Profound Medical Corp

TSX:PRN

Earnings Call Transcript 2021-Q1

[Operator]

Thank you for standing by, and welcome to Profound Medical First Quarter 2021 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now like to hand the conference over to your speaker today, Stephen Kilmer, with Investor Relations.

[Stephen Kilmer, Investor Relations]

Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include forward-looking statements regarding Profound and its business, which may include, but is not limited to, expectations regarding the efficacy of Profound's technology in the treatment of prostate cancer, BPH, uterine fibroids, palliative pain and osteoid osteoma. Often, but not always, forward-looking statements can be identified by the use of words such as plans, is expected, expects, scheduled, intends, contemplates, anticipates, believes, proposes or variations including negative variations of such words and phrases or state that certain actions, events or results, may, could, would, might or will be taken, occur or be achieved. Such statements are based on the current expectations of management. The forward-looking events and circumstances discussed in this conference call may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company, including risks regarding the medical device industry, economic factors, the equity markets generally and risks associated with growth and competition. Although Profound has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from most anticipated, estimated or intended. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made, and Profound undertakes no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future events or otherwise, other than as required by law. For the benefit of those who are new to the Profound story, I would like to take a moment to summarize our business. Profound develops and markets customizable, incision-free therapies for the ablation of diseased tissue. We are currently commercializing TULSA-PRO, a technology that combines real-time MRI, robotically driven transurethral ultrasound and closed-loop temperature feedback control. The technology is designed to provide customizable and predictable radiation-free ablation of a surgeon-defined prostate volume while actively protecting the urethra and rectum to help preserve the patient's natural functional abilities. TULSA-PRO is CE marked, Health Canada approved and 510(k) cleared by the FDA. We are also commercializing Sonalleve, an innovative therapeutic platform that is CE marked for the treatment of uterine fibroids and palliative pain treatment of bone metastases. Sonalleve has also been approved by the China National Medical Products Administration for the noninvasive treatment of uterine fibroids and has recently obtained FDA approval under our humanitarian device exemption for the treatment of osteoid osteoma. While we do not expect this FDA HDE approval to have a material impact on revenues in the near term, it is a significant milestone for our company, and we are making preparations for its U.S. commercial launch later in 2021. On the call today representing the company are Dr. Arun Menawat, Profound's Chief Executive Officer; and Aaron Davidson, the company's Chief Financial Officer and Senior Vice President of Corporate Development. With that said, I'll now turn the call over to Aaron.

[Aaron Davidson, CFO & Senior VP of Corporate Development]

Good afternoon, everyone, and welcome to our first quarter 2021 conference call. On behalf of the management team and everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Arun in a moment for an update on our commercial activities. However, before I do, I'd like to provide a brief update on our first quarter 2021 financial results. A quick reminder that we've changed our presentation currency from the Canadian dollar to the U.S. dollar. To streamline things, all of the numbers we will refer to have been rounded so or approximated. Our first quarter 2021 sales performance was significantly negatively affected by COVID-19 impacts, particularly in the months of January and February, resulting in our first revenue decline since Q1 2018. For the 3-month period ended March 31, 2021, the company recorded revenue of $711,000, down 41% from $1.2 million in the first quarter of 2020. As we mentioned in today's press release, business began to rebound in March. So far, that positive momentum has continued into the current quarter. While we do not provide formal quarterly or annual financial guidance and we continue to be cautious about the scope and pace of U.S. TULSA-PRO commercial adoption in the near term due to pandemic, factoring in the recent uptick in procedures at existing sites and what we already have in our TULSA systems agreement pipeline, we believe that we have the potential to make up for the Q1 revenue shortfall during the remainder of 2021. Total operating expenses in the 2021 first quarter, which consists of R&D, G&A and selling and distribution expenses were $6.8 million, an increase of 47% compared with approximately $2.1 million in the first quarter of 2020. Breaking that down further on a year-over-year basis, expenditures for R&D increased 47% to $3.1 million. This was primarily driven by higher spending for R&D initiatives and projects, options awarded to employees, additional headcount and an overall increase to general expenses, partially offset by decreased travel expenditures due to COVID-19 restrictions. G&A expenses decreased by 6% to $2.1 million due to lower salaries and benefits as the result of bonuses earned by management in the prior year and timing differences associated with the accruals, partially offset by increases to consulting fees and share-based compensation. Finally, selling and distribution expenses increased by 70% to approximately $1.6 million. Overall, the company recorded a first quarter 2021 net loss of $7.5 million or $0.37 per common share compared with a net loss of $2.6 million or $0.21 per common share for the same 3-month period in 2020. As at December 31, 2021, Profound had cash of $78.5 million. With that, I'll now turn the call over to Arun.

[Arun Swarup Menawat, Chairman & CEO]

Thanks, Aaron. I would like to start by addressing the revenues in Q1. As Aaron discussed, they were lower than expected, but as you will see, that has not translated into our being less bullish for the year. Let me highlight the key reasons why. First, as various sell-side analysts have noted this earnings season, a similar pattern emerged across the med tech space in the first quarter with even the most established companies seeing COVID's impact in January and February followed by a late March resurgence. We saw a similar pattern. However, since we are a game-changing technology that requires full training for treating in the MR suite and are relatively early in the U.S. commercial rollout of TULSA, our procedure decline in the first 2 months of the quarter was likely a little steeper and the recovery in March, while noticeable, wasn't robust enough to make up the shortfall. Second, we're starting to gain traction in building a high-quality U.S. installed base. As a reminder, our U.S. market entry strategy for TULSA-PRO targets 3 types of end users: one, early adopters, which includes urologists specializing in cutting-edge alternative prostate disease treatment; two, independent imaging center companies; and three, opinion-leading teaching hospitals. Each of these are expected to play different roles in supporting both short-term and long-term adoption. Our early-adopter TULSA-PRO sites were not as impacted significantly by COVID in the first quarter. While still slowed by travel restrictions, they continue to treat a growing number and an increasing variety of patients. At the beginning of 2020, we estimated that after the first 6 to 12 months of being operational, the average run rate would be 40 procedures per year, eventually growing to 100 procedures or more after that. Today, these centers have exceeded those targets by about 50%, achieving an average run rate of 60 procedures per year, and we believe that their run rate will continue to increase as COVID recovery continues. With respect to the second group, the imaging center companies, RadNet, Liberty Pacific, West Hills Center in Los Angeles, is now actively treating patients using TULSA after initially experiencing delays in 2020 and early 2021 related to COVID-19. As most of you know, we also announced a U.S. multicenter TULSA-PRO agreement with Akumin last week. Akumin currently has 79 operating clinics in Florida and a total of 134 sites across its network in 7 states. We expect to install TULSA-PRO systems in up to 10 Akumin centers over the next year or so, with the first site anticipated to be operational in the fourth quarter of 2021. Akumin is making a significant investment to impressively outfit these centers to focus on men's health. The initial geographic focus of their new men's health centers will be in Florida, where their first TULSA-PRO install will be. Texas and Pennsylvania are expected to follow. Based upon the success of the first 10 installs, we hope to expand our relationship in the future to include additional Akumin's men's health centers. I'm pleased to highlight that as part of the third group that we are targeting, we have agreements with top-tier hospitals in geographic locations that represent the largest markets for prostate care in the country. In California, Florida and the Northeast, we have agreements with renowned institutions like UCLA, Stanford, Johns Hopkins, Yale Cancer Center, WellSpan Advanced Prostate Cancer Center and Mayo Jacksonville and Mayo Rochester. In Texas, we have University of Texas Southwestern, Memorial Hermann and Methodist San Antonio. A couple of these aren't listed on our patient site, tulsaprocedure.com yet, but they will be added once they are up and running. From the perspective of signing new U.S. TULSA-PRO commercial agreements, the first quarter was our best yet. All the leading hospitals that I mentioned, with the exception of Rochester, are expected to go live in the summer time frame, while Rochester would become active around the end of the year. And as I mentioned before, the first Akumin site is to go live in Q4. The price point of all agreements remains the same at $7,710 or higher per patient. While we continue to expect teaching hospitals to be relatively lower volume at first and we have seen these institutions being particularly impacted by COVID-19, we still believe they are best positioned to drive long-term adoption of TULSA-PRO by training the next generation of urologists presenting at medical conferences and publishing papers in relevant journals. We are already starting to see the impact of that with TULSA-PRO being featured on the March 2021 cover of the Journal of Urology. To summarize the adoption status of TULSA in the United States, we have 10 operating sites and they are looking to increase usage in the remainder of 2021 and beyond. We have a significant number of opinion-leading sites, which we believe is also an early indicator of future adoption. Finally, Q1 was our best quarter yet in terms of new TULSA-PRO system agreements signed as hospital administrations were still functioning. And as a result, we now have more contracts for installations in our hands than our current installed base. These are the primary reasons why we remain confident in regaining our momentum in spite of the COVID-19 effect on our Q1 revenue. Although we remain cautious, we continue to also be pleased that the leading hospitals are utilizing the C-code to bill for TULSA procedure and that generally, what we are hearing is that the hospitals are getting paid. This again continues to be our interim strategy until a full CPT 1 application for TULSA can be filed and supported by the American Medical Association. Next, I would like to provide an update on the status of the planned CPT 1 application. We have initiated dialogue with relevant societies, including the American Neurological Society and the American College of Radiology to get initial feedback on the requirements to qualify for the CPT 1 application. Based upon their feedback, we continue to believe that the clinical publications on TULSA procedure and the publications that we anticipate later this year will likely be sufficient to meet the requirements for the application by end of this year. If the adoption of TULSA usage continues to increase as we anticipate, we may get the support that we need to file in 2022. In short, our CPT strategy remains intact. Our strategy is to not only continue to pursue the CPT 1 application with the combination of clinical data that already exists and that will likely be published by end of this year but also support a full level 1 study specifically for treatment of prostate cancer. This study will be run in parallel with the filing of the CPT 1 application as the study is not a requirement to obtain the code, but may further support coverage by insurance payers and will also provide additional clinical data to support significant adoption. To briefly describe the level 1 study, the trial that will be called [ Captain ] is designed to compare the TULSA procedure against radical prostatectomy with n equals 201, randomized 2 to 1. That is 134 TULSA procedures versus 67 radical prostatectomies. The trial design was developed in conjunction with our Clinical Advisory Board, and it has already been approved by a central IRB. The primary end points will include safety and efficacy, including measurements of side effects and non-inferior progression-free survival over time. The trial will primarily be run in the United States, and we anticipate patient recruitment to begin in Q4 this year. We're targeting about 10 to 12 sites, and they will include both sites that were part of TACT as well as new sites. We will continue to keep you informed on a periodic basis. The trial will be on ClinicalTrials.gov about the time patient recruitment begins. In the meantime, TACT 2.0 recruitment is coming along well, and we anticipate that patient recruitment will be completed by end of this year. The majority of patients will be in the U.S. We also anticipate that 3-year data from the initial TACT trial will be published later this year. In addition, we're aware of one additional Level 2a study and 2 additional Level 2b studies that will be submitted for publications later this year. So to summarize, I would like to echo Aaron's comments that while there remains uncertainty with respect to the TULSA procedures' adoption rate in the very near term due mainly to COVID-19's impact, we believe that we have the potential to make up the revenue shortfall we experienced in Q1 throughout the remainder of the year and remain bullish about our business. In spite of the impact of COVID-19 as a macro event, our team has been executing well. We have been signing additional TULSA-PRO site agreements at an increased pace over 2020. We are continuing to see broader TULSA-PRO adoption, both in terms of procedure volumes and types of patients treated in centers not as impacted by COVID-19. And we are progressing TULSA-PRO's reimbursement strategy by conducting additional studies to apply for a specific CPT code and ultimately a reimbursement determination. This ends our prepared remarks for today. With that, we're happy to take any questions you might have. Operator?

[Operator]

[Operator Instructions]

[Aaron Davidson, CFO & Senior VP of Corporate Development]

As you do that, operator, I should comment that I said our cash at December 31, 2021, was $78.5 million. I should have said March 31, 2021, was $78.5 million. Thank you.

[Operator]

And we do have a question from the line of Anthony Petrone with Jefferies.

[Briana Michele Warschun, Equity Associate]

This is Briana on for Anthony. I have a couple. So regarding the 5 newly contracted sites in backlog as of last quarter, when do you expect these sites to be up and running? And then my follow-up to that question would be, given the delays in one quarter, are you -- in the first quarter, are you still targeting roughly 25 installed by year-end?

[Arun Swarup Menawat, Chairman & CEO]

Yes, Briana. So most of the sites that I described are slated to be operational this summer. So I would anticipate that by the end of June, at the latest by end of July, most of the sites -- there are 2 sites that will be operational in Q4. One of them is Mayo Rochester. The other one is the first site that we signed the agreement with -- for Akumin. To your second question, as I mentioned, we have about 10 sites that are operational. We have more agreements already in our hands. And so getting to 25 at the moment, we do not see a problem with that. We think we should be able to, quite frankly, do better than 25 this year. And because of the fact that we already have these agreements is one of the reasons why we do believe that we will be able to make up a good deal of this, this Q1.

[Briana Michele Warschun, Equity Associate]

That's very helpful. And then just regarding the Akumin deal, how many systems will be installed in the initial 10 centers across Florida, Texas and Pennsylvania? And then looking ahead, what is the potential to expand across Delaware, Illinois and the other states?

[Arun Swarup Menawat, Chairman & CEO]

Yes. So majority of the systems -- or the first few systems are most certainly slated towards Florida. And then there are likely to be -- I would say at least half of the systems will be in Florida, and the remaining other 5 would be in the other 2 states that we mentioned, Texas and Pennsylvania. The strategy -- let me just quickly talk about the strategy, and I think it's more of an Akumin strategy than ours. But it is, I think, a pretty important strategy and impressive strategy. The idea is that we are focusing on the states that have the majority of prostate cancer patients or prostate disease patients, and they happen to be California, Florida, Texas and the Northeast. And then Arizona is another one that we will focus on later on. So by focusing on these large states, I think that as the awareness increases, we want to make sure that sufficient centers have TULSA-PRO availability so that people will become aware of it and they can go get treated. And as the awareness grows in the state and we earn our higher and higher numbers, we think we will be able to then supply -- sort of mimic those strategies from one state to the next. So rather than try to scatter these around the whole country, the idea is that we're putting them in key states in the beginning and leveraging all of our resources. Does that answer your question, Briana?

[Briana Michele Warschun, Equity Associate]

Yes. That's very helpful. And I have one more question on the procedure mix. So with the procedures that have been done through 1Q and even into 2Q, are you -- what is the mix of BPH off-label and then intermediate prostate cancer then moving into high-risk and low-risk prostate cancer?

[Arun Swarup Menawat, Chairman & CEO]

Yes. So I think that in general, it's a very general comment, Briana, believe it or not, perfect numbers, but I think that the number of BPH patients that we are treating is certainly increasing. My best guess is that about 20% of the patients being treated right now are in the BPH category. I think in Europe, that number is probably a little higher, maybe 35% in Europe. Of the patients that are prostate cancer patients, that's an interesting question because I think what we are seeing is that in the teaching institutions, which were undoubtedly very low in Q1 -- but I think what we're seeing in the teaching institutions, they are looking to follow the clinical trials that have been done. So they're sticking more to Gleason 7, which is mid-grade cancer patients. The early adopters, which are continuing to increase as well, they are actually treating patients that are -- that may be as much as patients that may have a slightly extracapsular activity or even patients where they are very high -- relatively high-risk patients where they think that there might be a need for a combination treatment, and they're looking to ablate the bulk with TULSA and then leave the rest for another combination. So we are seeing a pretty good variety. And even in BPH, I was actually talking with a physician just 15 minutes before we started today, and he was telling me they treated today a patient with a 270 cc prostate, the largest prostate that has been treated with TULSA. So they are definitely testing the limits. And I think that is certainly another reason for the confidence that the versatility and the flexibility of this technology is such that we do believe that a large majority of the patients can be treated with TULSA.

[Briana Michele Warschun, Equity Associate]

Great.

[Aaron Davidson, CFO & Senior VP of Corporate Development]

And Briana, I just want to comment -- this is Aaron, that BPH is not off-label. We are approved for the ablation of prostate tissue not specific to whether it's malignant or benign.

[Operator]

Our next question comes from Rahul Sarugaser with Raymond James.

[Rahul Sarugaser]

So thanks for addressing the revenue upfront. That has been helpful. So -- recognizing that you don't provide revenue guidance and we've sort of talked about the 25 installed base goal or hopefully beating that by the end of the year, are you able to give us a little more visibility in terms of going from the 10 currently operating to how many we expect to be installed in Q2 and then Q3? And then as a result, we can then do our own math to figure out what that ramp would look like.

[Arun Swarup Menawat, Chairman & CEO]

Yes. So Rahul, I think -- I would say 2 things. One is where the hospitals are open, as we talked about in our prepared remarks, we saw March was better than January, February; and April has been better than March. We are able to go to hospitals now and start installing. So if you do the math, I think we have enough agreements to -- I mean we have enough agreements to be double digits already. So you would see quite a bit of activity in the next 4 to -- from here to September, we'll be installing, I would say, at least 1 to 2 system a month probably is my best guess. Again, it's a little bit still unpredictable. But I would say we will be installing certainly 5 a quarter is a reasonable expectation.

[Rahul Sarugaser]

That's excellent visibility. And then now moving to the utilization rates. You referenced the early adopter sites operating at this relatively high level of around 60 per year, annualized. When we look at the -- when we try and reconcile that with the revenue number, it's -- there seems to be an asymmetry there. So because then if we back calculate for the rest of the installed base, it seems that they're essentially doing few to none. So how should we be thinking about an average utilization rate across the installed base, recognizing that, of course, we attenuated as you install devices and get them trained up, how should we be thinking about that rate as an average?

[Arun Swarup Menawat, Chairman & CEO]

Yes. So Rahul, I understand the -- where you're going with the question. And let me just start one more time. I think part of the reason that we said that we do have confidence in the growth rate returning after this COVID, part of it is coming from the fact that we already have enough contracts to be able to go install systems. So we know we think we can get to the installed base. And so along those lines, I would say we're going to end up with more new systems very, very soon than the older systems, which is more than a year old. So I think I do want to be very, very open and clear about that also is that initially, the run rate of these new systems is not going to be in that 60 per year rate right away. It's going to take 6 to 12 months before we get there. And the second thing is that I do want to continue to emphasize the point that we have a very, very disciplined market entry strategy that looks after those 3 types of what I call channels or customers. And every one of them is going to behave differently. And so the early adopters, they're 60 plus -- I actually think this year, they'll be better than that. Even with the first quarter, I think overall, they're going to do better than that. I think the hospitals are actually going to be relatively even more disciplined. Those channels are going to say, I'm going to do 5 or 10 Gleason 7 before I go to a higher risk. Or I'm going to train 3 or 4 different physicians before I really ramp up. Or I might want to look at a couple of outcomes of my own patients in spite of the clinical data that I see. So I do think that we should be realistic with respect to the run rate at the large teaching hospitals. Now again, having said that, I can give you another -- again, an anecdotal example. We -- WellSpan is one of the hospitals that we started -- that we signed the contract late last year. Again, they got delayed. They did their first patient in March. The second patient they did -- the physician put the whole patient and the whole thing on his own LinkedIn website with the whole -- like all the information and the images of the treatment itself. It's all done by the physicians. So it gives me confidence that they are liking what they see. But at the same time, they're still saying, "Look, I really like what I see, but I'm going to be very measured in the way I increase the types of patients I treat." And on the imaging center side, I think we're off to a very good start with RadNet with the delays. And I think Akumin, we should do even better than that, but they're not going to start until Q4. So I realize that this is a little bit of pluses and minuses here, but I want to be very clear and open about this and the reasons why it is and why we remain mid-term bullish and short-term cautious about things. And again, every quarter, we'll share with you more and more details on the adoption rates and so on. So I hope that...

[Rahul Sarugaser]

Great. Yes, that's excellent. And if you indulge just one more question around reimbursement.

[Arun Swarup Menawat, Chairman & CEO]

Sure. Sure.

[Rahul Sarugaser]

Last quarter, you talked a little bit about the C-code. And you, of course, are always very cautious around speaking around the C-code. Are you -- could you give us a little bit more update on how the rollout of the C-code is -- whether it's starting to be adopted by broader jurisdictions other than the initial? And then also just as the second part, this is great to hear that some clarity on the CPT code strategy, given that you're looking at an application hopefully towards the end of this year. But you also talked a little bit about maybe 2022. Can you give us a little bit more clarity in terms of distinguishing between end of this year and 2022 for that -- for submission of that CPT application?

[Arun Swarup Menawat, Chairman & CEO]

Yes. Very happy to. So Rahul, in terms of the C-code, to be honest, there is not a lot to add in the sense that the patients who are being treated at hospitals who are Medicare patients, they continue to get paid. The patients who are in -- who are applying through private insurances, majority of those patients are getting paid something. The hospitals that we have signed new agreements with are comfortable with the strategy, the same reimbursement strategy, and it's becoming fairly clear that, that strategy is likely to work -- continue to work. And I would say, again, soft measure. I can see hospitals becoming comfortable with billing for this new technology and the outcomes that they are seeing and in cases where they need to present more clinical data to get the insurance payer to pay. I think all that is continuing to happen, and we continue to remain very comfortable. On the CPT 1 side, again, to be honest, we're fairly happy with the way it's progressing, as I said in the prepared remarks. We were looking to engage with the various chapters, the reimbursement chapters of the top societies like American Urological Society and the American College of Radiology, which is a chapter of RSNA. And we're getting very positive feedback in terms of the strategy we've picked. And that if we can deliver what we believe we can, that, of course, that we would need from the society that we believe that it's going to be available to us. And so our goal was that we want to be able to get to that point where we qualify by end of this year. But to be honest, it's a little bit more -- a little bit more positive in the sense that not only that we believe we will be -- we'll get to the qualification point, where we also think that we are more comfortable that we will get supported by the societies than I was maybe 4 months ago. And so what that means is that once we qualify them, the application and all the administration process will start in early 2022. And by end of 2022, we should have some kind of ruling from the American Medical Association. So that's kind of the process. And overall, as I said, these are not hard numbers or anything. But I think that the direction, we remain pretty comfortable there.

[Operator]

Our next question is from Josh Jennings with Cowen.

[Joshua Thomas Jennings, MD & Senior Research Analyst]

I was hoping to ask about the sales funnel and the status here. Congratulations on the record TULSA-PRO new agreements in the first quarter. I just was hoping if you could just give us an update on -- with that success, where the sales funnel sits today in each of those 3 channels that you talked about, Arun.

[Arun Swarup Menawat, Chairman & CEO]

Sure. Josh. I mean the Akumin agreement is in public domain. So you know that 10 system over -- starting Q4 over 12 months. Then I think that there are, in the prepared remarks, I think I described at least another 4 agreements that are from leading hospitals that are -- that we have in our hand that we would be installing in the summer this year. And then I think that there are at least another couple of agreements on what we call the early adopter channel. So you're looking at in terms of contracts and then we have prior quarter contracts that have not been installed. So you're looking at, to be honest, over 15 already in our hands.

[Joshua Thomas Jennings, MD & Senior Research Analyst]

That's excellent. And I hope I was super clear in my question. But thank you for the information. But I mean to also just understand, just making sure that you're not depleting kind of where your sales leads are and that precontract funnel where that sits. I mean our assumption is that it's still full and continues to be added to as your sales efforts continue to have success. You're still -- I mean it's still such early days, but the funnel -- precontract funnel isn't being depleted and that's still flush.

[Arun Swarup Menawat, Chairman & CEO]

Yes, it is. Yes. Absolutely. Yes. I don't see depletion. I -- Josh, I also don't see anything changing in terms of feedback from patients or feedback from the urologists. In fact, every site is looking to increase utilization.

[Joshua Thomas Jennings, MD & Senior Research Analyst]

Excellent. And just to focus on the imaging center channel. Congrats on that Akumin agreement. I was hoping you could just share any updates on the RadNet agreement. The first center you said was up and running now, and I think there's a couple of other centers that couldn't come on board in 2021. Or how should we think about the cadence of RadNet centers adding TULSA-PRO into their repertoire over the coming quarters? And then any other imaging-centric companies or regions where there's potential to build on these contracts that are already with RadNet and Akumin and another one or more than those 2?

[Arun Swarup Menawat, Chairman & CEO]

Yes, absolutely. So I think the first site in the RadNet side is up and running, and I had the pleasure of attending one of the patients' case a few weeks ago. And I think that they are now in the process of educating their whole infrastructure, their whole urology referring group in our imaging center channels. We talk about referring physicians and treating physicians. So RadNet, and now that their first site is running, is now educating the referring group. So it's not going to happen, obviously, in one quarter or anything, but slow and steady. I think they will -- I believe that they will continue to ramp. And then the other 2 sites, we have -- the sites are assigned. And as soon as we know the dates, I think there are some infrastructure things like new MRIs and so on that needs to come on stream. But I would say generally, because of COVID, we are -- RadNet, particularly being in the Southern California, was unfortunately really hit hard overall as a region. But we have the other sites identified, and I think they are going to be -- we should be installing them over the next 12 months or less. And those -- I did not even include those in the numbers that I mentioned before. So...

[Joshua Thomas Jennings, MD & Senior Research Analyst]

Excellent.

[Arun Swarup Menawat, Chairman & CEO]

And to answer your other question. I think that when I look at the warm belt of the United States, it basically covers about 40% of prostate cases. So our priority certainly is California, Florida, Texas, Arizona. And then Northeast is the next place. So I think you will continue to see us focus on the southern belt a little bit more as we go forward for new agreements.

[Joshua Thomas Jennings, MD & Senior Research Analyst]

Great. And then just last question. Wondering about the -- any updates on traction in Europe and Japan? And how should we think about new TULSA-PRO centers or TULSA-PRO sales in those 2 places?

[Arun Swarup Menawat, Chairman & CEO]

Yes. Josh, that's a very good question also because normally, we do get -- we are selling in capital in -- outside of the United States. And in this particular quarter, we basically had no new capital revenue, which was one of the things that affected the top line number. But those revenues, we see them as really important revenues also. And Japan, in particular, is very interesting because we see those revenues as sort of not just revenues for the quarter, which is important, but also strategically, in the sense that Japan, we believe, can be a very important market for us. So establishing that beachhead and getting a number of sites going is important to us. And to give you a little bit more color, Japan also has been in shutdown mode. We have not been able to travel. So the pipeline that we had last year, as you know, even with the first wave of COVID, our capital continued to slow, but the fact that over the last 6 months or so, we have not been able to travel in Q1, we had no sale, no closure. That is not to say that the pipeline is not there. It is there. And we are working with the government authorities to get the regulatory approvals, and we're working there also on our reimbursement strategy. So I think you will see international sales come back later in this year, hopefully, as early as second quarter. And I think Europe is important. We see a change in the European government guidelines that came out earlier, just about 60 days ago, where they are moving ablative therapies from experimental to accepted. And I think, again, not in the very near term but in the midterm, it should have some positive impact. So bottom line, we -- with the travel restriction and so on, I think that Q1 from the international market perspective was -- did not yet -- was not well represented. But I do think that we see Japan, Europe and China and Asia as important as well, and you will see revenues from these countries in the other 3 quarters of this year for us.

[Operator]

And our next question comes from Frank Takkinen with Lake Street Capital.

[Frank James Takkinen, Senior Research Analyst]

I wanted to start with the funnel as well. I want to better understand -- hoping you guys can give us a little more clarity on better understanding the conversion time as customers work through the process from a pre-signed agreement, signed agreement, trained, installed and then first patient treated. Just looking to get a little better clarity on how long that total process takes on average given there's likely significant variation across customers.

[Arun Swarup Menawat, Chairman & CEO]

Yes, yes, yes. No, it's a good question. What I would say is that the best way to kind of gauge that would be when we did the install prior to COVID looking so big. And obviously, in retrospect, we started the market introduction of our product in January when it's also the COVID year. But I think what we've talked about this before too, though, is that from the time we typically receive an agreement, at the moment, it's about 75 days to 90 days to get the installation done. And then it's typically another 30 to 45 days before we can really start treating patients and so on. So at the moment, I would say 90 to 100 days is probably a good average number from the time we sign a contract to first patient treated. We certainly think over time that will diminish, maybe by end of this year to 75 days. And then over the long haul, we think it will diminish further to hopefully to 60 days. Some of the agreements that we have at the moment, you will see a little bit of a bimodal distribution from the perspective that a few sites are looking to buy new MRs to place the TULSA system. And so we will have to wait till these MRs get installed. And there are a little bit of delays related to that because of the same things that -- finding all the labor and all the things done during these times have been a little bit harder. But it will continue to get better over time. So you will see a little bit of a bimodal distribution where we do have a new MR to be installed. It's going to maybe take closer to 6 months. The ones where we can go to the existing MR, it's probably 3 to 4 months.

[Frank James Takkinen, Senior Research Analyst]

Got it. That's helpful. And then following up on the CPT 1 conversation and also understanding this is looking a little far out into the future. But if you stay with your guidelines of around the end or around the beginning of 2022, submitting -- hearing a ruling by the end of 2022. What -- how does that set you up for the CPT going into effect?

[Arun Swarup Menawat, Chairman & CEO]

So once the AMA -- typically you submit that to the AMA by -- if we're going to apply for it, let's say, next year, we will know by -- before the year is out if we receive it or not. If we receive it, then it goes into pretty much a standard process and the application goes into the [ rec ] committee, and the committee then start to look at the costs associated with it. And by -- within 12 months, they provide the code and the target reimbursement associated with it, and it becomes effective as of the following January. So in this example, January 2024, we would have effective full reimbursement theoretically if assuming everything is going well, right? So that's what we're working towards at this point. And the other thing that happens, typically, again, these are just our own beliefs and assumptions at the moment is that the C-code strategy, as we've talked about before, is the interim strategy. And once all these publications are done and the societies are beginning to be on site, which, as I mentioned, we feel pretty good about so far. That also will continue to give us confidence with respect to the usage of the C-code and continued payment against the C-code. So I think that's what you will see in 2022 is applying for the code, C-code in the meantime, supporting us, societies supporting us, those are the kinds of milestones that you want to look for. And then if all goes well, then January 2024 to have a full CPT 1 operational.

[Frank James Takkinen, Senior Research Analyst]

Great. That's helpful. Last one from me for Aaron. I saw you broke out revenue a little bit differently than you have in the past to capital equipment and noncapital recurring. My assumption is that noncapital recurring is the pay per procedure revenues associated with TULSA, but I just wanted to confirm that. And then could you just give us a summary of what's included in each line and so we're sure we're on the right page?

[Aaron Davidson, CFO & Senior VP of Corporate Development]

Yes. So in different parts of the world, we call pay per procedure or other parts, we call disposable sales, to me, that's all in the same bucket of noncapital recurring. So -- and even service contracts and things like that where it's recurring because in different parts of the world, we use slightly different terminology. So what we tried to do is clean it up to get to, I think, what people really want to know. When do we sell a piece of capital and have a onetime sale versus when do we have sales that we think have a recurring nature give them like disposables, pay per procedure service. And so we bucketed into those 2 buckets because we kept getting lots of questions about this. I thought it was confusing for people and tried to just clear it up so that our different terminology in different parts of the world tried to create a clarity of onetime capital and recurring.

[Frank James Takkinen, Senior Research Analyst]

Got it. And then that bucket had been -- yes, absolutely. I mean that bucket had been very appreciative of doing so.

[Operator]

Our next question is from Ben Haynor with Alliance Global Partners.

[Benjamin Charles Haynor, Analyst]

Just a couple of quick ones from me. First off, Aaron, if I think -- if I heard you right, I think I heard you say that the price point on the newly signed contracts is $7,710 or higher. Is that correct that there's an or higher aspect to that? And if so, what's the variability on how much higher that can go?

[Aaron Davidson, CFO & Senior VP of Corporate Development]

So it is a little higher. We took a price increase in 2021 that took effect about end of March. And for sensitivity reasons with customers, I don't really want to talk too much about it. But to assume it's just like a typical -- what type of inflationary type of increase you'd expect to see on drugs or devices.

[Benjamin Charles Haynor, Analyst]

So like 50% these days?

[Aaron Davidson, CFO & Senior VP of Corporate Development]

Yes -- no.

[Benjamin Charles Haynor, Analyst]

Just kidding. But -- so -- and then my second one. It really sounds like you guys have a pretty full pipeline, some pretty good visibility into things. But for the folks that may not know about TULSA-PRO, and this is more of an opinion question, I suppose, than anything. What do you think opens up there years and make some take notice more? Is it something where it's definitely more clinical data? Or is it hearing about something like you mentioned earlier, where a guy or a gal does a 270 cc prostate.

[Arun Swarup Menawat, Chairman & CEO]

Ben, let me make sure I understand the question. So you're asking what is the criteria on which people are signing agreements with us?

[Benjamin Charles Haynor, Analyst]

Well, I'm just thinking about, if people are unaware of TULSA-PRO and maybe the potential customers for the next multiple years are kind of already aware of you and identified and all that stuff, but with a 270 cc prostate being treated, do you think folks hear about that and say, "Oh, wow. What is this, being able to treat in the fashion that you guys treat?" Or is it a journal publication that really make them say, "Oh, wow?"

[Arun Swarup Menawat, Chairman & CEO]

Oh, I see what you mean. Yes. I mean I think it's -- to be honest, it's a combination of things. And a year ago, people would say that, hey, we want to see the clinical data and we want to see more clinical data. I don't think that when we go to the hospitals today, that is the lead question. I think people understand the clinical data is there. I think that the concept that they can create a wider variety of patients with this technology is definitely something that perks them up because when you just see the PowerPoints, that's not necessarily obvious. And so we are working to create an atlas as we do the training programs, where all of these special cases will actually be proactively presented to our urology committee as we go forward. And I think that, certainly, we believe, will be a good driver. I think that's certainly one factor. The second factor I really think is, again, what is continuing to drive TULSA is the patient response. To be able to go in and within 4, 5 hours, go home and be at home and have no pain. And the only thing you're complaining about is the grogginess from the anesthesia and the catheter that's stuck inside of you for a few days and nothing else, not about the TULSA at all. I think that's one of the other things that's driving. And so you -- I think you will see -- I would -- I mean to be honest, I would, Ben, encourage you to look at the LinkedIn site from WellSpan. I think it's Dr...

[Benjamin Charles Haynor, Analyst]

Yes. I have run across that. Yes.

[Arun Swarup Menawat, Chairman & CEO]

It is -- that's what's driving it. I think that's what you are seeing is that the physicians, when they treat, they see all this, and then they are excited about this new capability. And this is a leading site going on. So I think that's what's driving...

[Benjamin Charles Haynor, Analyst]

Well, that makes sense. And I appreciate the color there. That's really all I have.

[Operator]

And this concludes our Q&A session for today. I would like to turn the call back to Arun Menawat for a final remark.

[Arun Swarup Menawat, Chairman & CEO]

Thank you so much. And again, thank you for your support, and we look forward to the Q2 report and before that, I guess, the AGM that's coming up later this month. Thank you so much.

[Operator]

Thank you, everyone. This concludes today's conference call. Thank you for your participation, and you may now disconnect.