Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total worldwide revenue increased by 10.6% year-over-year, reaching $15.8 million.
- US Focal One HIFU procedure growth was strong, with a 63% increase in the number of procedures year-over-year.
- Successful placements of Focal One systems in notable institutions such as City of Hope and Robert Wood Johnson University Hospital.
- Positive interim results from the Phase III study on robotic HIFU technology for treating deep infiltrating endometriosis.
- Strong pipeline and growing demand for Focal One systems, with expectations for a stronger second half of 2024.
Negative Points
- Gross profit margin decreased to 37.5% from 39.6% year-over-year due to a shift in product mix and increased acquisition costs.
- Operating expenses increased to EUR12.1 million from EUR9.9 million year-over-year, impacting profitability.
- Net loss for the second quarter was EUR6.1 million, higher than the EUR4.7 million loss in the same period last year.
- Cash and cash equivalents decreased significantly from EUR43.5 million at the end of 2023 to EUR30.2 million.
- Challenges in the capital expense environment, with longer cycle times for hospital approvals due to macroeconomic factors.
Q & A Highlights
Q: Can you provide an update on the sales funnel and how we should think about placements in the second half of the year versus the first half? Also, any updates on the CapEx environment in hospital customers?
A: The sales pipeline remains strong and is growing. We expect a stronger back half of the year, with Q3 and Q4 typically being stronger quarters. Regarding the CapEx environment, hospitals are experiencing longer cycle times for approvals due to macroeconomic factors and higher interest rates, leading to more committees and extended timelines.
Q: Can you discuss the logistics of the VA system Focal One sale? Is there a single approval process for the entire VA system, or is it hospital by hospital?
A: Typically, VA hospitals are in major metropolitan markets and often associated with large teaching hospitals. Many academic faculty have staff appointments in VA hospitals, providing a strategic opportunity. We continue to work with interested VA hospitals and have an active pipeline.
Q: Gross margins finished below expectations. What will it take for margins to move significantly higher, specifically in the HIFU segment?
A: The lower gross margins were due to product mix, conversion of operating leases, higher costs from transferring vendors, and probe costs. We expect improved margins with a new vendor and higher HIFU volumes in the second half of the year.
Q: Can you provide more details on the BPH study, including enrollment size and timelines? Are there any learnings from the endometriosis program that could help with this trial?
A: The BPH study is a combined Phase I and II study focusing on defining optimal HIFU treatment parameters and validating safety and effectiveness. We aim to enroll patients starting in September. Learnings from the endometriosis program include effective lesion size reduction and a growing number of patients requesting Focal One robotic HIFU treatment.
Q: What percentage of the top-tier cancer center market does Focal One currently have, and what is the accessible market?
A: Focal One is in seven out of the top ten US News World Report best-ranked hospitals and 17 out of 35 SUO fellowship hospitals. We are in over 42% of national comprehensive cancer network participating hospitals. There is still significant market opportunity, and we continue to focus on both academic and community hospitals.
Q: How long will it take for EMEA and other European countries to start contributing meaningfully after the recent senior commercial management appointments?
A: We received reimbursement in Switzerland in July and expect the HIFI study data to be published in a peer-reviewed journal soon. This data will be crucial for achieving reimbursement in France, potentially by the end of the year or Q1 next year. We are building our team to capitalize on these changes.
Q: When will you start adding centers in the US and the rest of the European Union for the BPH indication? Does this require retooling of Focal One?
A: The BPH study aims to achieve CE mark MDR in Europe and provide data to the FDA for specific BPH treatment labeling. We are working hard to move this forward quickly. The study includes dose escalation to define optimal treatment parameters, and we are always looking to improve our products.
Q: What are the key financial highlights for the second quarter of 2024?
A: Total worldwide revenue was EUR15.8 million, up 10.6% year-over-year. HIFU revenues were EUR4.8 million, with five Focal One systems placed. Gross profit was EUR5.9 million, with a margin of 37.5%. Operating expenses increased to EUR12.1 million due to investments in commercial operations and R&D. Net loss was EUR6.1 million.
Q: What are the strategic plans for the future growth of Focal One?
A: We are focused on increasing our presence at urology-focused scientific meetings and strengthening our senior management and Board of Directors. We aim to expand our Focal One presence globally and capitalize on the growing demand for less invasive, tissue-sparing treatment options for localized prostate cancer.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
