ImpediMed Ltd

ASX:IPD

Earnings Call Transcript 2019-Q4

[Operator]

Thank you for standing by, and welcome to the ImpediMed Q4 FY 2019 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]

Thank you, Lexie. Welcome, and thank you for joining us today. We are hosting this conference call to discuss our 4C for the fourth fiscal year quarter ending 30 June 2019. Our CFO, Morten Vigeland, is with me on the line as well.During today's call, I'll be referencing the 4C we lodged this morning, Australian time, as well as the investor slide presentation lodged the 19th of June. As you know, we were just in the market last month, so our comments will focus on just the key issues. As we normally do, we'll take questions following my comments.Our financial results for the quarter ending 30 June were as follows. Total revenue for the quarter was up 40% to $1.4 million, up from $1.0 million last quarter. This growth was driven by a significant increase in SOZO revenue. Our recognized revenue for SOZO contracts for the quarter was $1.0 million, up 67% from $0.6 million last quarter and an increase from the same period last year of 150%.Our contracted revenue pipeline increased to $8.7 million, up 13% from the previous quarter. Compared to the end of last fiscal year, 30 June 2018, our contracted revenue pipeline is up almost 150%. The gross margins for the future contracted revenue is plus 90%.Our total contract value for the quarter came in at $2.0 million, up from $1.3 million in previous quarter and an increase from the same period last year of $0.1 million. As noted from previous investor calls, we continue to see seasonality in our business, where we typically have solid quarters at the end of the calendar and fiscal years. Now we believe the main drivers of this is the budget cycle at our customer level. Until we have seen widespread reimbursement, we believe this seasonality may continue.But to date, we've signed contracts for more than 400 SOZO devices globally. Our annual recurring revenue for SOZO contracts increased to $3.4 million. This is up 21% from the previous quarter, and an increase from the same period last year of $2.1 million or 162%.Net operating cash outflow for the quarter was $5.4 million, up from $4.8 million in Q3, but down $0.3 million from the same period last year. The increase in cash outflow was primarily related to an increase in inventory purchase of $0.2 million and an increase in R&D spend of $0.5 million. The increase in R&D spend was related to the timing of payments for our clinical trials.Cash receipts from customers for the quarter were $1.2 million, and cash on hand as of 30 June 2019 was $11.3 million. Cash balance on a pro forma basis was $24.3 million, including the net proceeds from the entitlement offer that closed on 19 July 2019.Adoption of our technology remained very strong. Churn since our launch of SOZO has been less than 0.5%, and total patient tests conducted since we've launched SOZO has now surpassed more than 50,000, with almost 14,000 tests conducted alone in Q4.Now let me provide you an update to the 4 reimbursement initiatives as outlined on Slide 25 of our investor presentation. First of all, the NCCN guidelines. As you're aware, the NCCN guidelines are the bible of cancer care in the United States. We worked hard over the last 6 years to have them recognize lymphoedema as a major consequence of cancer treatment. Earlier this month, Vanderbilt, the American Society of Breast Surgeons Foundation and the Learn Patient Advocacy group submitted an application to the NCCN for inclusion of bioimpedance spectroscopy for the detection of subclinical lymphoedema. Obviously, this is an important milestone for us, and we'll keep the market advised when we hear more information about the NCCN decision on that application.#2 initiative was the technical assessment. As background, in 2010, the Agency for Healthcare Research and Quality, also known as AHRQ, now this is an agency under the United States Department of Health and Human Resources, published a technical review of bioimpedance technology in general. This review is based on studies available at the time, and the review was not favorable.When the interim analysis of the [ PREVENT ] study was published, we requested a technical assessment of our bioimpedance spectroscopy technology and ours alone. Based on meetings with AHRQ, the application has been accepted for consideration for a full review. This is the first critical phase of several that are required for a fully publicly disclosed technical review of our new evolving technology, and we see this as a very positive step forward. And again, we'll keep the market advised as we move forward with this technical assessment.Commercial payers. We continue to meet with and submit our request for payments of our CPT Category I code to commercial payers. At this time, we have not been made aware of any decisions by a commercial payer. These are early days, and this is not unexpected. The meetings we've had have gone very well with several of them asking for additional information. One major payer has scheduled a full clinical review of our data for August. Obviously, reimbursement is our #1 focus, and we will continue to contact payers and keep the market updated as to our progress.The fourth critical reimbursement initiative was our publication plans. And we outlined 3 areas of focus. First one was the 2-year PREVENT trial data. The principal investigators are currently reviewing on the 2-year data with its original 508 patients. As you know, the lead investigator has committed to a publication by the end of the calendar year, and we have confirmed that they are on track still to do so.Second of all, we set our independent evaluation of the cost of treating lymphoedema. I was informed by the lead author this evaluation has been submitted and accepted for publication, and we expect that to be published later this year. Here, we saw there were additional independent studies. I have been made aware that several studies have been completed and are expected to be published, yes, later this year.Let me provide you a quick update on heart failure. We continue to enroll patients in our heart failure study with a number of sites now recruiting and enrolling patients. There are meetings scheduled with the principal investigators as well as our advisory board at a major heart failure congress later this quarter. So we'll be giving a full update on the heart failure program on our next quarterly conference call.In our June investor presentation, we provided guidance to the market for the first time. So please see Page 7 of our investor presentation for the details. Now our confidence in providing guidance is based on the new SaaS model we introduced when we launched SOZO. As you are aware, subscription business model provides greater insight into the forward-looking revenue streams. And we are now beginning to clearly see those. We have stated on a number of occasions, the critical juncture of the new SaaS business was a point where the subscription revenue exceeds 50% of revenue. We just crossed that critical point.The continued acceleration of our growth is now dependent on 2 key factors: the continuation and expansion of our current subscription-based business and the acquisition of new customers. We outlined the key initiatives to drive these 2 factors in our investor deck on Page 7. And during the coming quarters, we will provide updates to these kind of initiatives.Now let me say, we are extremely pleased with how we closed Q4 of FY '19, that sets us up very well for fiscal year '20. We're excited about the future of our business model as well as our SOZODigital Health platform. And from a personal perspective, we would like to thank our investors. We just completed a very successful capital raise, which would not have happened without your support. So again, thank you. Lexie, would you please open up the lines for questions?

[Operator]

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

[Shane A. Storey, Senior Analyst]

Look, I've got 3 questions. The first is just looking at the 40% increase in SOZO revenue this quarter, could you comment -- were any new centers added during the quarter? And then, I'm sort of specifically interested in the Ascension Health Hospital network.

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

We have added new customers. We added more than 50 new devices this quarter, Shane, and I can tell you that Ascension, we didn't have any new devices at Ascension, but I can tell you we are in discussions with Ascension, and they are expanding their educational program and they want to do educational seminars to other Ascension groups. So we see that as a positive step forward. They are very familiar with our technology, and the lead center has committed to all these educational seminars within the Ascension system.

[Shane A. Storey, Senior Analyst]

Yes, it has. And I guess, as we sort of segue into FY '20, look at that revenue guidance that you provided a couple of weeks ago now. Just if you -- and that information that you provided back in June or July, whenever it was, talk to some of the sort of factors that need to go right to get to the top end of that guidance. So I was just wondering if you could just refresh our memory on some of those levers that are available just to get the revenues towards the top end. And what sort of needs to go right and by when to sort of get us up near that sort of $10 million mark?

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

Certainly. So here's how we explained it. If you look at Slide 7, and if you don't have it in front of you, I'll quickly go through the key things. The growth drivers we said that are going to be important to get us to the mid-range, and then I'll talk about the ones that get us to the high end. So to get us to the mid-range to drive our lymphoedema national program on prevention, which we're starting to get traction on, this new program we outlined when we were in the market. And we're very excited about people now talking about the prevention versus just the detection with that device. And we planned for a full rollout later this quarter nationally. We need to target existing customers who are expanding their patient testing because as we've learned, if they expand their testing, they buy more devices and they buy more subscriptions. And so that's going to be critically important for us.Expand indications. What we're finding on some of these large cancer centers as they get used to using SOZO and they get used to testing patients, we then have an opportunity to sell them addition -- additional indications, which just bumps up our monthly subscription cost. The educational seminars are proving very valuable for us on expanding the usage of our device, so that's another one. We need to significantly reduce our sales and billing cycle time. We've started to see the effects of that with our new software. As we talked in our last quarter, our 3.0 software was specifically designed to reduce that installation time.We need to continually provide new economic data that shows the benefits of not only eliminating or reducing lymphoedema but also the cost savings through the system, and that's proving very beneficial as we go and start talking about the economic drivers as well as the patient outcome drivers. And then, we should start to see initial private payers begin testing later in the year, and we put that in the back half of the year. That gets us to the mid-range.To get us to the high end of that would be to expand existing customers into other cancers, such as gynecological, melanoma, prostate cancers and so forth, adding existing customers. So this gives low acquisition costs to us and high returns for us. And then that gets incorporated into the NCCN guidelines and then to see an increased number of private payers.So one way to take a look at it is that if you take a look at the low end, that's about 200 devices, the mid-range is 300 devices and the high range would be for about 300 devices in the marketplace.

[Shane A. Storey, Senior Analyst]

Okay. Look, my last question just relates to just -- I've just had to look now at the total operating expenses for FY '19. Should we expect operating expenses to track in a similar way for FY '20 sort of noting that FY '19 has come down quite a bit from FY '18?

[Morten Vigeland, Chief Financial Officer]

Yes. I think when you look at the FY '19 versus FY '18, the change in operating expenses, there is about $3.5 million, Shane. And I mean we wouldn't see that steep of a decrease in fiscal year '20. So I wouldn't say we're going to reduce our operating expenses by another $3.5 million. I think it will probably be flat to slightly down.

[Operator]

Your next question comes from Matthijs Smith with Canaccord.

[Matthijs Smith, Senior Analyst]

Great. Great to see some nice traction on the commercial adoption. Like Shane, just to imitate him, I've got 3 questions as well. First one is just around how SOZO is being used. Do you have any visibility in terms of what people are actually testing? Is it still primarily breast cancer? Or are there centers who are starting to use it for some of the other applications, such as protein insufficiency and some of the other things that we've heard about in the past?

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

I will tell you there's a couple of things we're seeing because, again, we're seeing the data live. And so the latest analysis did show a couple of things. One, we're seeing more people starting to test for bilateral lymphoedema. As we know, until we have SOZO, we can only test for unilateral.So we're seeing a greater interest now in the body composition information they're looking for such as nutrition, such as that they're now looking into dehydration for a different subset of cancer patients, head and neck cancer patients, for instance, who have a high rate of readmissions in the hospitals. Because of their treatments, they have trouble swallowing and eating. And so they're in the emergency room on average of 2 to 3 times during their course of treatment. So they were able to detect that early. They can try to intervene -- intravenously while they're still in a clinic versus going into the emergency room. So we're starting to see a number of tests being conducted that is not lymphoedema specific, but for us are providing great insights that people are now starting to realize the software is much more robust than the old U400. And so we're being requested for additional training or additional insights into what we can provide.We don't have a lot of -- I think that it's specific by account because we've just started that analysis, Matthijs. But certainly, that's something we'll be bringing up in the future because it is one of our growth drivers is to expand the number of indications that we charge for.

[Matthijs Smith, Senior Analyst]

And just along that theme. You got the approval for bilateral assessment last year. The majority of people using it or adopting that functionality, and are they paying more for it? Or is it still very, very much focused on unilateral assessments in breast cancer?

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

I would say, currently, the majority is for unilateral and breast cancer. However, the more established programs who are starting to test hundreds and thousands of patients a year are now moving beyond unilateral to bilateral because it is an issue that they have to deal with. And so -- and we are charging for bilateral in most cases. I would say there's a few exceptions of large centers who wanted to evaluate it. So we allowed them to evaluate it, but our intent is to get everyone to start paying for an expansion of our indications. And bilateral is the major indication for us.

[Matthijs Smith, Senior Analyst]

So it is proving up the model that you can introduce the technology and then add functionality and start charging more for that additional functionality?

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

Yes.

[Matthijs Smith, Senior Analyst]

Yes. Second question is just around the technical assessment from the AHRQ. What were the sort of technical concerns that resulted in not having favorable review? And I guess, to what extent are you comfortable that the data that you are able to submit now will address those concerns?

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

Well, first of all, understand that the original technical assessment was based on general bioimpedance, so anything from a single frequency up to our device, and they didn't specifically address every single manufacturer. They just did bioimpedance in general. So -- and also it only looked at data that was available up to 2009 because they published the results in 2010. So they considered bioimpedance at the time as experimental and not fairly able to detect changes in lymphoedema.So if you look at the data prior to 2009, nobody had a lot of data. Though we had probably some good data, we didn't have a lot of data. So if you think about the future now, we fast forward 2019, and we are able to have a discussion with AHRQ, talk to them about the PREVENT trial, they were favorably impressed by a small company wanting to do or conducting a large global trial, order of magnitude in which we did, plus all the other independent studies. And we requested not a review of bioimpedance devices but bioimpedance spectroscopy. And only our device, which they were very favorable towards based on the fact that we now have multiple FDA clearances and based on the fact that we had multiple studies from around the globe. So I would say that we have a very good chance of, one, completing the entire process; and two, having a favorable publication.

[Matthijs Smith, Senior Analyst]

And from recollection, that technical review then is a document that could be used by some of the private payers for making their own coverage decisions?

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

Yes, very good point. I can tell you now there are a number of private payers who have used that technical assessment as a reason for not paying. And one of the things they bring out is the fact that, one, it's experimental; and two, that there is no randomized trial.So the interesting thing is as we've gone around with several private payers and made our presentations, we always make it a point to say that if, in fact, they have the AHRQ evaluation as part of their denial, that, one, the data was old. That was from 2009. And then we'd laid out more than 190 studies on lymphoedema that have been conducted since that time. So I think we put that to rest where we have a chance to present that data.And for us, it's been -- it gives us a chance to -- look, it's a good starting point for us in these major meetings because as you know or you may be aware of the fact that when you go into these meetings, they try to look at their own policy and why they made a decision, either positive or negative, and that's their basis for starting. So if we go in knowing that, we can start with, one, the knowledge base; two, the number of studies; and three, the reason we believe that we have now moved out of that experimental range.

[Matthijs Smith, Senior Analyst]

Excellent. And just finally, last year, you signed up a contract with an insurer who was found to be using SOZO just for their own assessment of their heart failure patients. Has there been any sort of update in terms of them using SOZO? How effective it's been? Any read-through as to their ability to manage or better manage heart failure patients as a result of using SOZO from that project?

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

Well, to be honest with you, Matthijs, I have not stayed up with that particular one, but everything else, we have going on. It's a question, how -- I'll be prepared to answer that next quarter, how's that?

[Operator]

[Operator Instructions] Your next question comes from [ Ian Hyde ], a private investor.

[Unknown Attendee]

Just following on from some of the other questions that have been asked. So if we're getting into expanding indications with existing users plus linking that in with other indications that you're working on with the FDA, looking at bone density, renal failure and so on, linking that into the new software and the machine learning that I understand that, that's being used, can you put some more color into just how much this is going to a system drive? And what it's actually providing at the moment to actually really get traction in all of these areas?

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

Yes. So let me clarify a couple of points here, Ian. First of all, our focus is twofold. It continues to be on the cancer space with lymphoedema, and it continues to be on the heart failure clinical trial. So the software today provides information on basic body composition, which gives them information on muscle, on fat, on bone. It gives them the basics.Now if they want additional information, we need to get FDA clearances for that. So it's part of the presentation. We went into various indications that we have filed for based on the data that we already have from our own SOZO database and some other small trials that were already done independent of us.So the accounts who are using this for head and neck cancer, as I mentioned earlier, are using the dehydration status that we have on there, where you can measure the total body and water of a patient. And they take a baseline, much like on lymphoedema, and then they follow that baseline. So if they're losing fluid or they're gaining fluid, they can keep track of that. And they know exactly what it's doing.It's not a major emphasis or focus for us, and it's only at some very large centers who have high degree of research interest. Right now, our focus of the field is to move into lymphoedema cancer -- excuse me, cancer centers, develop a lymphoedema business, move on to the expansion into bilateral lymphoedema, but we're not having a major push by the sales organizations for these other indications at this time. We need to establish lymphoedema first. When these large centers call us, we're certainly happy to provide information. We like the fact we've been looking for new ways to use them. But once we get lymphoedema well established over this year, then it will be a major emphasis, probably next fiscal year or late this fiscal year.

[Unknown Attendee]

Sure. Okay. Well, just further to that, in the presentation the other week, you're collating real-world data to large applications to the FDA for bone density, renal failure, malnutrition and so on. Update on that?

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

Yes. So the good news about our device is the frequencies that we use, 256 frequencies, we do that sweep on every patient. So we can run any algorithm we want in that patient population. So for instance, of the 50,000 tests that we have today, we can take a look at patients who are at risk of dehydration or malnutrition. We can't provide that as an indication for use to customers today because they are not FDA cleared. But we can certainly use that data, real-world data in our applications, and we have used real-world data in our applications to the FDA, one, in our initial applications and then our follow-up discussions with them. So it was proven to be very valuable for us as we move forward.So again, it's -- the beauty about our technology, those frequencies are never going to change. And so any indication we want, we can go retroactively, historically look at these patients and pull their information. One, we know they're a sick population; two, we know whether they're heart failure, we know whether they're cancer survivor. So we can classify them in that level. We know if they are male or female. We know their general location. So as we look at this information, we can provide very specific patient population information to the FDA. So for us, it's a very positive way now for us to move forward on a very inexpensive way for new indications.

[Unknown Attendee]

Sure. And since you mentioned those 3 or actually 4 in the presentation the other week, any idea as to when you will be formally lodging applications and/or news from those?

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

Well, let's take a look at that because the way we have it laid out, I think, I just want to make it clear on that, that will be Slide 10, is we have lodged malnutrition, bone density, dehydration to the FDA. Renal failure, we've done the R&D work on it, and we have not launched any clinical trial. So if we turn to market, we're not going to be launching any major initiative that we need to spend the money on. I mean, renal failure, obviously, is a big opportunity, but it can wait. And right now, our focus is on lymphoedema and heart failure. Malnutrition, bone density and dehydration are going through various stages with the FDA, and we continue to have discussions with the FDA on those various applications, and we're answering the questions that they have. So we would expect some time the end of this year or early next year that we would have those indications through the FDA in one form or another.

[Operator]

Your next question is a follow-up question from Shane Storey with Wilsons.

[Shane A. Storey, Senior Analyst]

Not often I come back for a follow-up, but here we are. Going back on the AHRQ review, could you -- is that the one that was prepared by -- I think it was McMaster University as part of the MEDCAC review on bioimpedance back in 2009 in Baltimore. Was that, that one?

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

No. Actually, they used part of that, but it was actually done -- believe it or not, but the centers of Medicare and Medicaid outsourced it to a Canadian group, who looked at various data points.

[Shane A. Storey, Senior Analyst]

Yes, that's the one that, I think, both talking about the same study.

[Operator]

Your next question is from [ Ian Moore ], a private investor.

[Unknown Attendee]

Just with these conversations with private payers, I mean, is that moving in a direction where they're only going to provide policies based on some definition of high-risk patients? Or is it going to be -- where is that on average heading as to who will be -- who will that -- who they will be paying for?

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

Ian, the discussions that we've had have not focused on kind of risk stratify the patients. What we've done is we've actually provided them what the risk profile is. So whether you have had lymph nodes removed or you have taxanes or you have radiation, which covers a large, large portion of the adverse patient populations, you're at risk of developing lymphoedema. What we focused on is twofold: one, patient outcomes showing from our patient data from the PREVENT trial a 95% reduction in lymphoedema; and the cost of treating advanced cases or complicated cases of lymphoedema, which an independent study has shown to be up to $70,000 a year, which is about $60,000 more than the average breast cancer survivor.So we've not gotten into specific discussions about risk stratification, because what we don't want them to do is focus on that. So right now, I can tell you that we have -- we haven't avoided any questions. We adjust the way we presented. Our perspective and that of the principal investigators of the trial say that everybody who has undergone breast cancer treatment or those that have undergone prostate treatment, that the impacting lymphatics should be tested. Now impacting lymphatics could be from a surgical removal, could be from using [ taxanes ] or could be radiation or a combination of those 3. So we're trying to leave it as vague as possible so that they don't get into a point of what is risk stratification and who should get the testing and who shouldn't get the testing. We've not crossed that bridge, and I don't know if we'll ever have to cross that bridge. I just don't know, but we have -- based on the advisory board that we have, a former private payer, medical directors of Medicare private payer -- or excuse me, Medicare medical directors, we've worked very hard not to make that an issue.

[Operator]

Your next question comes from Scott Power with Morgans.

[Scott Power, Senior Research Analyst]

One quick question, just on the technical assessment that's been accepted for review. Roughly, how long do you think it might take? And does it need to be finished before the NCCN will make a decision?

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

Oh, my gosh, great question. So first of all, let me tell you, the NCCN relies on their own technical assessment. So they are not going to be looking at AHRQ because -- and also, what we have brought up with private payers is the fact that, that was done in 2010 based on 2009 prior data. And then, we quickly showed that we've done more than 144 studies since that evaluation took place. So no -- look, I don't know how long it will take, Scott, but the good news is that we've filed for it. We can tell insurance companies that we filed for it. But more importantly, what we tell them is all the data is being collected since that. So -- and also, you recall that the AHRQ said there was no randomized trial. And so that's what's typically repeated by insurance companies. So now we can lay out all of these trials that have been done and one that is Level 1 evidence study.So again, it's -- for us, it's really a very strong talking point with insurance companies. And again, the NCCN doesn't look at technical assessments by anybody other than their own medical group.

[Operator]

Your next question comes from Sally Watson with Oblique Logic.

[Sally Watson]

Just a quick follow-up on the question I had last time, I think, we spoke was whether you've had any contact with GPOs? And if that had progressed at all in terms of driving sales channels for you?

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

No, we will have -- as I said last time, GPOs were not a focus that we're currently going after. One, we don't feel like we have to negotiate a national contract. We're in a number of hospitals who belong to GPOs. I really believe that our focus is twofold: one, on the private payers, and then on those integrated health and networks because each of those provides us an opportunity. Now that doesn't mean we won't get into a GPO. But as we looked into the GPOs and the discounts we would have to offer to get into the GPOs before we can even approach somebody is it's something that we don't want to cross unless we have to.And the other thing is, the hospitals that belong to these GPOs, the number that we have, I don't know that off the top of my head, but I can tell you this, none of them have asked us for a GPO contract before they would proceed, and it has not prevented us from getting intuitive. It's not like we're a pacing device or an implantable or a drug or something that will have mass adoption at this point. I would say that once we get to a large market penetration with companies we will have to deal with.But I think right now IDNs are -- will provide us a big opportunity because they have capitated fee, as you know, and they're looking for ways to improve patient outcomes and reduce costs so they can improve their profitability, and then also the private insurers.

[Operator]

Your next question comes from Tony Scenna with Selector.

[Tony Scenna]

Just a question on the -- as the business shifts to a commercialization model, can you just talk a little bit about what changes occur internally to achieve your -- the guidance that you put down for devices? I mean, you've spoken just quickly then about at the low end, you would like to see 200 devices to meet that. So I'd just be interested to know how -- what the sales composition is like, sales team is? And how you're approaching that?

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

Yes. So the sales team has -- we still have about 12 people in the field as we've told the market. And until we start to see adoption from private payers that we would try to limit that. And then when we start to expand, we will do it in such a way before private payers, what we saw is if we started this free momentum that we would hold some other parts of the business, expenses and so forth, to really drive that. And so we started to see private pay adoption and then traction because we believe most of that could be self-funding at that point.So really 2 phases: one, at this stage before we see any private payer start to come on board, we'll use what we currently have. We are adding to that. We are adding to the sales channel. And we are reducing expenses in other areas in order to pay for that. And then, we have already made a conscious decision once we start to see traction in private payers, and that results in increased revenue, that will start to beef up that organization as well. So we're taking it really in 2 different phases at this point, Tony.

[Operator]

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

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

Okay. Everybody, well, listen, thank you for joining us today. We appreciate the time, and we look forward to reporting in the next quarter, and we're excited about the year. So again, thank you very much, and have a good day.

[Operator]

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