Profound Medical Corp
TSX:PRN

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TSX:PRN
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Earnings Call Analysis

Summary
Q2-2024

Profound Medical Q2 2024: Revenue Growth, High Confidence

In Q2 2024, Profound Medical reported revenue of $2.23 million, up 39% year-over-year, with a 64% gross margin. The company expects full-year 2024 revenue between $11 million and $12 million. Operating expenses rose 24% to $9.3 million. Profound saw a net loss decrease to $6.9 million from $7.3 million in Q2 2023. They have $34.1 million in cash. TULSA technology utilization rose, targeting prostate disease, and showed promise for mainstream adoption with new AI modules enhancing procedure efficiency. The CAPTAIN trial progresses well, and new reimbursement codes are expected to drive future growth. Leadership remains confident in achieving 2024 goals.

Earnings Call Transcript

Earnings Call Transcript
2024-Q2

from 0
Operator

Good day, and thank you for standing by. Welcome to the Profound Medical's Second Quarter 2024 Financial Results Conference Call. [Operator instruction].Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Stephen Kilmer, Investor Relations. Please go ahead.

S
Stephen Kilmer
executive

Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include forward-looking statements within the meaning of applicable securities lives in the United States and Canada.

All forward-looking statements are based on Profound current beliefs, assumptions, and expectations and relate to among other things. Any expressed or implied statements or guidance regarding current or future financial performance and position, including the company's 2024 financial outlook and related assumptions, the expectations regarding the efficacy of the bounce technology in the treatment of prostate cancer, BPH, uterine fibroids, palate pain treatment and osteoid osteoma and its future revenues and financial results.

Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements.

No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call.

Profound undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise other than as required by law.

Representing the company today are Dr. Arun Menawat, Compound's Chief Executive Officer; Rashed Dewan, the company's Chief Financial Officer; and Dr. Matthieu Burtnyk, Profound Chief Operating Officer.

With that said, I'll now turn the call over to Rashed.

R
Rashed Dewan
executive

Good afternoon, everyone, and welcome to our second quarter 2024 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 Matthew in a moment to provide updates on TULSA clinical publications, utilization trends, the CAPTAIN clinical trial and reimbursement.

However, before I do, I would like to provide a brief summary of our second quarter 2024 financial results. To streamline things, all of the numbers I will refer to have been rounded, but they are approximate. For the 3-month period ended June 30, 2024, the company recorded revenue of $2.23 million with $1.46 million coming from recurring revenue and $773,000 from onetime sale up capital equipment.

Second quarter 2024 revenue increased 39% from $1.6 million from the same period in 2023. Looking forward, for the full year 2024, based on the company's current business planning and budgeting activities, we continue to anticipate revenue to be in the range of $11 million to $12 million.

Gross margin in Q2 2024 was 64% compared to 66% in Q2 2023. As we mentioned on our last call, we expect gross margin to vary some quarter-over-quarter, but just as we delivered about 60% margin in 2023, we continue to expect to deliver that or better in 2024.

Total operating expenses in 2024 second quarter, which consists of R&D, G&A and sales and distribution expenses were $9.3 million, an increase of 24% compared to $7.5 million in the second quarter of 2023.

Breaking that down further. Expenditures for R&D increased 33% on a year-over-year basis to $4.2 million. G&A expenses increased by 1% to $2.1 million, and sales and distribution expenses increased by 32% to $3 million.

Net finance income for 2024 second quarter was $934,000 compared to net finance expense of $884,000 for the same 3-month period of 2023. Overall, the company recorded a second quarter 2024 net loss of $6.9 million or $0.28 per common share, down from a net loss of $7.3 million or $0.35 per common share for the same 3-month period in 2023.

As of June 30, 2024, Profound had cash of $34.1 million.

With that, I will now turn the call over to Matthieu.

M
Mathieu Burtnyk
executive

Thank you, Rashed, and hello, everyone. In the second quarter, real-world utilization trends from Tulsa providers continue to demonstrate the unique and unrivaled flexibility of the technology to become a mainstream procedure in the treatment of prostate disease.

Approximately 3/4 or 73% of the procedures was for the primary treatment of prostate cancer. 15% were hybrid patients suffering from both cancer and BPH, 8% were salvage treatments and 4% were men with BPH only.

Half of the procedures were prescribed whole-gland treatment plans, 29%, subtotal but more than half the land and 21% were hemiablation or focal therapy. Prostate cancer patients across all grades of disease were treated primarily intermediate risk patients with 84% being Grade Group 2 and 3, 5% were low-risk Grade Group 1, an 11% high-risk grade Group IV or V cancer.

Similarly, patients with all prostate shapes and sizes were treated from less than 20 cc to over 100 CC. This quarter, about 1/2 or 51% had proceed volumes under 40 cc. And another 30% had a prostate volume between 40 and 60 cc and the remaining 19% had proceeds over 60 cc.

We continue to see TULSA as the only treatment modality, which can be used across the entire spectrum of prostate volumes and disease with clinical evidence in patients with cancer or BPH as well as the only option for hybrid patients who have both prostate cancer and BPH.

The workflow step of creating the treatment plans within the spectrum of prostate diseases, was recently made faster and easier with the release of contrary assistant, Profound second TULSA AI module, which received FDA 510(k) clearance in May.

Since its release, early physician feedback in the form of post-treatment surveys has confirmed that prostate segmentation with the TULSA AI module had excellent accuracy in real-world cases with decreased treatment planning time. In fact, in nearly all cases, urologists reported that contain assistant improved the accuracy of the treatment plan, information that we're planning to publish in conference presentations later this year.

I would like to now shift focus to reimbursement and highlight some of the key aspects of the new TULSA Category 1 CPT codes included in the proposed rules issued last month by the U.S. Centers for Medicare and Medicaid Services, or CMS, for short. These new codes have been designed to reflect the unique aspects of the TULSA procedure with respect to location of service, member physicians performing the procedure and intensity of post-procedure follow-up visits.

First, the TULSA codes have been approved for use in all locations of service. That means TULSA can be performed and billed in hospitals, Ambulatory Surgical Centers, or ASCs, and interestingly, within the physician-owned non-facility setting, which includes Oxis-based lab or OBL, a physician office, a Lupa office or an imaging center.

The spectrum of location of service provides not only a broad installed base opportunity, but also allows for maximum patient access and physician preference. The proposed rule has established TULSA as a Level 6 urology APC with the hospital national average Medicare payment just over $9,200, which is on par with all other comparative prostate cancer procedures.

However, with TULSA's faster into service time, the payment rate per hour within a hospital will actually be similar if not better, to comparable procedures. Additionally, within the ASC environment, the proposed national average Medicare payment for TULSA of $7,175 has been set significantly higher than the 4,715 assigned to another longer ablative procedure.

In the non-facility setting, the proposed equivalent national average Medicare payment for TULSA is even higher at over $9,400, which creates a unique and interesting opportunity within the physician-owned office setting.

Second, the TULSA codes have been designed to optimize physician time for maximum efficiency. Unlike other comparable procedures, 3 TULSA codes enable the procedure to be performed entirely by one physician or two physicians working together from different or the same specialty. These physicians can share the procedure and build for their own work performed, optimizing the RVUs per hour.

The third key point is the Zero Day Global assigned to the TULSA procedure, which is unlike any other comparable prostate procedure that includes a 90-day global period.

This allows flexibility for physicians to bill separately any additional services for each patient visit following the TULSA procedure at the appropriate level based on E&M guidelines.

Complex visits can be built at a higher level, and this mitigates risk of variable or complicated patient follow-up demands than a 90-day global codes creates. Following the publication of the proposed rule, CMS is accepting comments until September 9. They will then issue a final rule likely in November this year before the new codes and payment rates go into effect on January 1, 2025.

Finally, with the new CPT codes becoming effective in 2025, I wanted to provide an update on our ongoing CAPTAIN study, designed to support positive coverage from private payers in the U.S. The CAPTAIN trial is the first and only Level 1 study comparing head-to-head a new technology to robotic radical prostatectomy. It is powered to demonstrate non-inferior efficacy with superior quality of life outcomes such as urinary continence, sexual function and penullink, among others.

We continue to see strong interest in joining the study given the high level of impact it is expected to have in the urology community In the last quarter, we have onboarded 3 additional sites, including Stanford and the Mayo Clinic, adding to the top hospitals in the world participating in CAPTAIN. We are pleased to reaffirm that the rate of recruitment remains well positioned to complete enrollment of the CAPTAIN study this year.

I will now turn the call over to Arun.

A
Arun Menawat
executive

Thanks, Matthew, and good afternoon, everyone. Our message remains clear. As we approach 2025, when we will start competing on a level playing field for the first time with respect to reimbursement, TULSA increasingly has the potential of becoming a mainstream treatment modality across the entire prostate disease spectrum, raising from low intermediate or high-risk prostate cancer to hybrid patients suffering from both prostate cancer, and BPH to men with BPH only.

And also, to patients requiring salvage therapy for radio-recurrent localized prostate cancer. There are several reasons driving our confidence, which I would like to highlight. TULSA is an incision and radiation-free one-and-done procedure performed in a single session that takes a few hours.

Virtually, all prostate shapes and sizes can be safely, effectively and efficiently treated with TULSA. There is no bleeding associated with the procedure. No hospital stay is required, and most TULSA patients report quick recovery to their normal routine.

Also, the TULSA procedure is done with real-time imaging in the MR more for pixilbidpixel precision. While some thoughts that might pose a unique challenge when we first introduced the technology to the market, it is now quickly evolving into one of TULSA's most distinct advantages.

MRI guidance allows for real-time temperature measurement and automated control to preserve prostate disease patient urinary continence and sexual function while killing the targeted prostate tissue via TULSA's besides sound absorption technology that safely and gently beats it to kill temperature between 55 to 57 degrees.

By the way, that's not just what the clinical evidence shows. It's what TULSA patients are saying. And as we discussed in the past, cause use of MRI is steadily growing in urology as clinical evidence continues to point to the benefits of MR imaging from early patient screening to diagnosing and treating with TULSA.

Accordingly, we are now forging even closer relationships with the 3 major MR companies to go beyond compatibility of our respective technologies and help maximize the tremendous opportunities that we see ahead to further support this modern treatment pathway.

In addition, we continue to innovate with 2 of the main goals of increasing treatment efficacy and improving workflow efficiency. On that front, we are continuing development work on the third planned TULSA AI module, TULSA BPH. More details on that will be provided later this year.

Finally, as you all know, adequate reimbursement is essentially to drive forward physician adoption. Mathieu walked you through the proposed CMS release for TULSA. So, I won't repeat the information.

However, I think it's fair and appropriate to highlight a couple of factors that we think should help us become a main treatment once reimbursement starts next year. First, while TULSA and radical prostectomy will provide similar revenues to hospitals, we believe TULSA will be more profitable for them right away. It's often planned that a surgery suite and especially a robotic you see is really the most expensive real estate in the world.

It costs on average around $3,000 an hour for a hospital to operate a surgery suite versus around $800 an hour for an MR seat. Also, as I mentioned earlier, TULSA is a same-day procedure that doesn't require a hospital stay for recovery like RP does. So, TULSA potentially represents a lot of cost savings for hospitals on that basis alone.

Second, unlike TULSA, RP cannot be performed and is not reimbursed in a wide spectrum of treatment settings outside of the hospital, such as ASC, OBL, the physician's office, a local office or imaging set up.

So, while we are working with our major MR company partners to improve the treatment experience for urologists and their patients to ensuring TULSA can be readily accessed in the most usable setting. The same cannot be sent for RP and as we help drive the migration of interventional MR from radiology to the surgical department of hospital. We will be coming to face them while they cannot come to us.

To summarize, we continue to believe TULSA has the potential to become a mainstream treatment modality across the entire prostate disease section. Patient enrollment in the CAPTAIN post-market study comparing TULSA to RP is progressing as planned. We will provide more details on our next TULSA AI module, TULSA BPH later this year.

We remain on track to grow our TULSA installed base, 275 systems this year. We look forward to competing with other cancer disease treatment modality on a level reimbursement playing field for the first time starting in January. This ends our prepared remarks for today.

With that, we are happy to take any questions you might have. Operator?

Operator

[Operator Instructions] And our first question comes from Fredrick Wise with Stifel.

F
Frederick Wise
analyst

Let me start off with reimbursement. Obviously, this is clearly compelling step forward. I guess a couple of questions, and maybe you'll expand on Mathieu's excellent comments and yours several things. One, what kind of reaction are you getting from the physician community from existing customers from potential customers?

Maybe talk us through, is this accelerating discussions already? Or are people saying, no, let's talk once the rule is final? Just some color around there. And maybe as well, talk about how you're getting prepared for what clearly will be a meaningfully more compelling reimbursement environment from a sales and marketing and environment.

A
Arun Menawat
executive

Yes. Rick, great question. So, I think since the proposal have come out, we have been talking with our physician community. And I can certainly already speak in general terms. So, the first thing that they are all very appreciative of is the flexibility that this treatment can be done in almost any setting.

And so, they're kind of now thinking about, okay, do I do this at an imaging center or do I go back to my hospital and have them establish is over, if I do it, for example, in office setting, how my old equipment, can I now participate both on the physician payment side as well as the technical payment side also on that equation. So, I think that flexibility that Matthieu and I talked about has actually been well received.

The second part of the message that I think people are starting to grasp on to is the fact that when we look at this from the perspective of dollars per hour or profitability overall, I think that the numbers actually can come out a little bit better for TULSA in those situations.

And so, I think that a number of them are going through the numbers with us, but I think the general feedback is that there are going to be certain situations where there are going to be strong wins. So, I can give you a couple of actually good examples.

So, if you look at our private urology practice, OBR, for example, even the Medicare patient payment there would be $9,800 national average. And if commercial payments are typically 1.5x of Medicare you're looking at, $14,700 or close to $15,000.

So, I think as we look at the landscape, there are going to be certain situations where there is going to be a clear win for TULSA from an economic perspective. So, I think that we're sorting through it. Most people are prepared to talk at the proposal level and not waiting for the final rule to come out. And our team is out in the market talking with the physicians already.

With respect to your second question on how we're preparing for it. I think that these are, as you know, we do things quite methodically. So, we are, at the moment, visiting with our physicians we have re-engaged with the pipeline, which we feel very good about and that we can now begin to justify the adoption or acquisition of the new device based upon 2025 numbers and so on.

So, we are in that process at the moment. We do think that we will need to add more salespeople. So, we're starting to figure out exactly how and what locations that we want to do that also. So, that part is a little bit earlier stage, but we're absolutely preparing for it.

F
Frederick Wise
analyst

Another question, maybe just shorter term, you reiterated your goal of 75 systems by year-end. Maybe help us better understand your line of sight. That's a big step up from the kind of when you think of the third, fourth quarter run rate, it's a big step up from the kind of quarterly run rate. And again, why are you so confident?

A
Arun Menawat
executive

Obviously, we completely get the fact that this is a big step-up in the second half of this year for us. But in the second quarter, I think in the earlier presentation this year, I sort of alluded to the fact that this is going to be a unique year for us as we transition to the reimbursement model as compared to cash pay models.

I think that what we did see in the second quarter was people were saying, well, you're only a couple of months away from getting the proposal, let me see, just to be sure that we're going to be okay. So, I think we did see that, but we have not only not lost the pipeline.

We are actually seeing them even more engaged now that the proposed rule is out. And so, the sales team is pretty confident and that's the basis that we felt that we should reiterate the guidance.

F
Frederick Wise
analyst

And just last one for me. You talked sort of intriguingly, I think it's the first time I'm hearing, you said that you're forging closer even closer, I think, were your words. Relationships with the 3 major MRI companies. Maybe you could just dig deeper a little bit there. What are you hoping for? What should we expect from all that? And is that something that's going to take years on or something sooner? Just help us better understand what you're working toward.

A
Arun Menawat
executive

Yes. No, I'm happy, Rick. As I said in the prepared remarks, the test that we use an MR originally was considered is the they going to reuse an MR. But I think with the clinical data and the fact that number of physicians have now actually used the procedure, I think they actually see the value of the MR.

They see the fact that this gentle heating the heating tissue only to kill temperature, that continuous ability to monitor the temperature or make adjustments in the treatment plan if needed. And then with the TULSA AI module that was recently cleared because we have MR-high-quality MR images, we were able to develop it.

I think the first thing that has happened is, people now get people now think that, okay, this is not a difficulty. This is something that really adds value to treatment and patient care. And I think based upon that, a number of companies are now also developing real-time in biopsy procedures. So, there are multiple companies that are saying, "Hey, we can do in more biopsies and they can be done in a very timely manner as compared to historically where they've taken a lot longer to do so.

And so, this whole idea that we can use MR to screen patients diagnosed patients, maybe even more biopsy and then treat patients, it is starting to really catch on. And so, the MR company, this is very synergistic to the MR company. And so, the MR companies are working with us to really determine what is an interventional MR as compared to a diagnostic MR.

And then interventional MR would be midrange magnet rather than a 1.5. It will be a 0.55 TULSA magnet, where we can use AI technologies to provide the same high-quality images, but we can also provide practical things where a surgeon can literally walk into the MR. It literally put their hand inside and they can actually do interventionally.

And so, Siemens has already announced that product. They're already publicly announced a leasing model for that product. And so, I think the synergy is what I'm talking about. And I think you will hear from these companies later this year, I think you will hear about it in RSNA this year and at our own conference earlier this year that our product, the biopsies, the diagnostic images and the treatment is all coming together, and you'll see multiple companies supporting this effort.

Operator

And our next question comes from Ben Haynor with Lake Street Capital Markets.

B
Benjamin Haynor
analyst

Just maybe following up a little bit on Rick's questions there and the relationships that you're performing with the MRI firms out there. What has kind of been their reaction to the proposed reimbursement? Isn't that something that kind of raises a flag for them?

A
Arun Menawat
executive

Yes, Ben, I mean, generally teaching, I think people expected that if we could level the playing field and the fact that we have a lower cost system in place that we're going to be leasing place. And so, when these companies are looking at how do we justify an MR centric prostate care strategy, they're looking at it and they're saying, okay, we already have reimbursement for diagnosis.

We already have reimbursement for biopsy. Now, there is a level playing field reimbursement for the TULSA procedure. And so, they're basically looking at it and saying this adds to their ability to justify financially using all of these together. And then the idea is that there are a number of ASCs or OBLs or Lupa that have expressed historically expressed interest in owning MRs.

And so, when you combine all of this together, I think we can put it across the finish line towards a financial model that can justify it. And so, I think that's how these MR companies are looking at is that this is another reason to be able to justify that MR. And the lease and so on are looking and saying, well, this is going to add to our ability to have full control of the patient from beginning to the end, which means better care of the patient.

B
Benjamin Haynor
analyst

And then on the specifically, do they look at it and say, well, yes, the Medicare reimbursement that expire to me, but I really need the commercial patients to be able to make this work? Or how do they tend to think about that to the extent that you can share?

A
Arun Menawat
executive

Yes. No, I mean we've already been in extensive dialogue. And so, I think we will have to come up with explicit customized model for different situations. And I do think that to the way you're describing it is in the realm of possibilities is that they might want to pick, for example, for insurance patients where the payment is pretty good. And if the ASCs or the Lupas are owned by the physicians where they have the ability to get reimbursement from both sides of the payment equation that they are likely to take the private payers to those sites and the Medicare patients typically go to the hospitals.

So, I think you will see as the economic models get developed further, I think you will be able to see that, hey, there are certain types of patients that they will take to one site where it can be more profitable. Another type of patients, they can take to another site where that could be profitable also.

And I also think that the hospitals will want to see adoption because to a hospital, they are losing money on a Medicare patient. So, if we can show that, hey, they can actually break even or make some money on a Medicare patient, that's a win for that, in fact, also right? And they already have you know, robotics is well highly utilized. So, they already have enough our patient population to use the robot. And if they make some space for that by using the MR for our procedures, they're actually making money or at least breaking even on the TULSA procedures and then they're making money on the other procedures that go on the robot.

So, I think it's not going to be a simple equation, but I think there's going to be plenty of different ways to be able to demonstrate economic value here, and we're quite excited about that.

B
Benjamin Haynor
analyst

And then one last one for me, just on the TULSA clearance that you have now. I mean, it seems like both thermal boost and Contouring Assistant kind of confidence booster for clinicians. But can you share maybe how much time Contouring Assistant will take off of a procedure? I mean is that 10, 20, 30 minutes? What does that look like?

And then anything more that you can share on the adoption so far of both thermal boost and Contour Assistant amongst the falls that have an available tool.

A
Arun Menawat
executive

Yes, Ben, absolutely. The thermal boost, we easily talk about the wide variety of patients that are treated, and you heard that from Matthieu already. The thermal boost is one of the reasons why we are seeing these later stage treatment now happening with TULSA because they feel very confident that if there is a little [Indiscernible] of the cancer at the outer edge, they can blast that region or if they suspect that there is some involvement to the muscle, they are able to blast into that region.

So, I think the latest statistic and Mathieu, please feel free to chime in on this. I think it's in the order of about 50% of the patients being treated Thermal boost being used.

M
Mathieu Burtnyk
executive

Yes, that's correct. About 50% of the treatments we see the use of thermal boost at least for a portion of the treatment plan.

B
Benjamin Haynor
analyst

So that's highly valued?

A
Arun Menawat
executive

Yes, highly valued. And then on the AI side, majority of our sites now already have the AI. They have many, I would say, about 1/3 to maybe more than have already used it to treat patients. The initial feedback is quite positive as we anticipated. There are 2 things that we're hearing. One is that the treatment designs are very smooth. So, they kind of like the smoothness of the way the treatment designs are proposed.

And the confidence that, hey, this is coming from patients who are successfully treated in the past. And then the second thing we're hearing is definitely it is saving time in all these procedures. So, I think our goal, we will actually present data as we get statistically significant information where we will present the data.

We think the best way to put it is that ultimately, if they're doing 2 cases in a day, they will be able to do 3. If they're doing 3 in a day, they will be able to do 4. As they're going forward, they'll be able to do 5. And I think that, to me, is the biggest benefit of this in the sense that in about the same amount of time, they'll actually be able to do more cases which certainly not only speaks to the pocket book. It also speaks to their whole workflow of the whole day.

So, that's what you will see. I think for procedure time, certainly, it will be several minutes. But I think procedures part of today, you will see an increase, and that's going to be valuable to them.

Operator

And our next question comes from Rahul Sarugaser with Raymond James.

R
Rahul Sarugaser
analyst

So, Rick and Ben did a terrific job asking many of the clarifying questions. So, maybe I'll ask something about as you scale. So, we you're just talking about the stocks going from 1 to 2 to 3 to 4 patients a day. Perhaps you could give us a little more clarity in terms of how the 3 codes can be leveraged for docs to potentially stock procedures and essentially increase the profitability per unit time either by using residents or to be creating efficiency in the system to make it more profitable for them.

A
Arun Menawat
executive

Yes. Rahul, I'm happy to. So, as I was saying before, the flexibility and the fact that we have multiple codes allows each site to effectively determine what is the best way or the most effective way and efficient way for them to treat the patient. So, I'll share a couple of examples. So, if I'm a teaching site and I have a resident, I could help the resident do sort of the initial workup of the patient, which will include putting the patient down the MR table and inserting the catheters, attaching the table to the MR suite being with the patient in the time they're being anesthetize.

And that we call sort of medical device management. And a resident could easily do that. And so, the primary physician could then come in really at the time when they need to start the treatment planning, which now is AI-based, but they can start to do the treatment planning, then they can stay for the treatment itself, which from beginning of the end is even based upon the CMS numbers is less than 90 minutes total time for the physician.

Then they can leave and then the president would come back and on the patients stable and go with the patient to wake them up and remove the catheters. So, it's an efficient process.

It brings the fifth primary physician only for the core part of the procedure, it would be less than 90 minutes. And if they do that, the resident could be using the medical device code and the physicians would be using the treatment part of the code. And if they did that, I think per hour basis, will be almost, I mean not quite double, but certainly 50% to 70% better on a per hour basis for the physician, whereas a resident, it will make less money. But in comparison, we'll also do very well. That's just one example.

In another setting, you could have a urologist and a radiologist, both sharing the procedure. And in that case, they can sort of 1 person is doing the treatment plan, the other person is panning the next patient. And this is also why we talk about number of patients for data than the time part procedure. So I think those are a couple of examples of how they will be able to use these codes to be able to optimize the workflow that will be most efficient for them.

R
Rahul Sarugaser
analyst

And so perhaps continuing on this theme and broadening into BPH. So sort of a 2-part question. One, is there any update on profound aspirations around BPH? And very specifically, are the codes that are currently issued applicable in BPH? And how do you see the BPH strategy playing out, particularly again in the procedure stacking scenario.

A
Arun Menawat
executive

Sure. Yes. So, great questions, Rahul. With respect to BPH we kind of see ourselves in steps also. So, the starting step for us is to focus on those patients where the prostates are larger than 100 CCs and/or they have not only BPH, but they might also have some form of early-stage disease.

And so, that patient would particularly benefit from our therapy, that group of patients because if they have very large prostates, we can still treat them very quickly, and we can basically let the transition zone in some cases, the medium low if it is needed.

And still, we can be a relatively fast procedure for them. And because our prostate shrink, we're shrinking a very large prostate and think that should lead to durability over time. And in those cases where there is some form of early-stage disease or even internally, we caught them call them hotspot because in these fusion images of the MR, these by parametric images. You can actually see zones of the prostate where the cells look unusual.

And so, those patients where they see not only the BPH, the problems with the transition zone in the median lobe. But they also see those hub zones, they can actually go ahead and treat them to some extent before the development to cancer will become bigger.

So, I think that subset of the market, we think, is at least about 400,000 patients, and we think that is where we want to start. The procedure will automatically have the AI technology right off the gate because it is being developed off of that platform.

And so, we think that it will also be a lot faster procedure than a typical cancer procedure is because we're not ablating the whole prostate. We're typically doing maybe 30% of the prostate, which makes the treatment part also very fast. So, AI-based treatment design that will be customized to each prostate and then a much less amount of vision.

We think we can be fairly competitive in the market in terms of the time of the procedure.

And then to your second question on the reimbursement, the way our FDA clearance, it says that the clearance is for ablation of prostate. So, it does not specify whether it's good tissue bad tissue causing BPH or causing cancer. And the reimbursement code are against this FDA clearance.

So, we will confirm it in the end. But at the moment, we think these codes should be good to go. So, I think next year, not only that we have this momentum towards reimbursement-based model, but we also think that we will introduce the BPH module as well.

R
Rahul Sarugaser
analyst

I'll just slip in one quick last question and then I'll get back in the queue. Given all the tailwinds you talked about today, how is the profound team feeling? What is the sentiment in the company?

A
Arun Menawat
executive

I mean the Profound team, I think the senior team has really out nicely. I think the goals are crystal clear for us, and we know what we need to do. And I think the general move of the team at pretty much every level, let's go get this done. I feel pretty good about that.

Operator

And our next question comes from Michael Sarcone with Jefferies.

M
Michael Sarcone
analyst

Just to start, just on the recovering noncapital revenue, it looks like that was down year-over-year and maybe flat versus the prior quarter. Could you maybe just talk about what you saw in the quarter there and then maybe give us some color on TULSA utilization or procedure growth for the quarter?

A
Arun Menawat
executive

While in comparing to the year-over-year, I think we were 39%. The number of patients that we treated in Q1 is higher than the number of patients we treated in Q2 versus Q1. I think that, as I've said before, the fluctuation that you see in dollars is in thousands of dollars and it more relates to shipment of the product to the sites as compared to the number of patients being treated.

And, as I had sort of alluded to earlier, we do see that capital revenues are coming in this year because more and more hospitals are saying, we do have funds for products like these. And now that the reimbursement picture is becoming even clearer.

I think you will continue to see this mix changing. And so I think that in some of those situations where we do sell the capital, we will reduce the dollars per case for them because today, we charge everything in a bundled payment. We will start charging in an unbundled way. So, you will see these fluctuations. But I would not read anything beyond that into these detailed numbers.

M
Michael Sarcone
analyst

And then you added for TULSA to the base in the quarter. Can you give us any color on how that broke out between capital sales versus just pure placements?

A
Arun Menawat
executive

I think most of these are placements today for now. As I was saying before, we did see that I wasn't sure how this year was going to unfold to some extent because of the reimbursement is being the 800-pound gorilla. And I think in the second quarter, we did see a little bit of that sort of discussion with the hospital to say, let me just wait until I get at least a proposed rule out before I sign on the Barnat line.

But as I was saying before, I think that is now everybody is back on, which is why we think we have a high bar to come in the second half, but our team seems to be very confident about that. But I wouldn't read, I mean, majority of the 2024 will still be placement based. And I think what you will see over time is that the placements will convert into capital as they start using it and they start to develop the economic models, I think you will start to see them convert so that they can reduce their part case cost and they can use other buckets for the capital dollars and service dollars.

Operator

Our next question comes from Scott McAuley with Paradigm.

S
Scott McAuley
analyst

Most of the questions have kind of already been asked, but just following up on the last one around the capital revenue because you did have, I think it was $700,000 plus this quarter in revenue from capital equipment. So, is that sales in Europe or elsewhere versus just kind of you're alluding to before, U.S. capital placement models?

A
Arun Menawat
executive

It is a North American sale. So, for Europe or Asia, we would break it out, but this is a North American sale.

R
Rashed Dewan
executive

Yes, McAuley, this is Richard. So, just a little detail in our segment report. So, if you look at our financial statement, it shows under North America.

Operator

Our next question comes from Brian Gagnon with Gagnon Securities.

B
Brian Gagnon
analyst

I know it's not really fair to ask about procedures per day with real reimbursement yet, but your highest level users, maybe your top 4 or 5 guys or gills, how many procedures are they doing per day now? And where do they think those procedures per day will move to once reimbursement begins?

A
Arun Menawat
executive

Very good question, Brian. So, we have, Mathieu, what, 8% of the sites are doing 4 procedures per day already?

M
Mathieu Burtnyk
executive

Yes, that's about right.

A
Arun Menawat
executive

And I think, Mathieu, what percentage doing 3 per day today?

M
Mathieu Burtnyk
executive

We're seeing about, I'd have to pull up the exact figures here, but we're seeing over 10% or maybe 20% of the sites doing 3 procedures per day.

B
Brian Gagnon
analyst

It's actually much better than we thought it would be.

A
Arun Menawat
executive

Yes. So, about 1/4 of the population is in the 3 to 4 procedures per day already. We think once this AI is fully in place that pretty much every site, we will be able to increase one more patient. And we're going to do our own conference shortly and we will ultimately publish the information on the number of procedures.

I think in general, our expectation is that we take weekend provide up to a 20% advantage in terms of time against vertical prospective.

B
Brian Gagnon
analyst

That would be great. On the MRIs and expanding relationships, are the 0.55 TULSA interventional MRIs. Are they easier to install and operate? And what does it take for a facility to install a regular MRI today versus installing one of these interventional MRIs?

A
Arun Menawat
executive

So, Brian, today's MRIs typically are 1.5 to 3 test labs, and they use a lot of helium and so on. And so, hospitals typically put them on their main floor or their basement floor because they weigh something in the order of 30,000 pounds, and they will require especially rebuilding the foundation of the floor.

And the new ones that 0.55 have multiple advantages. Number one, they weigh typically about 8,000 tons. So, I kind of tell people that you can take for 250 easily, actually, you could take forward F-150 and told them from place to the other.

But the most important thing is with that less weight, they can actually replace them basically in the room of any operating room and that you can place that system in there. And the magnetism because they are 0.55 TULSA.

Normally, these hospitals have to provide significant shielding, which costs $1 million or so per magnet because of these high-strength magnets versus with this shielding the magnetic strength is typically about feet from the edge of the MR itself. So, literally, almost no shielding required which saves a lot of money in terms of installation costs.

And the reality is that physicians can literally stay in the MR suite doing the procedure because there's no issue related to magnetism. So, number of advantage is the one that I talked about before that physicians can literally put their hand in the board and literally see their hands, see the cancer inside the patient and put the needles in the right places.

The fact that they are smaller, they can be moved easily. They can be put in a normal operating size room. And when you think about all this and then you combine with the fact that TULSA is the only procedure where it will be reimbursed in a doctor's office, that starts to become a pretty compelling proposition. The caution, obviously, is entirely new and it's going to take some time to deliver all of this.

But I think this is why we are quite excited about the new MRs that they can literally be placed, and they can be operated, they're much simpler to operate. They don't have multiple buttons because they're designed for intervention only and then combining the economic models as we talked about before, I think that is likely to be a winning combination.

B
Brian Gagnon
analyst

So, this should be a big deal for adoption of these new systems, which in turn will directly benefit this whole continuum of MR prostate diagnosis treatment and post-treatment visualization that you guys have talked about for the last year or 2?

A
Arun Menawat
executive

That's exactly where we're going. That's exactly right. No, this is why I think MR companies invested a lot of money to commercialize this type of a product because they see that whole thing sort of converging towards an MR centric prostate care strategy.

B
Brian Gagnon
analyst

Last one for me. You mentioned the commercial reimbursement was higher than CMS patients. And I guess the one thing I didn't realize, and maybe you can expand on this, is that today, radical prostatectomy doing CMS patients is not profitable for a hospital system?

A
Arun Menawat
executive

That's right. So, in the hospital, doing robotic process sector, in a typical hospital does not pay enough to cover the cost of the hospital. So, they actually lose money doing it. And we think that with the way our reimbursement is working and the fact that the MR suite is far less expensive and the fact that there's no possible stay, we think we can show them a model that, in the worst case, will break even for even the lower-cost hospitals.

B
Brian Gagnon
analyst

So, at a minimum, you should get a lot of the Medicare patients as your patients in the future, assuming they can figure out this MRI log jam?

A
Arun Menawat
executive

That's exactly right. And so, we are in dialogue with them to confirm everything. We want to make sure they can use their own data to see what we are describing to them. But I think based upon the numbers that we see, based upon the robotic prostatectomy data that is in the CMS database, we think what we are seeing makes a lot of sense, and it will make a lot of sense for the hospital to meet that transition.

Operator

And this does conclude the question-and-answer session. I would now like to turn it back to Dr. Menawat for closing remarks.

A
Arun Menawat
executive

Thank you so much, and thank you for the vibrant questions, and we're really looking forward to providing another significant update at the Q3 call. Thank you.

Operator

And thank you for your participation in today's conference. This does conclude the program. You may now disconnect.