Perimeter Medical Imaging AI Inc

XTSX:PINK

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Good afternoon ladies and gentlemen, and welcome to the Perimeter Medical Q3 2023 Conference call. [Operator Instructions] This call is being recorded on Tuesday, November 14, 2023. I would now like to turn the conference over to Jodi Regts, please go ahead.

[Jodi Regts, executive]

Thank you. Good afternoon. Thank you for joining us on this call and webcast to provide the third quarter 2023 results for Perimeter Medical Imaging AI. Joining me on today's call is Adrian Mendes, Perimeter's Chief Executive Officer, who will provide an overview of Perimeter's progress across the business; along with Sara Brien, Chief Financial Officer; and Andrew Berkeley, Perimeter's Chief Innovation Officer, who are available to answer questions when we open up the call for Q&A after our prepared remarks.Please be advised that during this call we will make a number of statements that are forward-looking, including statements regarding the future financial position, business strategy and strategic goals, commercial activities and timing, competitive conditions, research and development activities, projected costs and capital expenditures, research and clinical testing outcomes, the potential benefits of our products, including Perimeter S-Series OCT, Perimeter B-Series OCT, and Perimeter ImgAssist, the efficacy of our clinical trial designs, the timing and anticipated enrollment in our clinical trials and the timing of potential publication or presentation of future clinical data.Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time-to-time in our SEDAR filings.Our results may differ materially from those projected on today's call. We undertake no obligation to publicly update any forward-looking statement. For additional information about the risks and uncertainties facing our business management encourages you to review the company's public filings and press releases, which are posted on sedarplus.ca. The news release summarizing this quarterly update is available under the Investor section of our website at Perimetermed.com and filed with SEDAR+.Now, I would like to turn the call over to Adrian.

[Adrian Mendes, executive]

Thank you, Jodi. Good afternoon. Thanks everyone for joining our call. Today, I will walk you through some of the highlights from the quarter and zero-in on advancements made within both the clinical development and commercial sides of our business.Before getting into these detailed updates, I wanted to provide some high level observations on progress made across the business.Since joining the company this past summer, we have made some key changes at the leadership level, which are all driven by our goals to improve team morale, increase employee retention and remove any silos preventing effective collaboration across the organization as a whole, all with the intent of greatly increasing our pace of execution.During our last quarter, we welcomed Sara Brien as our CFO and Andrew Berkeley, one of Perimeter's co-founders to his new role as Chief Innovation Officer. Today, I would like to extend warm welcome to Adam Hodges, who joined Perimeter's senior leadership team as our Vice President of Sales and Marketing in early September.Adam's extensive med-tech background represents a great fit for us with his focus on advancing category-first, novel technologies that challenge the clinical standard of care and add value to the healthcare system. In fact, I believe he has already made a positive impact, both in his department and across the company, and we expect that our sales and marketing team will continue to benefit from his leadership as we expand the number of surgeon champions and geographic regions adopting our commercially available S-Series imaging platform, and ultimately the adoption of our next gen AI-enabled B-Series technology when it reaches a commercial rollout stage.We have been very deliberate in how we've approached these org changes as we're hyper aware of the importance of not just attracting, but also retaining top talent. I'm proud of the team we have in place, and as we grow, I believe we are creating a strong culture that will enable us to achieve our ambitious business goals.Let's dig in now on the clinical development side of the business and the progress made across our next-gen AI development and the ongoing pivotal trial. This quarter, we've reported the outcomes of our positive interactions with the FDA that resulted in us reaching alignment on key elements of our clinical trial, which is evaluating Perimeter's B-Series device when used during breast conserving surgeries, otherwise known as lumpectomies.The B-Series device combines Perimeter's innovative OCT platform with our ImgAssist AI technology, which will further accelerate customer adoption of Perimeter solution.This quarter marked an important milestone in our clinical development program. First, we received regulatory approval to implement our substantially enhanced AI algorithm in the ongoing pivotal clinical trial under the existing study protocol. As a result, all clinical trial sites are now used in the updated AI as patients continue to enroll in the ongoing study.Andrew spoke on our last call about some of the anticipated significant benefits of the new enhanced AI, which takes advantage of additional training data and Perimeter's latest AI advancements that demonstrate improved sensitivity, specificity, precision and recall. It is expected that this updated version of ImgAssist AI will contribute to more accurate classification as well as fewer false positives and false negatives.Second, we now have a planned interim analysis in the trial, which will provide us with an early readout of results based on the use of the newest algorithm. If key endpoints are met at the time of the interim analysis, we may opt to conclude the trial and begin preparing regulatory submissions supporting market clearance.Alternatively, the interim analysis could support continuing the trial to build a stronger submission package for additional subjects. Ultimately, our goal is to expedite the development of our next-gen AI technology and deliver it to our surgeon customers to improve clinical and economic outcomes in breast surgical oncology.Third, we are permitted to enroll additional subjects up to 531 and have received clearance to increase the number of trial sites with goal of further supporting and expediting patient enrollment.I'm pleased to report that we recently added a clinical trial site at the University of Washington, Fred Hutch Cancer Center, located in Seattle as a quick follow on to the recent site initiations at Baptist MD Anderson and Mayo Clinic in Jacksonville, Florida.Importantly, patient enrollment is tracking well and slightly better than modeled, and we continue to guide that we expect an interim analysis in the second quarter of 2024. If we determine that more data is needed, anticipate sub-study completion by the end of 2024.We continue to hear from KOLs that the potential of combining AI with ultra-high resolution, intraoperative imaging has the potential to become a new standard of care during breast conservation surgery. Our clinical development team is extremely driven to conduct a well-run study that provides us with important data, allowing us to chart a clear path forward to our next-gen technology. We look forward to keeping you updated on our progress.Turning now to our 510 cleared Perimeter S-Series technology. Briefly for those newer to the Perimeter story, this is our flagship intraoperative OCT imaging technology, which provides surgeons with resolutions capable of visualizing tissue structures at the cellular level down to the critical 2 millimeter depth with 10x higher image resolution than X-ray and ultrasound, and a 100x greater image resolution than MRI.Cancer surgeons have long recognized the challenge of achieving clean margins, while preserving healthy tissue during surgery, and since it's several days or weeks before pathology reports on margin status are available, if they show positive margins, patients must typically return to the operating room for another procedure due to cancer left behind.We conducted a thorough review of the business when I came on board as CEO, and I firmly believe that there continues to be a compelling product market fit for Perimeter's commercially available S-Series OCT. Our focus today is to build a network of early adopters capable and driven to use our groundbreaking technology.While this does begin to establish an early stage revenue pipeline, perhaps more importantly, it allows us to have a clear channel to customers to gather product feedback. We are applying an agile approach to our commercial business to learn in the field with the goal of constantly iterating and improving upon the current state.These same early champions and reference sites will take on an even more important role when we launch our next-gen AI-enabled tech to reach our goal of significantly broadening our user base in the U.S. Our team continues to make good progress for each of these targeted customers.We have a clear game plan to further expand our install base by connecting with high potential surgeons, leveraging existing institutional relationships within healthcare networks and identifying the optimal geographic locations. In particular, those which offer the lowest barriers and costs providing image training support.A few additional comments on our most common pricing model. Healthcare facilities typically receive a free placement of the Perimeter S-Series device and then pay per procedure with the purchase of our proprietary specimen immobilizer consumables, which we sometimes refer to as the "razor blade" model.Importantly, assuming we establish clinical validation, regulatory approval of our AI technology, the console can be easily updated with the new AI feature. Looking ahead, we believe we can leverage this combination of imaging and AI across multiple indications as we grow our business.Our go-to market strategy is further supported by a strong IP position. We hold 6 issued patents and a proprietary image database of over 2 million images related to breast cancer alone. We also recognize that there are further opportunities outside of breast cancer.Looking ahead, we continue to identify viable growth opportunities through the expansion of indications and tissue types, as well as exploring new points in the cancer surgery workflow, for example, using Perimeter technology to assist the pathologist as well as the surgeon.I also wanted to highlight that Perimeter is shortlisted in a grant funding process sponsored by the Advanced Research Projects Agency for Health, otherwise known as ARPA-H under its Precision Surgical Interventions or PSI program.We attended a Proposer's Day in early September and subsequently submitted an abstract, which has been selected to advance to the next stage of the grant funding process. We remain on track to submit a full proposal by the deadline this Thursday.Clearly, we are excited to participate in this important Biden Cancer Moonshot initiative and thrilled that the Federal Advanced Research Project Agency for Health has selected Dallas as one of the 2 regional hubs in his $2.5 billion health innovation network.In addition to being a potential source of non-diluted funding for the company, the goals of the PSI program align precisely with the mission of Perimeter, and further validates the significant healthier problem that our team is committed to solving, ensuring that no patient needs to return for repeat surgery due to cancer left behind.Turning briefly to our financial position. As of September 30, 2023, cash and cash equivalents were approximately $18.1 million U.S. For more details, please refer to the quarterly report and press release filed today. With this strong cash position, our prudent fiscal management and additional CPRIT grant money still available to us, we're confident we'll be able to support our planned clinical development activities and fund the continued commercial rollout of our product.In summary, on behalf of the whole Perimeter team, we are very excited about the future ahead. We believe no other technology comes close to what we have and Perimeter's technology is perfectly positioned to address a widely-accepted $750 million problem in breast oncology in the U.S. alone, and many multiples of that across other indications and other geographies, not to mention the significant emotional challenges with today's standard of care.We continue to add and redeploy resources to support the key areas of our business and remain focused on our goals that include, expanding our base of key opinion leaders who will champion the use of Perimeter S-Series, supporting ongoing enrollment in our pivotal trial, using the improved AI algorithm, exploring additional tissue indications, another workflow expansion opportunities and continuing to grow a high performance team that is driven to transform cancer surgery.And with that, I'll now open up the call for questions. Operator?

[Operator]

[Operator Instructions] Your first question comes from Rahul Sarugaser from Raymond James.

[Rahul Sarugaser, analyst]

I apologize for a little bit of the background noise. And I also apologize that I got dumped off the call for a little bit when you were talking about the AI trial and potentially be able to accelerate the 510 application. So it would be great to hear a little bit more about what you're seeing in terms of timeline, numbers of patients, any additional parameters and/or thresholds that we should be looking for as we try to get more resolution on that?

[Adrian Mendes, executive]

Sure. Thanks for the question, Rahul. So if we run the trial all the way to the end, we should be complete in the fourth quarter of 2024. As mentioned, we have the opportunity to have an interim analysis and that at the current rates, we're at right now projections will be in Q2.Right now, as of the end of November -- sorry, end of October, we're tracking a little bit ahead of our projections, maybe about 15% ahead in our patient enrollment rates. So we're actually quite confident we're be able to hit those deadlines.We brought on, as mentioned, maybe you didn't hear it in the call when were kicked off. But we brought on Mayo and MD Anderson in Florida as well as the University of Washington earlier this quarter. So that'll really pick up the rate of enrollments. So we're feeling pretty comfortable right now that we'll be able to hit the dates that we described.

[Rahul Sarugaser, analyst]

And so in terms of that interim analysis can you have a sense of sort of the number or the number in the dataset and any thresholds that we should be looking for in order to de-risk the likelihood of an approval?

[Adrian Mendes, executive]

Yes, so the primary outcome that would allow us to have that a successful interim analysis would be for us to have what they call conversions. So 6 conversions out of the 186 enrollments that we would have at that point in time. So basically 6 patients that, if it were not for the use of OCT in their procedure, would've had to come back for a second surgery because the margins would not be where they need to be. But for having used OCT, the surgeon found the inadequate margins and was able to correct that within the first surgery. So that's really the target that we're looking for at the interim analysis point.Unfortunately, we're blinded to the data right now, so it's hard for us to, in fact, we just don't really know how we're progressing against that. However, when we look at from anecdotal information from our commercial side of the house, which doesn't of course use the AI-enabled product, but does use OCT in all the sites we have out there. We're seeing very, very good outcomes there from those surgeons. So we've got a high degree of confidence we'll be able to hit this trial hopefully by the time we get to interim analysis, but certainly by the time we run the entire trial.

[Rahul Sarugaser, analyst]

And just one last question then. Driving FDA clearance is one thing and then having strong enough data to change hearts and minds of doctors is another. And so while you've expressed confidence and being able engender an FDA clearance, how do you see that data playing in terms of as a marketing tool to be able to drive adoption?

[Adrian Mendes, executive]

Yes, so I think that's where the decision of whether we actually do, even if we achieve that outcome at the early analysis point whether we choose to continue to run the trial to the end just to gather more data. So that'll be one aspect of that.The other side of it in terms of the marketing side of even beyond the AI piece, is really the outcomes we're seeing from the S-Series in the commercial world right now, which as I said anecdotally is very positive. And there's data that we're looking to pull together to be able to publish over the coming few months.

[Operator]

[Operator Instructions] There are no further questions at this time. I'll turn it back to Jodi for closing remarks.

[Jodi Regts, executive]

Thanks Colin. Thanks everyone for joining us today. This concludes our Q3 call. Thank you.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.