ImpediMed Ltd

ASX:IPD

Earnings Call Transcript 2022-Q2

[Operator]

Thank you for standing by, and welcome to the ImpediMed Limited Quarterly Results and Investor Conference Call. [Operator Instructions]I would now like to hand the conference over to Mr. Richard Carreon, Managing Director and CEO. Please go ahead.

[Richard Carreon, MD, CEO, President & Executive Director]

Thanks, Kelly. Welcome, everyone, and thank you for joining us today. We're hosting this conference call to discuss our 4C for the financial quarter ending 31 December 2021. Joining us on the call today is Tim Cruickshank, our Chief Financial Officer; and Mike Bassett, our Senior Vice President of Corporate and Strategic Development.I'll be referencing the 4C and speaking from the quarterly activity report we lodged this morning Australian time. This presentation is a summary of the more detailed 4C. After our remarks, we'll be taking questions.Let me first start off by providing an update on the publication of the PREVENT trial. The principal investigator, Dr. Sheila Ridner, received notification late last week from the publisher of Lymphedema Research and Biology [indiscernible] accepted and the schedule for publication in the coming days. So that's been a good news.Let's start on Page 3 of the presentation. Today, we'll be covering 3 key topics: the ongoing strength of our business, even as hospitalization rates in the U.S. and Australia sored in record levels not seen in previous spikes of COVID-19; Two, we'll review the critical facts in the PREVENT trial and the feedback we received from the PREVENT [ treatment ]; and three, the success of the Case Assistance Program and obtaining reimbursement and the foundation that is now in place that will drive unit sales and increased [ ASPs ] over the balance of the calendar year. We will also discuss and show data from a hospital and how reimbursement is changing the dynamics of their entire program, and we've included a link into their presentation as well.Turning to Slide 4. I'll ask Tim to provide more in-depth analysis of our financials. But just quickly for me, and what was one of the most challenging environments with COVID Omicron variant safety, hospitalization rates at a record level and causing disruption across the U.S., most [indiscernible] experienced within health care system, the company still delivered very robust results. Some of those highlights, our SaaS revenue growing to [ 71% ] year-on-year. We maintained our annual revenue run rate of over $10 million and 26% year-on-year growth quarterly revenue and post the capital raising, the company is now fully funded to achieve breakeven. We continued to drive double-digit growth despite the ongoing global pandemic and the leading indicators of our business look very, very positive.We've made substantial progress with reimbursement over the last quarter, which together with the pending publication of the PREVENT trial [indiscernible] sets us in a strong position to execute our business plan in 2022.I'll now ask Tim to provide a more in-depth analysis of our financials. Tim?

[Timothy Cruickshank, Chief Financial Officer]

Great. Thank you, Rick, and good morning, everyone. So I'll be taking you through some of our key financial highlights listed on Pages 5 to 7 of the presentation that we posted today in ASX. All figures presented are in Australian dollars unless otherwise indicated.So on Slide 5, we've highlighted the key metrics we use to measure the health of our SOZO business. It continued to show solid growth in the quarter met by significant headwinds in COVID-19 Omicron variant, led by, as we indicated, 71% growth year-over-year in our Software as a Service revenue from SOZO. SOZO annual recurring revenue, or ARR, grew by 7% year-over-year to 8.4 million. The contracted revenue pipeline dipping slightly to $14.3 million in the period. A small decrease in CRP was attributable to the timing of revenue recognition under the AstraZeneca contract as well as the timing of contracts signed at the end of the quarter. We typically expect to see -- we expect the year-over-year CRP metric to increase on the quarterly basis moving forward.Let's look at 2 other key metrics for the business, SaaS gross margin and churn rate. SaaS gross margins finished for the half year above [ 95% ]. We would expect those strong margins to continue to be in that range over the balance of 2022 as revenue continues to grow, and churn rate remained negligible at just 2%. The small impact to our renewal rate of 98% stems from a few small practices with operational and financial constraints due to COVID-19 related challenges. Though the majority of our growth is expected to come from large institutions, we would expect churn rates to remain very low.Slide 6, our land-and-expand strategy has laid the foundation for accelerated growth as our success with reimbursement begins to take hold. In a very challenging environment for SaaS quarter, we were able to make significant progress in a number of critical areas. While unit sales were no doubt impacted in the quarter by COVID-19, the quality of accounts that were closed were exceptionally high. We added our 36th NCCN/NCI Member Institution in the quarter. We expanded our footprint in world-class cancer centers as Memorial Sloan Kettering. And we've landed/expanded 10 additional regional cancer centers. Given the headwinds faced [ versus ] tremendous targets, we've stated since the original launch of SOZO that in a [ clear reimbursement ] environment, the key -- the first key to our strategy is to land the technology in these large institutions, which we continue to do.For the second consecutive quarter, 1.5 of our unit sales [ account ] to new accounts and we have now landed more than 830 units in the market, primarily to large institutions. As we begin to capitalize on the strength of the PREVENT trial data and on the success of the Case AssistanceProgram of reimbursement, we will now be very well placed to accelerate expansion of our technology in the coming quarters. As a result of this strategy, ARR and CRP for the Core and Clinical businesses combined remained strong at $8.4 million and $14.3 million figures respectively.As we stated in the past, we anticipate over 90% margins on our total $14.3 million in CRP when that revenue is recognized in the coming quarters.On Slide 7, we look at cash flow. Cash on hand at 31 December 2021 finished at $50.8 million. Cash received from customers grew for the fifth consecutive quarter to a record level of $2.6 million. And net operating cash outflows for the quarter came in at just $2.9 million, as we maintained our focus on strong financial discipline and our path to cash flow breakeven for the business. In October to November 2021, the company completed a placement and share purchase plan totaling $42.5 million in gross proceeds.As outlined in the use of funds from that capital raise, the company will be utilizing a portion of these funds in the upcoming quarter in order to make critical investments in things such as advanced inventory purchases to stay ahead of the supply chain, SOZO II hardware development cost, software development for critical initiatives such as EHR integration, electronic health record integration and; ESRD clinical trial costs for a renal observational study. So we anticipate net cash outflow through Q3 FY '22 will be in the range of $5.5 million to $6.5 million for that one quarter. As the majority of these investments are onetime in nature, we also anticipate that in Q4 FY '22, net operating cash outflows will drop back below $3 million and continue to decrease over time as sales accelerate.So in summary, in a very challenging environment, the company still continues to take critical steps forward during the quarter in landing-and-expanding a number of extremely high-quality accounts which resulted in strong year-over-year metrics for the SOZO business. And the success of the capital raise in conjunction with positive momentum with the Case Assistance Program in reimbursement allow us to make capital investments in a number of critical areas of the business, with all of these factors leading to an acceleration of growth over the balance of 2022. And we've done this without adding significant recurring costs in the business as we focus on the resources [indiscernible] to reach breakeven.Thank you, all. Rick, I'll turn it over to you now.

[Richard Carreon, MD, CEO, President & Executive Director]

Thanks, Tim. Please turn to Page 8. Let me walk you through patient testing from the past couple of quarters. I'll be discussing this data from the bar chart on the right-hand side of the page. And as I've stated previously, patient testing results [indiscernible] an indication for us.Now for the last 2 quarters, patient testing has fallen. It first started in the United States and then Australia as Omicron spread. And it's now beginning to recover in that same manner. Hospitalization rates in the U.S. peaked last week, and are now dropping. [indiscernible] the clinical cases. We're seeing patient testing slowly recover as well. More importantly, we see data showing our technology as it becomes standard of care in major cancer centers.Now COVID-19 has come in 3 waves: the original strain, the delta variant, now Omicron. During the first spike in hospitalizations, only 46% of our installed SOZO devices in the U.S. were testing patients during that spike. Now during the spike in hospitalization brought on by the Delta variant, the number of SOZO devices used in testing patients shot up to 69%. And during the record spikes in hospitalization for Omicron variant, 83% of our installed SOZO devices were testing patients. Now albeit, the spikes caused fewer patients to be tested, but many more devices were testing this last time as these patients were brought in for treatment.Now we believe this shows a growing strength of our technology, evidenced by continued growth and a record quarter for our SaaS revenue. We also believe this shows the impact of our lymphedema prevention program and our newly introduced Case Assistance Program have on our business.Now despite the [indiscernible] hospital resource returning these fees on patients who were brought in for cancer treatment, our technology is considered essential for the patient's long-term care. Of note, we discussed for the number of [indiscernible] was well over 350,000 patient tests conducted to date, our ability to make real-time decisions to help improve and grow customer programs is increasing rapidly. This real-time testing along with the growing database of patient information and our ability to mine this data is what really has allowed to grow throughout this pandemic. Over the remaining financial year as the Lymphedema Prevention Program and Case AssistanceProgram continues to grow, we would anticipate seeing an acceleration of patient testing. We truly believe we are at a tipping point.Page 9. As I stated earlier, the PREVENT trial manuscript has been peer-reviewed, accepted and the principal investigator has been notified and will be published in the coming days first online, and then in print. We are very pleased that the findings of the manuscript were unchanged from the [indiscernible] and the manuscript's very strong conclusions were endorsed by the reviewers. The key messages are follow: One, the PREVENT Trial met primary end point and reached statistical significance; two, in patients with early detection using L-Dex, intervention resulted in a 7.9% rate of chronic lymphoedema compared to 19.2% rate of chronic lymphoedema in patients with early detection using tape measure, with a p-value of 0.016; three, this represents an absolute reduction of 11.3% and a relative reduction of 59%; four, 92% of patients with early detection of cancer-related lymphoedema using L-Dex and intervention did not progress to chronic lymphoedema; five, L-Dex showed a statistical significant benefit across all risk factors for the study. This is rarely seen in Level 1 evidence studies and shows the true strength of our technology; and six, lastly, and very importantly, the paper concluded these statistically significant results demonstrate bioimpedance spectroscopy screening should be a standard approach for prospective breast cancer-related lymphoedema surveillance.Now these are fantastic results, and I want to thank the patients and investigators involved in the PREVENT trial for their hard work and dedication. This was a serious commitment from all involved. A special note of thanks to Catherine Kingsford who has marshaled this study from its inception [indiscernible] tenacity, patience and dedication, but it's well worth it. It will change the lives of countless cancer survivors and something that all involved would be incredibly proud of.Page 10. Now it's essential to understand the significance of the PREVENT trial, and not only what it means to ImpediMed, but what it means for patient outcomes. What PREVENT proves is that a significant number of cancer survivors need not suffer from lymphoedema going forward. With the change practice, we must also remove the financial burden from the patients and the providers, and that means a clearing in reimbursement. Reimbursement of our L-Dex testing has widely sponsored the landmark PREVENT Trial. The trial is a level 1 evidence study, meaning that the prospective randomized and multicenter, as one of the authors noted, the results of this study are practice changing. We mentioned on our last call that we moved the reimbursement function in-house. This has allowed us to substantially expand our offering and establish a case assistant program, reimbursement assistant programs are standard industry tools to establish reimbursement for new technologies. Our program is very similar to those used by Medtronic, Stryker and Abbott, to name just a few.The aims of the program are to assist hospital, cancer centers and physicians in filing the necessary documentation to fight denied insurance claims. This is building up case files at key insurance carriers in showing the growing usage in demand for our testing, insures key regional and national insurance companies are aware of the latest data that [ shows the medic analysis ] and laying the ground work for presenting the PREVENT data upon its publication. The results of the data have been outstanding with a number of industry veterans commenting that these high case win rates, they've never seen before.Since we last reported the numbers was the capital raise, you can see the very strong growth in pace that our team has undertaken. Case wins have grown from 298 at 1,723 and that at an incredible run rate of 96%. There are over 100 external appeals we've won and these are the damaging ones, as insurance companies can be fined up to $10,000 for a lost appeal. And the program has an additional 1,800 cases still processing and that number grows daily. Notably, the case wins across the country are across the country and across all major carriers. The success of the Case Assistance Program and propending PREVENT Trial manuscript give us the confidence that we will obtain automatic reimbursement for SOZO L-Dex testing in time.In parallel, the lead investigators have agreed to submit an application to the NCCN for inclusion of our technology in the cancer guidelines for lymphedema, the application of scheduling this by the end of this week. For us, all these data points to a technology that can significantly improve patient outcomes becoming available to all adverse cancer survivors.Page 11. We've touched on the Omicron impacts throughout the presentation, so I won't go over it again. What I will say is that while it was difficult, we did manage to take several very positive steps forward. This includes the corporate accounts team securing a pilot program with a major hospital system and are in advanced discussions with two others. We continue to add and expand our footprint to world-class cancer centers, including Memorial Sloan Kettering and UT Health San Antonio.We landed a major oncology group. Now this is the first entree into this critical, critical segment for us. It's really the next phase of our journey. We landed or expanded in further 10 regional cancer centers, so making progress in a difficult time to win business in extremely high-quality [indiscernible] and establishing [indiscernible] of what can become very large accounts for the company.We've also covered the success of the Case Assistance Program and the confidence it's giving us in our future. This confidence has been setting up the groundwork for an environment where we can not only accelerate the sales or accelerate sales while simultaneously growing our ASPs. We have realigned the sales approach to take advantage of the success of our Case Assistance Program. We have the right people in the right place with the right focus, and we are investing in the clinical support and reimbursement teams to continue to build up these programs. We've done this without adding significant cost to the business as we focus on the resources at hand to reach breakeven.Page 12. We touched on a number of these milestones throughout the presentation. So I'll just mention a few. We're very pleased to see the extension and expansion of the AstraZeneca trial resulting in over 410 device being leased generating over $5 million in revenue over the life of the trial. We continue to make progress with the heart failure program with that be AdvocateAurora Health. We see this as a substantial opportunity over time, and the level of [ impeachment ] remains very high. And it's also good to see our reference recognized [indiscernible] in the Australian market with Colliers Securities becoming the first U.S. brokerage firm to initiating coverage of ImpediMed.Turning the focus to areas for Q3, a couple of key points of note. In oncology, the principal investigators will submit the PREVENT data to the NCCN this week. We will continue to focus on and expand reimbursement for the case assistance program and engage with potential customers in our key focus areas: breast surgeons, oncology groups, regional and national cancer centers.In heart failure, we'll ensure AdvocateAurora has sufficient resources to be successful, and we'll add additional heart failure programs. In renal failure, we are looking to finalize the initial renal failure study in the coming weeks and commence recruiting this quarter.Slide 14. This is a very exciting information I'm about to share with you. We've attached to a link to webinar that was released last week. It's a presentation of SOZO and Deaconess Women's Hospital, High Pointe in Indiana. The clinicians exam the process of adopting ImpediMed lymphedema prevention program and the case assistance program. If you have time, I strongly recommend you listen, a couple of points to listen where the clinicians want to start a lymphedema prevention program, but there's also a financial imperative within their health [indiscernible]. They present their base case, they began working with our case assistant program. They discuss what obtaining reimbursement does to the economics and improve patient outcomes and the number of cancer survivors they can add to their program.The data on the 2 slides on Page 14 were taken on the 24th slide that clinicians presented. You will note on the slide on the left, they conservatively estimate their growing at-risk cancer population over the next 3 years. They split out the estimated measurement by Medicare and private payer. When they look at the potential return on investment, they only consider Medicare because that's the only group that was paying at the time. You will see the 65 tests a year comes out to a total of $8,255 or $127 per test. They recently began working with our case assistance program.Their slide on the right-hand side now shows their average private payer payment is $212 per test. This represents just over 50% premium in their geographically adjusted Medicare rate of $127. We've always said the private payers typically pay a premium for the publishing Medicare rate. So this is very, very good news. We now have [indiscernible] positive of insurance carriers now paying at a premium. Jointly, we've helped them submit 152 cases to the required insurance companies. 34 of those cases have already been paid. The other 118 cases are under review with the potential of an additional $25,000 in reimbursement. The significance of this cannot be overstated. Go back to the slide on the left-hand side, and let me do the math for you. Go back to year 1, remember, 65 tests on Medicare patients that reimbursing rate of $125 per year showed $8,255. Not only [indiscernible] tests on private pay patients, that a reimbursement rate of $212 suggest equal of [ $20,776 ] for a total of [ $23,031 ] in gross reimbursements. Year 3, this work is very interesting. Using the same rates and their cancer patient estimates, the total reimbursement, it goes to $225,721 per year. The reimbursement for this size of institution coupled with significantly improved patient outcomes is extraordinarily compelling. And when we listen to these clinicians discussed our program, I asked if you think about how many lives would be transformed because they are finally getting access to our technology.So in summary, [indiscernible], the publication of the PREVENT trial is just days away and the momentum on the business, we are indeed at an inflection point. We expect to see both accelerating unit sales and increasing ASPs over the balance of 2022, and I want to thank you for your continued support, and we look forward to another transformational year.This concludes our remarks. Kelly, we're now ready to take questions.

[Operator]

[Operator Instructions] Your first question comes from private investor, [ Ian Hart ].

[Unknown Attendee]

Now first, regarding the [indiscernible] now looking forward with all the data we now have, we've got [indiscernible] you've now got the cost analysis that it's run through. If we've gotten [indiscernible] a bunch of corporates sense [indiscernible] but any data show any more color or update on how [indiscernible].

[Richard Carreon, MD, CEO, President & Executive Director]

Certainly, Ian. Thank you for the question. So the key accounts of the [indiscernible], we have a large number of key corporate accounts across the country [indiscernible] data. So what's the propensity that comes out and with the new data that we have on the [indiscernible] we certainly will be reengaging all of our accounts, both current and new ones and those in the pipeline. Because the data has shifted dramatically, and I would say the data shifted dramatically over the last 30 days. So we have a plan in place and we just submitted a full training of our sales organization to take advantage of all of that. So that's why we said you're going to be seeing acceleration of unit sales is going to increase in ASPs.

[Unknown Attendee]

Sure. And connected with that, [indiscernible] oncology group, so is that significantly looking [indiscernible]?

[Richard Carreon, MD, CEO, President & Executive Director]

Well, that's looking at lymphedema. So if I'm a patient, a cancer survivor and I've completed my surgery, I'll not only continue to see a surgeon for the next several years, I'm also handed off to a medical oncologist who is now responsible for my chemotherapy, my radiation therapy and all of my follow-up, and they typically follow those -- their patients for 5 to 10 years depending on the cancer type and treatment types. So that's always been a part of our long-term goal once you crack that market. Now we do see that as an opportunity for [indiscernible] but with the reimbursement, the way that it's starting to shape up and with the PREVENT Trial [indiscernible] on top of medical oncologists now are very interested. Because if you think about it for a moment, I'm a surgeon, I'll [ wan to ] see that patient for even 90 days, a year, up to 3 years. If I'm a medical oncologist I'm seeing that patient for 5 to 10 years. You're going to see a lot of -- I'm going to see a lot more lymphedema than possibly that surgeon will. So I put my best interest on my practice and for my patient [ to address ]. That's why we see this a big opportunity for the company going forward.

[Unknown Attendee]

Sure. And just talking on business then [indiscernible] mentioned in the market there, but generally with [indiscernible] it got reimbursement there, but nothing that sounds impressive, nothing impressive [indiscernible] getting it out there [indiscernible] possible for clinicians to testing [indiscernible]?

[Richard Carreon, MD, CEO, President & Executive Director]

I mean, we have approached several key accounts and several key accounts have approached us, and we have a number of negotiations and discussions going for putting that into a facility. We have facility of over [indiscernible]. So we're in a very committed position as COVID starts to wane over the coming weeks, we believe that we'll be able to start to accelerate all of those.

[Unknown Attendee]

Sure. And lastly, you mentioned that you had a meeting with a Board [indiscernible] involve the insurers [indiscernible].

[Richard Carreon, MD, CEO, President & Executive Director]

So we had a meeting with a group of health care companies as part of our advisory board. These are current and former medical policy directors at major centers, and it went extraordinarily well. I looked at the data. I looked at the [indiscernible] information and they gave us some very, very sound advice on how to move forward. And some of their advice has actually helped progress our lymphedema -- excuse me, our case assistance program and the statistics that I just shared with you, the 96% win rate is some of their advice has been instrumental in helping up shape those [indiscernible]. They've been very, very good in providing us information on the best way to present and what data they're looking for. And more importantly, exactly how layout of our story through that. So we'll continue to use that throughout the process, and once we have the PREVENT Trial we'll start meeting with the insurance companies initially over video conference and then a long-term face-to-face to continue [indiscernible].

[Unknown Attendee]

Sure. Then [indiscernible] probably don't answer the question, but any view or color [indiscernible] look like with both the sides [indiscernible] authorized coverage? And throwing another question is, obviously,[indiscernible]?

[Richard Carreon, MD, CEO, President & Executive Director]

Well, we'll submit the envelop in a week -- by the end of the week, and we -- I can't tell you [indiscernible] sometimes it takes up to a year. We just don't know. And you should know, we're going down 2 different avenues to obtain reimbursement. Obviously, the NCCN won't be the fastest route to that, but also understand with the insurance companies. We've always said that the first part of our journey [indiscernible] critically what they were looking for, the Level 1 evidence. We've got that now. So what is important in moving forward with the insurance companies is to continue to win these cases because it builds up [indiscernible] so that they can see that there is a demand. Once they have demand then they allow us to come in and have discussions. And as you can see, we have a great track record. We've won almost 1,800 cases. We have another 1,800 in the pipeline. So more importantly, we're now able to show the track record from our accounts. So we only have a very small portion of our accounts on our case assistance program.With the PREVENT Trial and with an expanded case assistance program, we plan to go after to all of our accounts and show them exactly what could be -- what we could do to the impact in their business. And we're certainly going to bring up the information that I just shared with you on data that was presented by [indiscernible]. So I think we've got a very robust program. And I think over the coming months, we will also see the impact on that. But I can't say how long until we get the coverage from the insurance companies. Now they're making payments today. This is obviously their first set. Their next step after that is cover, [indiscernible] they want to form a coverage policy and they tell you that you no longer have to provide all this data, all of this information, and they will just cover X amount of tests per patient per year. So I'll take [indiscernible] advice now because it stands well and will accelerate our program. Payers will just see -- excuse me, coverage [indiscernible] expect to get coverage, both on the medium to long term.

[Unknown Attendee]

Sure. And I've got another one. Has anyone done any [indiscernible]?

[Richard Carreon, MD, CEO, President & Executive Director]

That's our job. That's what we have to do when we get a chance to address with their medical policy board. We have to go in there and show the data across not treating. So when a patient gets hospitalized for cellulitis and get infections at the hospital for 3 days or they have to wear a compression sleeve -- some compression sleeve or they then get to a level where they're now on a compression pump and which is about $10,000 to $12,000 for compression pumps. So all of that is less when we go into the policy boards to lay out our case of why spending several hundred dollars of tests is much more cost effective way for them versus leaving the patient to eventually develop lymphedema. And I also think the results of PREVENT Trial showing a 92% reduction, you can't ignore that. And that's why I also think that because of the metanalysis we've been able to show carrier that you need to start paying for this. The data is compelling. So again, I think with PREVENT, it's just going to put us over the top, and it will give us the information we need.

[Operator]

Your next question comes from Natalie Williams with [indiscernible].

[Unknown Analyst]

First, if I can just shift to renal failure. I just would like to -- if you could just provide some color on the time line for the observation and intervention trial? And also, maybe give an idea of what clinical end point, what they've achieved in trial?

[Richard Carreon, MD, CEO, President & Executive Director]

Yes, Mike, do you want to take that?

[Michael John Bassett]

Certainly. So -- can you hear me?

[Richard Carreon, MD, CEO, President & Executive Director]

Yes.

[Michael John Bassett]

Excellent. So Natalie, the 2 trials just on the observational trial they were collecting data but also [indiscernible] across 2 subsets of patients, the first [indiscernible] of patients will be very stable patients and the second patients will be the newer patients, which are relatively unstable. And we'll be looking at both patients to see whether there are changes in body compositions that aren't being picked up in their [indiscernible]. The second trial will be the interventional trial, and that's where we look to actually intervene and say how much fluid should be tested for those patients on a daily basis. So they come in 3 times a week for dialysis and we will help collect the amount of fluid that needs to be removed from that patient. But currently, they're just using weight. And when they look at their -- they look at what they were 2 days ago, also where now? I believe that the increase they're going to do with fluids, they're up to 1 kilogram, [indiscernible] changes, that will be incorrect. And we believe that's why you get such a large number clinical related hospital observations and mortality.The second study we hope is up in the -- just beginning of the financial year will ready with FDA, [indiscernible] industry observational trial. The observational trial, we [indiscernible] which you can see because we've already got patients on [indiscernible] [ 17 ] patients and they only days passed 1 month. And what we'll be looking at means to the individual trial [indiscernible] again, to be returned by the FDA what those endpoints will be. But we do think that if we just look in to the non-inferiority in terms of hospitalizations, in terms of adverse events, mortality over that period of time and then we have the intervention ongoing versus the current standard of care. But again, that's something that we have to consult with the FDA.

[Operator]

Your next question comes from Peter Gregory who is a private investor.

[Unknown Attendee]

[indiscernible] your presentation and assuming that this will be the growth [indiscernible] happening. If I can just pick up on the previous questions about the renal trial, do you expect that to have -- to go through the process of peer review and then publication? And what sort of time do you expect them to [indiscernible]. And secondly, in renal, in terms of the patients that you're actually expecting, not giving successful outcome in trials, what sort of profile of patients you expect it to be? Do you expect it to be, are all dialysis events infectious or [indiscernible]? If you could just shed a little bit of color of what you see [indiscernible]?

[Richard Carreon, MD, CEO, President & Executive Director]

Yes. That's very good. So Mike, I'll let you take that.

[Michael John Bassett]

So the second part of the question is, yes, we see [indiscernible] within the current standard of care. So instead of taking patient [indiscernible] as well, but you'll be looking at your forward from the SOZO output, and we believe that could be used in every single case for each patient to come in. What was your first question, again?

[Unknown Attendee]

Just in terms of timing [indiscernible].

[Michael John Bassett]

Again, once we have had the meeting with the FDA, we'll let the market know exactly how long, but we're not talking about a year, we're talking about 6 months to 12 months type of [indiscernible]. And these patients are readily available for recruitment. So we don't expect the recruitment phase to be long. And we've got the -- the most important thing for the dialysis will be the FDA approval as opposed to a publication. We sure the publications will come, but there's no reimbursement really associated with dialysis treatment. They're essential all Medicare patients and in that case it really does come down to acceptance from the dialysis as opposed to going for reimbursement.

[Unknown Attendee]

Okay. That's good. That sounds like a really good opportunity and could [indiscernible] physician fairly quickly? I'd also like to ask about the capital raise of about $40 million. Clearly, part of that is, for one, of the better funding the continuing business to get [indiscernible], but also there's a significant amount of investment in new [ treatments ]. Would you be able to give a bit more color to what those new things might be the investment -- your investment-type activities and funding the continuing business?

[Richard Carreon, MD, CEO, President & Executive Director]

Certainly, Tim, I know that you've covered that. You gave some highlights, why don't you go through that in detail?

[Timothy Cruickshank, Chief Financial Officer]

Yes, absolutely. Peter, so one of the main things being that renal study that you were just [indiscernible] on. So that study, the costs that baked into our outlook versus capital raise. If that's advance inventory purchases, so with all those things that the world is seeing with the supply chain, we have taken the stance that we're going to stay ahead of it wherever we can. So we're pushing inventory for our SOZO hardware. So that we continue to manufacture post reimbursement to meet public demand.And you've got a couple of software development projects that will be brought on in terms of -- that electronic health record integration is one of the key things that we're currently working on now. So those are the types of investments that we're looking at over the next less than 3 months -- 3 to 6 months in terms of critical investment right now.

[Richard Carreon, MD, CEO, President & Executive Director]

And also, Peter, we're also investing in SOZO, too, because it's quite really important for us to [indiscernible], excuse me, renal filer and to expand the commercialization of heart failure. SOZO II is going to be [ implemented ], we said that we will be bringing that to market this very year.

[Operator]

Your next question comes from Jonathan Scales with [indiscernible].

[Unknown Analyst]

Just wanted to ask a question, make a reference to the [indiscernible] products are not enough. Can you just talk about the rationale for the price increase, what type of pushback you get against there? And how you are [indiscernible] for? And what type of percentage increase you'd expect?

[Richard Carreon, MD, CEO, President & Executive Director]

Jonathan, when we started down the road with SOZO. It was always our intent to be able to come out with a device that provided us a Software as a Service platform. Then it also provided us an opportunity to adjust for our pricing, either through due indications and new software [indiscernible] packages, some things in addition into the [indiscernible].So we're going to take the opportunity at every avenue we can to charge for those extras if you will, that you can add to SOZO. So if you think about it for a moment, the U400 was just a dumb device that provide data, great data, sell back the electrodes, not a lot you could do with it. SOZO offers us phenomenal opportunities across the board. But what I just described was just one small portion of it. Let's go back to the example that I just made for the reimbursement. So when we look at Deaconess, what they did is they showed [indiscernible] $225,000, so in U.S. dollars. And that would be testing a large number of patients. So with that, you can imagine they're going to need more devices. And they're also going -- we're also going to be in a position to start raising our prices on the out years for SOZO. So right now, we have a 3-year contract. Typically, that price is set flat rate over the like of the 3 years. What we're going to be going to is a more robust contract that adds reimbursement continues to build that we would continue to increase our prices under that. So right now, we see that as the second opportunity for us to increase our ASPs. I can't give the order of magnitude because we're still working for those details, you're going to be able to be see those shortages as we go into market and we start [indiscernible] with customers. But you can imagine, we've got a very, very strong program. Again, I'll use Deaconess as the example. Even at the year 1, in round number, it's $60,000 all-in Medicare private pay, and we've said that our ASPs are typically around north of $1,200 per month per 3-year contract, plus a small fee on the capital equipment business. So again, just round numbers, if we take a look at that, all-in, I'd say $40,000 over 3 years. So even under that scenario, if Deaconess was just keeping their same number of patients, we would -- they would still be profitable and we're still in good shape. But as they continue to get more patients and part of what you'll hear when you listen to their take is that -- or their presentation what you'll hear is that they're getting referrals because [indiscernible] lymphedema prevention program. As they expand that, we want a piece of that because we need to continue to invest in the business and bring them better ways to manage their patients. So we're going to find every [ apple ] we can and continue to charge them that we believe is valuable for them managing their patients and continues to improve their outcomes.

[Unknown Analyst]

And the discussions of product as about what value [ it's reimbursed ], about that range? Is there a range that is way higher than you're getting then?

[Richard Carreon, MD, CEO, President & Executive Director]

Well, I'll put this way, reimbursement from private payers to a provider is contractually set up front. So they typically use as one of those as a negotiated price that they have. And so in almost every instance is if there's a premium above the Medicare. Now there's a lot of things that go into that contract. And I understand that Blue Cross Blue Shield [indiscernible] City, they have a different contractual obligation to another hospital. And so the reimbursement across the street could be different. But I think what's real world examples of Deaconess was a 50% premium, which is really a good premium that you could expect. I will say that based on Deaconess reputation, we'll better that in the country that a 50% premium is probably a very good starting point for gains in your model. And remember that national rate is $141. Deaconess is at $127 because they're in a rural city and the Medicare geographically changes the amount. So just -- so when you do your margin on a national sale, you may want to look at $141, about 50% premium is there.

[Operator]

Your next question comes from David Packham.

[Unknown Attendee]

Congratulations on PREVENT study publish. And apologies [indiscernible] and really just a statement I'd like to make is that the fact we've been able to achieve publication for PREVENT with the discussion unchanged, which I understand is the case, is quite remarkable because it pertains a very strong segment which you've alluded to, that this technology should become a standard approach, and that's quite an achievement. But my interest in the company really is some degree of [indiscernible] because I'm a nephrologist. And the technology to me seems to be tremendously -- had tremendous potential in the improved management of our chronic dialysis patients. So I'm very encouraged that you're working on both these trials. But I'd urge you to just take -- make a decision to end-stage renal failure and chronic dialysis because where this technology is going to change now the management in the nephrology space will be on chronic dialysis patient. And just for investors on the call, I'd tell you that these patients being managed are being weighed before their dialysis treatment and after, 3 times a week. The changes that we actually inflict upon the patients that around 4% of their body weight in fluids is what we take off. And you can imagine the potential from medical [indiscernible] practicing that. Periodically, the patients won't be [ accepted ] by their physicians, not even on a monthly basis to see whether what was happening with the weight. [indiscernible]. But anything that can improve upon that has tremendous potential. So I'm really pleased that you're concentrating in that area. But my question for you, is the observational study be actually done in Australia?

[Richard Carreon, MD, CEO, President & Executive Director]

The observational study is going to be done in the United States, and it's going to be done with one of the premier nephrology groups in the U.S.

[Unknown Attendee]

Okay. Okay. And that's disappointing.

[Richard Carreon, MD, CEO, President & Executive Director]

Yes. I'm sure -- as we start to expand that, we certainly continue to look at Australia as one of the key areas that we do research. And as you know, a number of institutions in the [indiscernible] study, Australia. Macquarie, who helped with the study. And we're going to look at the same thing with renal failure as well as heart failure. It's obviously [indiscernible] it's critical. [indiscernible] from the standpoint that we have a relationship with FDA, we breakthrough designation with the FDA. We want to move quickly. It's imperative that we will be optional in this study. [indiscernible].

[Operator]

[Operator Instructions] Your next question comes from Paul [indiscernible].

[Unknown Analyst]

Well, just a couple of questions related to the AstraZeneca revenue. So the SOZO business revenue for the quarter was $2.4 million. Can you give a bit of a breakout of how much of that was the AZ contracts? So the question number one relates to that?And then secondly, I think you mentioned the AZ contracts in aggregate is roughly a $5 million revenue contract. If you can give us some feel for how long duration-wise, there is [indiscernible] and the value of the residual contract?

[Richard Carreon, MD, CEO, President & Executive Director]

Certainly, Tim, do you want to take that?

[Timothy Cruickshank, Chief Financial Officer]

Sure. Yes. So $800,000 this quarter was recognized under the clinical business, which is primarily made up of those AstraZeneca contracts. So we have a number of other clinical trial contracts as well, so $800,000 of the $2.4 million. We're roughly a little over halfway on average contract there. So I don't have the exact numbers in front of me, but with that we will have that revenue to go over the coming quarters and remaining revenue to be recognized. Is that [indiscernible], Paul?

[Unknown Analyst]

Yes. So just roughly, is that -- will that be over the next 12 months, 2 years? Is it a fairly sort of even distribution? I guess partly what I'm trying to get a flavor for is when that eventually runs off, unless they extend their trial or move to a new trial that would need your device, there will be a little bit of a small revenue hole, obviously. So that's why I'm trying to understand the timing of that.

[Timothy Cruickshank, Chief Financial Officer]

Great question. Yes, absolutely. So over the next 6 to 12 months, we'll continue to recognize revenue under the AstraZeneca contract. So the remainder of that coming in over that time period. And then the idea is there that the acceleration in the oncology space, where we're primarily focused now on the successful reimbursement, will more than cover-up any of that lost revenue from AstraZeneca. So if the timing of the acceleration works, we will be replacing oncology units for the renal trial if those weren't to be expanded or extended.

[Operator]

There are no further questions at this time. I'll now hand back to Mr. Richard Carreon for closing remarks.

[Richard Carreon, MD, CEO, President & Executive Director]

Thank you, everyone, for joining us today. We appreciate your time again and your support, and we're looking forward to the next time that we can look forward to results in Q3. So I have [indiscernible]. That will end our call.

[Operator]

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