross margins on our SaaS revenue. And as we've stated in past presentations, we expect 90-plus percent gross margins on that entire pool of $19-plus million of future revenue. We signed over $4 million in contract value in the quarter between our new and renewal contracts in our Core Business and as well as the continued contract extension in our Clinical Business.

So this indicates 2 key things. One, average monthly licensees are continuing to increase in our driving Total Contract Value growth. With unit numbers below expectations for the quarter, our growing TCV shows how critical it is for us to drive additional value on every opportunity that we renew and expand while working through reimbursement. And two, we have a diverse service offering showcased by the ability to sign and renew contracts in both the Core Business and the Clinical Business. This diversified offering will only increase when other markets come online in a meaningful way such as heart failure. In addition, churn rate remained negligible, dropping to 1%. Contract renewal rates remain at a healthy pace. And to date, approximately 900 sales of units have now been sold commercially since the launch of SOZO. The key here, again, is the quality of accounts remains at an extremely high level. As we'll discuss later in the presentation, the addition of GenesisCare and the expansion of key IDN and NCCN institutions will serve as a key foundation for the acceleration of growth as reimbursement takes hold.

So let's talk some more about renewals as we move to Page 6. This continues to be one of my favorite slides in the presentation in terms of really helping people understand our business model and how it's starting to take hold. We noted last quarter, we achieved a 34% increase in the average monthly license fees across our renewal contracts. We also noted that a more reasonable expectation for this growth was a strong double-digit growth moving forward. We are very excited with the 38% increase in average monthly license fees achieved in the quarter as it was above our internal expectations. And when you look at the contracts up for renewal in Q2, our current quarter, it will be reasonable to expect a similar result this quarter as well. We're achieving these results because of: one, our continued software enhancements that we offer our customers; two, our ability to add licenses to contracts; and three, our stair stepped pricing model that ensures a partnership between us and our customers as we help them to improve both patient outcomes and their health economics.

The bottom of this page is where you can really start to see how our business model can show its power. I mentioned earlier, our ARR in our Core Business, $8.2 million, that represents the very next 12 months of revenue on all the SOZO contracts signed to date in our Core Business. If you look out 1 further year, the 12 months after that, those same contracts equate to $10.9 million of revenue over the next 12-month period of time, at a 33% increase in revenue prior to selling an additional unit. So our stair stepped pricing model locks in growth before any additional unit sales curve.

And on to Page 7, this is where we look at some of the FX impacts. With the recent volatility in the Australian dollar, foreign currency rates are clearly the topic of discussion. So to give some insights, revenue and cash flow, they both utilized an average exchange rate in the period, which was AUD 0.68. That was just a AUD 0.02 drop from the prior quarter when you look at the average rate. Heading into Q2, if the rate stays at an average rate of somewhere between [ $0.62 to $0.64 ], that would be a 4% to 6% -- or [ $0.04 to $0.06 ] drop from the prior quarter. So a bigger impact in Q2 than you would have seen in Q1. And when you look at our numbers, the continued drop in that rate, it's going to have a positive impact on the revenue numbers we're reporting and the SaaS metrics as well as cash receipts, and it would have a negative impact on cash outflows and expenses.

So if we look at a couple of constant currency numbers, when you look at Q1, the FX impacts weren't as volatile on the numbers from a revenue perspective, as might be expected but they did positively inflate revenue figures. One example, total revenue growth and reported 10% growth on the Australian dollar. That equates to 2% growth on a constant currency basis. What's important to note here though our SaaS revenue from the Core Business, as I mentioned earlier, this is a key metric and is expected to be the largest long-term growth accelerator for the business. When you look at SaaS revenue from our Core Business in U.S. dollars, which is the right-hand side of Page 7, we saw our largest increase in over 2 years coming in at 14% growth in USD. So that's taking all currency out of the equation for our U.S. business, and you saw that 14% growth last quarter. So the underlying key metrics in the business are continuing to grow strong regardless of foreign currency impacts.

In terms of cash holdings, we hold cash and currencies that we anticipate will need for operating expenditure. So the vast majority of our cash is held in U.S. dollars with some held in Australian or euros as well. I'll note in this past quarter, we received the R&D tax refund in Australian dollars, so our Australian balance jumped slightly from the receipt of that refund. But at September 30, 2022, approximately 80% of our cash reserves were held in currencies outside of AUD, primarily U.S. dollars. So a lot of the FX impact that you see is strictly from a reporting standpoint in terms of the impact on the business, the underlying cash is already held in U.S. dollars.

And then lastly, quickly to go through Page 8 in cash flow. As I mentioned, we have a cash balance of $34.9 million. In the quarter, cash received from customers, $2.7 million, very positive to see cash receipts continue to track closely to revenue on a quarterly basis. Our net operating cash outflow was $5.7 million. As Dave mentioned and as we outlined in the prior 4C in July, cash outflows temporarily increased in Q1 related to nonrecurring or annual fees. Q1 contained our annual corporate insurance program fees related to the change in management and staff short-term incentives from the 2022 financial year. So when you remove those things as well as the R&D tax incentive on a normalized recurring basis, we've got spend that equates more closely to $3.4 million to $3.6 million for net operating cash outflows. This, therefore, yields the 10-plus quarters of cash prior to the acceleration of sales.

As we look to Q2, this quarter will also contain some additional onetime fees related to the continued measured cost controls. But starting in the second half of FY '23, as David indicated, our net operating cash outflow is expected to be below $3 million per quarter for the second half of the financial year. This puts us in a sound financial position, ensuring we are putting in place the building blocks with reimbursement and coverage that will lead to an acceleration of sales, all the while remaining diligent in finding measured opportunities to reduce our cash burn.

Dave, I'll turn it back to you now.

[David Anderson, executive]

Okay. Thanks, Tim. I'm going to turn to Page 9. And as mentioned in the last quarter, the last time I spoke with you, one of the most impressive aspects what I should go over is the groundwork that has been laid in our large corporate accounts and our integrated delivery networks, some of which has been discussed by Tim, and how those accounts can be leveraged in a post-reimbursement environment. That market is significant. They should potentially provide the avenue of a significant growth reimbursement as the top 25 IDNs represent over 1,700 hospitals and 24,000 medical facilities according to the recent IQVIA report. We have relationships, significant number of relationships in these -- a number of these IDNs already, which can be leveraged as we can help to accelerate growth. Also this quarter, saw designing of the global strategic partnership with GenesisCare. GenesisCare is one of the largest providers of cancer care in the U.S., in Australia, in Spain, and they are also in the U.K. In the U.S., GenesisCare operates 120 radiation oncology centers.

We are starting with 1 SOZO in 5 different GenesisCare locations. There will be implementation learnings on both sides. The corporate agreement will allow us to roll out the program to additional sites in the U.S. and abroad. As such, we are absolutely focused on successfully implementing the pilot programs. In addition to signing GenesisCare in this quarter, we renewed or expanded programs in IDNs such as the City of Hope, the University of Pittsburgh Medical Center, Sutter Health in Northern California and Trinity Health. And within the NCCN institutions as well such as the Mayo Clinic, University of Texas Southwestern and Fred Hutchinson Cancer Center up in Seattle.

When you look at these graphs on Page 10, it's easy to see the tracks. They are impressive and the trends are accelerating. This month, we will reach a milestone total of 500,000 Patient Tests on the SOZO Digital Health platform. As you can see, we are achieving every successive 100,000 testing mark faster and faster with the last 100,000 taking just over 6 months, and it has really does speak to the health of the business. But I see another indicator of future health of the business. When I think about the economic return that can be achieved once reimbursement is in place. The economic equation is [indiscernible]. In the U.S., last quarter's 47,000 tests at a blended rate of Medicare patients and private-pay patients equates to in excess of 50 million in revenue per annum of reimbursement for our clients, our providers. Tim demonstrated that the growth that's already inherent in our business model. And this will only strengthen with reimbursement and that's the topic of the next slide.

I believe this is on Page 11. This slide shows the graphic evidence of our products. The title of the slide says it all, reimbursement is the key to unlocking value, and that has been built within the business and that which we want to leverage. We're approaching it from dual paths. First is private payer reimbursement. Second is NCCN guidance. We had a busy quarter and with a private payer reimbursement as previously mentioned. The CAP program provides -- continues to provide the evidence required to assist in achieving the goal of policy determinations within the regional payers. We have been successful in obtaining initial coverage determination payments to our providers from 2 payers already with consideration from 2 more in the next 30 days. Additional meetings as previously mentioned, will occur over the next 2 months. The second pathway to reimbursement is through NCCN inclusion. Most companies only have the traditional path available to them. We're fortunate to have the NCCN pathway, also available to us as well. As we announced earlier this month, an additional submission has been made to the NCCN at this time for inclusion of the BIS technology and the Survivorship guidelines. We see this as a very positive development on several fronts. For the additional submission effectively gives us 2 shots on goal instead of just 1 is increasing the probability of inclusion. The Breast Cancer guidelines referenced the Survivorship guidelines. So any change in the Survivorship is applicable to Breast Cancer as well. Three, it's successful. It broadens the application across many different cancer types. And lastly, the Survivorship Panel are subject matter experts. So there will be a clear understanding of the issues and the unique solution BIS offers cancer survivors.

Our expectations around this timing haven't changed. The Breast Cancer submission -- submissions were heard on August 25 and 26 at the Annual Meeting, and we would expect to see any changes to the guidelines published before the end of this calendar year. The Survivorship's submission will be heard today actually and -- in next week's meeting at their annual meeting next week. Again, we have an expectation of an outcome before the end of the calendar year. It's indeed an important quarter for reimbursement and for the ImpediMed's future.

So turning to Page 12. Earlier in the month, we provided an update on the clinical program at the request and a question from our last meeting. And I will go over all of it here, but I do want to mention the 2 Cleveland Clinic sarcopenia papers that were published. These publications demonstrate the power of the data contained within the SOZO Digital Health Platform. And the 2 papers were derived from data already captured through Cleveland Clinic lymphedema prevention program. They used the data to test the [indiscernible] of BIS data in assessing sarcopenia in that same patient core. The results were extremely promising, opening up the possibility of an additional oncology indication. But what I wanted to emphasize is that the Cleveland Clinic initiated these studies and the study was fully funded by the Cleveland Clinic. So this is just an example of the value of the data that we potentially see long-term within the SOZO Digital Platform.

So turning to Page 13. We've covered off on most of the key achievements from the past quarter, but I will bring to give an update on heart failure and renal segments. Firstly is heart failure. We continue to make progress with the AdvocateAurora Health program. We presented to them last Friday on 2 of the work outcomes. First was the clinical evidence covering a number of case studies that clearly demonstrate the utilities of SOZO with the HF-Dex in tracking patient fluid volumes. Two, the pilot shows that because of the high percentage of heart failure patients that are covered by Medicare. Medicare reimbursement payments are currently sufficient to more than cover the cost of delivering the service to patients without relying on private payer reimbursement. We also made progress with the SOZO 2 project which is critical to the viability of both heart failure and the renal failure player segments. Removing contraindications is a critical success factor in the SOZO 2 project. I'm very pleased to say that the initial testing suggests that we will finally be in a position to submit an application to the FDA for removal of the contraindications. We are on track for SOZO to FDA clearance in January and the contraindication submission will follow immediately thereafter. With a number of upcoming milestones, we are positive on the outlook for the Heart Failure program going into calendar year of 2023, so in just a few months.

In renal failure, after a slow start with the observational study because mostly due to COVID-related staffing shortages, across -- which plagued the entire dialysis industry, recruitment really picked up last month and has allowed us now to close the study. The final patients will complete their protocol this month. A preliminary review of the data looks promising, and we will now complete a data review and to discuss the outcomes with the principal investigators with a view on establishing our next steps.

And finally, I'd like to turn your attention to a summary of our key focus areas on Page 14. These are much the same that we saw in our last discussion and we made good progress over the last quarter. And this quarter is shaping up to be pivotal to the future of ImpediMed. The key areas of focus are advancing reimbursement through private payer policy determinations and potentially NCCN guideline inclusion; two, for revenue growth, focusing on both the accelerating unit sales and further increasing the average monthly license fees; and third is cost control. If we execute in these focus areas and we'll reach our goal of achieving profitability with the capital that we now have available.

With that, I want to thank you for your support, and I look forward to meeting many of you over the next week. And sorry, I think we are ready for questions.

[Operator]

[Operator Instructions] Your first question comes from Shane Storey from Wilsons Advisory.

[Shane Storey, analyst]

Maybe first question for Tim, please. Just to further characterize that lift in average monthly license fees. Tim, is that 38% increase that called out, is that on a constant currency basis? That's question one. And then you able maybe to give us a rough estimate of the proportion of the installed base that's available for over the next 12 months for such renewal activity?

[Timothy Cruickshank, executive]

Sure, Shane. Yes, thank you for your question. Great to hear your voice. 38% is based on Australian dollars, so that -- I don't have the constant currency number for that in front of me but I would guess it would be somewhere in the order of 28% to 30% on a constant currency basis. And then in terms of the magnitude of contracts, we see -- right now, we have a pretty heavy cohort of contracts coming up for renewal over the last 2 quarters we have. So we've averaged about 30 contracts that have been renewed in the U.S. each quarter. So that trend should continue in Q2 that we're in now. We have a big group. There's a small break in Q3, and then it picks up to about that level again. And if you track our unit sales as well, and this is something that we can potentially put together in a slide, you can tell -- the contracts that we signed 3 years ago in terms of our unit numbers, those will be coming up for renewal now. So typically, we were seeing about 30 to 40 units being signed this time 3 years ago.

[Shane Storey, analyst]

Okay. So it's as simple as just tracking back through the historical.

[Timothy Cruickshank, executive]

It should be. Yes. So -- while broad scope, should be able to do that.

[Shane Storey, analyst]

Yes. Okay. Yes, we've got that done. I mean it reads like a reasonably large increase to absorb on the surface of things even -- when you make that adjustment for FX. So maybe if you could give us some color on how the customers are thinking about that? I mean any of them building on the CMS code? Or are they offsetting it in other ways, are there other forms of reimbursement or other efficiencies that they're sort of justifying it to themselves with?

[Timothy Cruickshank, executive]

Yes, that's exactly right. So a lot of these customers are joining our Case Assistance Program, and so they're really ensuring that they're starting to see the health economic side of it kick in for them. And then a number of them are just seeing the software increases that we had -- the enhancements that we've made to our software. So a lot of these customers signed up when we were on our 2.0 software, and we've come a long way with 4.1, which includes analytics and really a lot of these real-time kind of -- not alerts, but real-time indicators that we're giving to our accounts. So the enhancements that we've made strictly from a software perspective are strong enough alone to carry the increases. But when you add CAP on top of that, it makes it a pretty easy conversation to have with the customers.

[Shane Storey, analyst]

Okay. My last question, probably 1 for David, please. And just given the recent success there in signing Genesis and you provided a nice update there on Corporate and IDN business development front. But I guess my question is really around the US Oncology Network, which is -- now I appreciate that the pilot with them probably had its challenges during the pandemic, but the status check on that would be pretty useful, I guess, in the lead up to this reimbursement quarter that you've called out.

[Timothy Cruickshank, executive]

Yes. Shane, I'll take that one as well, but I'll turn it over to Dave to add any additional comments he might have. So the US Oncology program is growing slowly. We actually added another unit during this quarter but it's really at more of a site level that these additions are being made at present. Their former CEO moved on from the company about a year ago. And so we're rebuilding that relationship within their networks. But we continue to see site-by-site growth within US Oncology and...

[Unknown Executive]

[indiscernible] they've put the program in place. They haven't made the money that they thought they would make on it. And side by side, that's why the Case Assistance Program is going in and they're becoming more commercial where they're expanding. We see great potential in this -- with US Oncology once we have reimbursement across the states across the states, but there...

[Operator]

[Operator Instructions] Your next question comes from [ Richard Mills ] from [ Pacific Union ].

[Unknown Analyst]

Thanks for a very good presentation. And I hope all the good things come true. I just wanted to ask probably innocently what is the internal process of the NCCN when it hopefully adds you to the required list? Is there a lot of politics? Or is it reasonably simple? Can they defer a decision and so on? Probably difficult to answer.

[Michael Bassett, executive]

Thanks, [ Richard ], for the question. It is a little difficult to answer because each particular group is very different. They made up of about [ 13 ] people each. So when we look at -- it's a lot of background noise here. When you look at the breast cancer for example, it will be made up with surgeons. It will be made up with oncologists, and it will be made up of radiation specialists. And so they will get together. There's normally NCCN staff that took on those panels, about 4, 6 per panel. They will actually give you -- do a lot of the background work on the clinical aspects of the product and the papers that they produce. And then they will have some sort of recommendation to that panel who will then bring their own expertise and talk, and both on it. So it is actually hard to tell how these things progress. Within -- 1 of the reasons why we're quite positive on the Survivorship Panel is that there are, as Dave mentioned, subject matter experts that really work on breast cancer survivorship. So it's obviously -- they see a lot of things being that they understand the problem, they understand the solution that we provide. So we're quite positive on that one. So they will -- they've got together and they both and then it really comes down to the NCCN start writing up the changes and then releasing them in the guidelines. And that -- we just go back to history to see when those sort of things and how often frequently that they have been released after the annual meeting. That gets us to go on between now and the end of the year.

[Timothy Cruickshank, executive]

Yes. And I would add, [ Richard ], that they typically publish their findings in the minutes of the prior meeting. And so what you generally find is you find some of that result will be resolved when they reconvene at the next meeting. That meeting is expecting to be in November. However, they don't have any particular obligation to any particular meeting schedule. But if they follow their normal pattern, that meeting would be in November, and we would expect and be hopeful that our review would be in the minutes of that to be approved at that meeting of the prior meeting in August. So that's what we expect. Again, we can't predict it exactly, but that's why we're making the comments we are.

[Unknown Analyst]

Are there any reasons for people to oppose you? Specialties that perhaps don't like your product or cost or something like that? The cost is infinitesimal compared to cancer, obviously but there's always somebody who wants to produce counterargument. Do they get what I would call the [ no ] presentation from somebody not just on your product but on other products?

[Michael Bassett, executive]

Yes, there's always submission to get knock back despite [indiscernible]. Okay. So there's always submissions to get knock back. Our last submission was made with the interim results. And as you remember, we had a p-value on that clinical trial of 0.14. And at that time, they still made the changes. It said, they should have a lymphedema prevention program in place, you should be taking baseline measurement and early detection is optimal for outcomes. And so they've actually made those things. The only thing they didn't do is specify what is the best technology. Now they can again leave that blank. But what they do know is most hospitals are meeting their obligations using tight measure, which has now been told basically doesn't work and is not as effective as our product. So then when you think about the rates and definitely if you jump on to the website, you can see this, it's all about improving patient outcomes. So that's why we have a high level of confidence that we'll see the changes.

[Operator]

Your next question comes from [ Greg Ward ] from Trafalgar Capital Management.

[Unknown Analyst]

Congratulations on the good momentum and thanks for the presentation. If you can refer to Slide 9, I just wanted to kind of ask you if you can segment the market. You guys report out IDN, Corporate Account and NCCN Institution. Can you just break out for lymphedema and the kind of the revenue potential for those 3 different pools, please?

[Timothy Cruickshank, executive]

Yes, [ Greg ], thanks for your question. So I guess the way we look at those different parts of the market are, you've got Corporate Accounts, which are -- we typically name something in Corporate Account when we're talking at a high level at the organization and in something like GenesisCare, that could be implemented quickly once -- in this specific example, once the pilot program is proved, you're looking at a more massive -- faster uptick in terms of devices and revenue. When we talk about IDN, that's specifically those top 25 IDNs. I think we mentioned there's around 1700 hospitals that we would be targeting overall. What we look to do with the IDN is we get a master service agreement in place and then we effectively have a license to hunt. So right now, pre-reimbursement, our sales team is going out and selling them on an individual basis. With reimbursement, you would anticipate that there would be an acceleration in that adoption as well even when you're hunting on a site-by-site basis. And then NCCN institutions, I believe there 36 NCCN institutions. We're in over half of those. And the size of -- so the NCCN is obviously a very specific market, but they're the thought leaders, and they're the -- they're the hospitals that the rest of the market follows as well. So we really look at them as the leaders in terms of seeing the adoption there will lead to a larger presence across the market. So I didn't give a lot of specifics in terms of revenue size in those markets. But hopefully, that gives you kind of directionally what we're attempting to accomplish there.

[Michael Bassett, executive]

It's probably starting with more work on, Greg, to be honest. I mean I keep talking about doing the work of number of hospitals and opportunities within hospitals. So we've started doing work on -- besides the hospital and how many SOZO machines that they can take. We're actually looking at some data at the moment, acquired some data at the moment so we can actually look at the Medicare numbers, the breast cancer numbers. And so we can look at, in particular, how many SOZO units can be bought. It hasn't been a high priority because we know there's a significant market out there at the moment, and we're only touching such a small portion of it, but it is work that we need to do more on.

[Unknown Analyst]

Right. Okay. And then just on the 25 IDNs, what portion of the market do you think that those 25 have of the IDN market as a potential revenue tool?

[Michael Bassett, executive]

I can tell you the record, it's pretty high. I mean when we think about sort of like 5,000 U.S hospitals. Well, we think about 5,000 U.S. hospitals, these guys are about 1,700 of them all up as of the beginning. So there's going to be a fair percentage of the overall market, and they tend to be on the larger side as well. And so to that particular point of view, you're probably taking up an even larger portion of the amount of SOZOs.

[Unknown Analyst]

Right. Okay. And of the 16 that you're in, what portion on average of those 16 have you penetrated? The potential market within each of the 16?

[David Anderson, executive]

Very little. We have -- I think we made a statement about 1/4 of our SOZO units are in those IDNs. So that's around the few hundred units in the IDNs that we have out there. So that's still a small percentage. We're talking 10% of the coverage area at the moment at most.

[Timothy Cruickshank, executive]

So the main reason why we called it out, [ Greg ], is that -- some of these IDNs have taken more than 12 months to get into. By the time you do the BIS, then we try to do the tech assessments with them and everything else. And so we're actually through them now. And because of that, we might only have 1 or 2 units. But as reimbursement comes on, we can send our sales force team to really hunt within those units because they're still -- US Oncology was a great example there where they're looking for economic outcomes as well as clinical outcomes. And so we really have to -- once we have the economic outcome, then we can go specifically hunting and we don't have to go through all those tech assessments, BIS or anything else. So you can actually get growth quite quickly as opposed to on a hospital-by-hospital basis.

[David Anderson, executive]

And [ Greg ], I would say that 1 of the other reasons for our focus there is most of the IDNs have a variety of segments, health care segment where BIS technology could be used. So once those relationships are established. And as we enter the heart failure market or the renal market or other segments where BIS can be used, then they can leverage that relationship within that same IDN and that's -- so that once that foothold is there, then we should be able to accelerate growth into the other segments more easily than starting from scrap.

[Unknown Analyst]

All right. Okay. And have you got a case study in those 16 of where you've actually penetrated a lot quicker throughout the hospital group versus another example where you've been there for some time, but it's actually been quite slow to penetrate, understanding the differences?

[Michael Bassett, executive]

It's really coming down to reimbursement, and we still don't have reimbursement. We will see that coming. But we know from dealing with the likes of US Oncology, that is the sticking point. And where we're gaining at the moment with those guys is because of the Case Assistance Program where we can get the reimbursement. And then we put that up, we've actually looked other positions within those soft sites, we like in Australia too. And the Case Assistance Program is what I would define as [indiscernible] reimbursement. We have to work hard to get it. But when once it becomes automatic reimbursement, we think that will accelerate even further. That's my example. And afterwards an example of what Dave just mentioned in terms of moving from lymphedema into heart failure, and that's actually under the master service agreement as well. So that allows us to do both.

[Unknown Analyst]

Okay. And to your point, just then, Mike, I think you've said in the past that these reimbursements have very much come down to kind of regional to regional combat with these funds and actually going through the court process and then losing, then putting up the white flag essentially. So is that literally how you penetrate these IDNs on a region..

[David Anderson, executive]

Yes. it is, [ Greg ]. One of the primary strategies is to go to the areas where we have volume, particularly in testing and we have a favorable regulatory environment as well as a [indiscernible] supportive, whether it's IDN or just a multidisciplinary provider. And because they typically have most of their volume patients at regional health plans, which is predominated across the country because of the Blue Cross Blue Shield system. And so once -- the strategy is to go to where we have and where we have relationships, where there are strong regional players and then get policy determinations done, which once that happens, then you move past reimbursement, policy determination means it's actually in the coverage that payer is providing to its members. And so that means it's systematic. There is no level of approval for that claim to be paid once it's in coverage. And that would be done by getting the policy determination that we've mentioned that we're working on now. And so we start with the regional payers and then we leverage into the national accounts as well.

[Michael Bassett, executive]

So in the case of like when you look at the national market share, you might like over the last national share let's call it, 10%. But in the region, Blue Cross Blue Shield region -- regional, might be 40% market share. And [indiscernible] has a policy in California, although it doesn't need to have it state by state, it's very hard for them to stand up and say we think it's medically necessary for the California people, but not New York people. So I want to find is it cascades across their country. So they're what you call slow to adopt. But if you're a regional player where you've got 3 large hospitals that are asking for this, then a large part of your market comes from those hospitals. So you tend to have -- and when you've lost appeals in those places which is shown both medical necessity and efficacy of product, then they tend to go over it.

[David Anderson, executive]

So -- and this may be in the weeds a little bit too much. But there is also an interesting angle on this particular issue and that's a national player. So the UnitedHealthcare is the [indiscernible] of the world. Much of their client base and their membership base is self-funded by the employer. Self-funded accounts are not regulated by states. They are regulated under a federal regulation under ERISA. The regional players, which is typically the blooms and other smaller regional plans tend to write employer plans that are fully insured, and therefore, they are regulated by the state in which that contract is held. And so to get support through the process of the regional players is a little easier because once the state regulator issued a circular letter for policy determinations, then the regional players have to follow suite. The national players for all of their membership governed by ERISA do not have to follow that regulation by a state regulator. So that's a little more effective to start with the regional players. And then over time, the national players come to suite because they want to compete in that state and they need to have similar coverage determination, but it takes them a little longer to get that.

[Operator]

Your next question comes from [ Richard Mills ] from [ Pacific Union ].

[Unknown Analyst]

You say you sold 18 units in the last quarter, which was slightly disappointing. Obviously, if you get NCCN validity, you would hope to sell quite a lot more each quarter for hopefully a long time. Can you just indicate the capacity you have to make and supply the right number? And hopefully, that's a little bit more color.

[Timothy Cruickshank, executive]

Yes. Great. [ Richard ], thank you for that question. Great. Yes. That's obviously the a million dollar question, how many units will that be going out. The good news is we feel that we have adequate inventory at this point to satisfy that. We've got a couple of things going. With the last capital raise, we earmarked a number of funds to make sure that we stayed ahead of the supply chain. So we've actually bought a lot of parts so that we can build. The other thing we have going for us is we have our SOZO 1 product, which is currently on the market, and we'll have our SOZO 2 product out in the market in the next calendar year. So you've got 2 different product offerings that will work for different hospital systems depending on their pricing and what they're trying to do with their programs and if they're expanding beyond oncology. So we've got a number of different levers to pull from an inventory and supply standpoint. So we're very confident that we've got what we need. And I look forward to getting to a place where that's the topic of conversation of how we're going to keep up with the number of devices.

[Unknown Analyst]

I mean could you put a figure to what your capacity on a quarterly basis to manufacture would be or manufacture and supply?

[Unknown Executive]

We could expand the manufacturing to almost anything you'd like to get to. We would start running on actually the implementation. So we need to bring on volumes to the implementation. But we are far away from that at the moment. But you could easily rise that up to [ 125 ] at the top of my head without any problem whatsoever.

[David Anderson, executive]

Yes. We have the same contract manufacturer as a number of the largest medical device companies.

[Unknown Analyst]

Yes, yes.

[David Anderson, executive]

Great question. If there are no other questions, then I think we can wrap up the conference today. I appreciate everyone joining and listening in and for -- especially for all the questions. And again, I look forward to meeting many of you over the next 1.5 weeks in person. And hopefully, we can continue the conversation. So thank you all for joining.

[Operator]

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