Artrya Ltd

ASX:AYA

Earnings Call Transcript

[Danny Younis, executive]

Good afternoon, and welcome to the Artrya Second Quarter 2025 Investor Webinar. My name is Danny Younis, and I help with Investor Relations for Artrya. With me this afternoon, we have the CEO, Mathew Regan, who is in the center of your screen. To the left of your screen, we have the NED and Co-Founder, John Konstantopoulos. And to the right of your screen, we have the CFO, Mark Wainwright.

Before I hand over to Matt, just a quick note that we will be having a Q&A session at the end. [Operator Instructions]

I would now like to hand the webinar over to Matt.

[Mathew Regan, executive]

Yes. Thanks, Danny, and welcome, everybody. So yes, just to reiterate, so to my left, we have the CFO, Mark, with us today as well. And along with John Barrington, one of our co-founders. JK is with us to my right. So we're here to pretty much answer any questions we can.

Sort of the format that we'll do is I will just assume that the [ report ] has been read by our participants today. I'll just give a very brief overrun of that, but then I'll delve into what I think some of the key questions may be for people. Obviously, there'll be some keen interest in where we are with our 510(k) application, and I will absolutely delve into that. And then we'll leave it open for some more questions and go from there.

So without any further ado, yes. So during the quarter, so we were -- we spent around $1.2 million a month, which is down. We were very conscious of that spend during that sort of Christmas -- leading into that Christmas period. We did want to make sure we maintain momentum with our 510(k) application, which we did. That spend will probably look to rise a little bit, as we look forward as I try and bring activities forward for our future FDA applications, notably our plaque product, but I will also delve into that in a moment as well.

The other activity, and that's ongoing is that we are in the very late stage of negotiations with a couple of very key, in fact, 2 of the top 5 radiology providers in Australia. The importance of that for us is not so much financial, but absolutely validation of our product and also about our integration of our product, which we have also been doing with our U.S.-based partners in Tanner, Northeast Georgia and Cone. You might recall in previous conversations that we had already integrated our product in with the Tanner Health Group. We are 90% done with the Northeast Georgia Health Group, and we're still underway with the Cone Health Group in integrating our product there.

The importance of that is that once we do get our Salix coronary anatomy product cleared by the FDA, we'll be able to turn those integrations into real products very quickly. And the learnings that we get from Australia with these 2 further large groups will also aid us in moving forward once we get our SCP product through, which is the one that actually attracts the CPT code rebate in the U.S., which is where we really start to see some revenue coming into the business.

On top of that, John has been the pointy end of the spear for us leading our charge into the U.S.A. I'll let him talk a little bit more about some of the future relationships we're building with some larger health care systems in the U.S. Pretty much everybody we show our product to in the U.S. as it was everywhere, really, really appreciate what it can do and what it can do for their practices, and we certainly don't get any negative commentary on any of that.

The other key activity, obviously, during the last quarter was a successful $5 million placement aided by Petra. So we're very thankful for that. And we're also thankful for some of the key people that have entered our shareholder list as well, very understanding of where we are in our business and where we look to go forward to. I will make note that Tanner also took up a portion of shares in that placement. So that is a real vote of confidence from a U.S.-based strategic partner in what we can do for them in their business as well. Right. So that's some of the key activity that was underway.

Now into the 510(k) application, so we've been guiding the market that we expect to get our clearance by the end of this first quarter, so that's the end of March. And we are still on track to do that, and we feel confident in doing that. The FDA did come back after our submission. You will recall, we did a Q sub -- a second Q sub submission before we put our application in to give us confidence we're on the right track, and we certainly have that confidence now.

The FDA came back with 6 key questions for us. They were all process related, none of them were deficiencies. So that also gives us confidence. Some of the questions were around things like cybersecurity. Now whilst we put cybersecurity into our application, they wanted to delve into particular detail around that. So we've been able to do that -- respond to that question. We've packaged it up. We've had third-party reviews with it, for instance, and we're ready to go. We will be submitting all 6 questions of the package back to the FDA towards the end of this month, no later than the 1st of March. That gives us a good 30 days for a response from the FDA for a clearance.

We do not expect any roadblocks in any of this process. In fact, we expect we'll deliver our responses back and it will be into the FDA's product. I think they have a maximum of 30 days to respond anyway. So -- and we have high confidence in that. But of course, nothing is a [ lock ], and the FDA can do what they like, but we feel we've been delivering everything they need.

Just to give another sort of flavor and some of the questions that we got, I can't go into complete detail on all of them, but some of the questions were around procedural things like what would be in our user guide and user manual and that sort of stuff. So we make sure that we clarify those pieces or have included those pieces for the FDA's confidence.

Another kind of question that we got from the FDA was related around the visualization of our products. So those that have seen our product, you'll recall that we have an aorta and an artery model that steps down from that aorta and it's the arteries that we're really interested in. I mean, one of the questions that the FDA was starting to delve into was around the aorta itself.

We really had 2 choices at that stage. We could have pushed back on the FDA and said, well, actually, you don't need to know about the aorta because the only thing that's clinical is around the arteries. We chose not to do that. We could have also pushed back in the sense that because we have such good detail and validated detail around our central lines and vessels that, that in turn allows us to have confidence that the aorta is correct. We chose not to do that as well.

In fact, what we chose to do was to play the perfect partner to the FDA and just deliver them the information that they requested. So we've done that as well. So all of those sort of things are getting packaged up into one response back to the FDA with third-party reviews and utilizing some key third-party clients over in the U.S.A. and clinicians in the U.S.A. to do that.

One of the questions that I've received recently is how often do the FDA sort of answer these clarification questions after you've put in your submission. And my understanding talking through our third party that do this all the time is it's not uncommon at all. Quite often, the FDA are learning through these processes as well. They are not AI experts. They have some people that they can call on for that, but they certainly are not AI experts, and they like to understand each and every application and further their knowledge as well. So that's why some of the questions we could push back on, but we chose not to.

The other reason that we chose not to is that some of the questions actually overlap with the data that we're gathering for our plaque product. So for those that will recall, we have an SCA product, which is our base product. We built on top of that, and we will be self-predicating to our SCP products with that once that is cleared. Our plaque product is the one that attracts the $950 reimbursement code from the U.S., and that is around the sort of plaque volumes and the plaque characteristics as well. So some of the work that we're doing right now overlaps with that as well. So that's something that we're very happy to do.

And now on our plaque product, so we are looking well and beyond our current SCA application. We know we have that in hand, and we're looking towards a sort of end of July, early August clearance for that product. So if you work that back, it's towards the end of April that we'll be looking to submit. We have already done a Q-sub meeting for this one quite a while ago, but that is still relevant for us and for this product.

As we get through our current clinical work with our SCP product, we'll make a decision at that point whether to conduct a second Q-sub or not. I can tell you at this stage, that is not in our plans or our thinking. We think we have the right data, the right processes and the right information from the FDA already to move to a submission. But we will be not ultra cautious, but we'll certainly be cognizant of how our relationship evolves with the FDA to make sure we have every opportunity to get through.

On top of that, so with the FDA, we see no roadblocks. So the other key thing is I just want to reinforce, there were no deficiencies in the questions that we received. And where I stand right now today, we are on track to deliver that package of work back to the FDA within time for them to give them clearance or give us clearance, hopefully, by the end of March. Danny, I'll move on, but there may be other questions that come with that, and I'll get to those towards the end.

Some other stuff that we're going. So John is actually, as I described, the pointing end of the sphere moving into the U.S. So he is going to potentially move to the U.S. towards that July -- end of July period, coinciding with our SCP product. But before that, John is traveling quite often to the U.S. and has been developing a relationship with the large health groups over in the U.S.A. JK, maybe just give 2 minutes on what you're doing there?

[John Konstantopoulos, executive]

Sure. I mean the primary focus is really trying to shift the 3 strategic partners that we have, Tanner, Northeast Georgia and Cone Health to the point, where once we have clearance for Salix Coronary Anatomy that we can roll that out into the respective systems there and start generating revenue. And then that really obviously goes further once we have a Salix Coronary Plaque product.

But they've also been really, really helpful and supportive, as key opinion leaders in the U.S. market in introductions into more larger -- medium to larger sized systems. And we're now in discussions with groups such as MultiCare, HCA, who is the largest for-profit group in the U.S., Wellstar, Piedmont and all of these systems are -- have volumes of greater than [ 25,250 ] and some over 100,000 CCTA scans per year.

As Matt mentioned earlier, we have a lot of interest from a number of systems in the U.S. I've had to actually dial some of that back because we just cannot handle that demand at the moment. So I'm very much focused on some key strategic partners that are looking for a point-of-care, real-time approach solution that can help them become a profit center in the current system and that CT first approach that is being driven in the U.S. at the moment.

[Mathew Regan, executive]

Yes. Thanks, JK. So again, we'll take further questions if there are any on that a little bit later.

So the other product that is absolutely still in our workload at the moment is our SCF product, so that is our blood flow product. We are anticipating working through diligently to an end of this calendar year clearance for that product. There has been a fair bit of work going on underway with that as well, particularly during the last quarter, including engagement of expertise in this area out of Switzerland, I believe, as well, and also with data so that we can ensure that we're getting our models to work in the great fashion. I will say that as far as development goes with SCF, that one is at around about the [ 60% ] mark at the moment. SCP and SCA, obviously, they're done. So they're now well and truly into that sort of clinical testing phase, as far as we are concerned.

The other thing that is underway at the moment that will shift us a little bit will be if we can land very imminently, I hope, one of these -- at least one of these 2 large radiology groups in Australia. These will be names that our shareholders will be familiar with. Of course, until the ink is signed, it's not signed, but we are very confident that we will land at least 1, if not 2 of these counting in weeks rather than months. So that will really shift our operations, at least here in Australia into that sort of production support space and enrollment, but that will not impact us, as far as we're concerned with our target of the U.S. clearances.

So from our point of view, we've got a really clearly defined body of work ahead of us. It is primarily and first and foremost, around getting SCA cleared, which we expect by the end of March. It's about getting SCP cleared, which we're expecting by the end of July, and it's about developing and delivering our SCF product, our blood flow product by the end of the calendar year.

One thing I just want to make sure that our shareholders are fully aware of is that the SCF product, when it goes through the FDA process is a distinct group, as opposed to the SCA and the SCP product. So that can largely, if we are ready, happen concurrently. They both though require the SCA product as a predicate for ourselves to report against.

I think with that, Danny, I will open up to questions that there may be.

[Danny Younis, executive]

Yes, absolutely. Thanks, Matt. We will now move to the Q&A session. [Operator Instructions] We do have some questions coming through. The first couple, Matt, I think they've largely been answered. It was all around why wasn't the cybersecurity and the demographic data added, but I think you've already answered that.

[Mathew Regan, executive]

Yes. So okay, let me just refresh on that. So absolutely, those things were, and they were answered in there. But of course, well, the cybersecurity is a really interesting one, right? So we have very good expertise internally. We have a very good response. And all that response is accurate today. It's really around them clarifying. So there's always nerves around privacy and security with health care products.

The same with the sort of demographics. So some of the questions were, yes, you use this sort of level of demographics with your responses, but we want to delve in a little bit more on how much was sourced from the U.S.A. Mainland versus the Australian Mainland, for instance. Interestingly, we just also put in to upregulate our Australian product from a Class I product to a Class IIa product with the CGA. The CGA asked very similar demographic questions that the FDA asked as well. So whilst we did give responses, they wanted to delve into a bit more detail on that.

[Danny Younis, executive]

Okay. And another question around the FDA, Matt. Is there any other potential requirements pending for FDA, i.e., are there any other potential obstacles, where it can be delayed again?

[Mathew Regan, executive]

Look, I can never say 100% categorically no. But I mean, I'm at the 95%, no. I mean the questions we got were relatively benign in nature. There were no deficiencies presented. There was a lot of stuff that was accepted by the FDA that gave us real confidence that's very difficult to sort of elaborate on a call like this. So I couldn't see anything coming out of left field, but I also can't guarantee 100% that, that won't be the case.

They're currently going a process, where they're trying to select RFK Jr. to Head of the FDA essentially. So I can't rule in or out what the FDA may do. But as far as we're aware, based on the Q-sub, based on the responses, based on the information that they've already accepted from our application that we see no roadblocks coming from the responses we're about to submit.

[Danny Younis, executive]

Okay. The next question is around the $15,000 of revenue last quarter that was in the 4C. So presuming of the current Australian customer, which they assume is the $15,000, what's the maximum annual revenue potential from that account from that customer?

[Mathew Regan, executive]

The way I might answer that, Danny, is that in Australia, the health system is such that it is all cost out and efficiencies. We are never going to shoot the lights out financially in Australia with any number of -- in fact, we could have 100% of the Australian market and financially would not shoot the lights out at all.

The reason that we are pursuing clients in Australia is very much around validation of, a, our product; b, because we are born in Australia, we want to make sure Australian citizens have access to our software and c, clinically, that we have clinical leaders here that can help us, as we move towards the U.S. market. We will never financially make a huge amount of money out of the Australian market.

And I would reiterate that if we were born in America, not in Australia, we would not even be pursuing the Australian market. But we want to because we're born here, obviously, and the founders and some of our key experts early on are all in Australia, and we all want to see Australians benefit from this. And hopefully, in the coming weeks, you'll see that come to fruition in a much more full way.

[Mark Wainwright, executive]

Yes. Danny, just to add on to that, that $150,000 reported revenue, I mean that's a single site for that network or that group. So that's a very small cardiology center. So that's probably per quarter what we expect. They are looking to expand to another site. But for that group, that's roughly per quarter what we expect.

[Danny Younis, executive]

Yes. Excellent. Thank you. Again, outside the U.S. this time, so looking at the U.K. and Europe. So what work is going towards the U.K. and Europe? Are you awaiting the FDA clearance first?

[Mathew Regan, executive]

No. So with the U.K. and Europe, so what -- we have done a little work there. So our CE Mark, we've made sure that it's up to date, and we've been through our BSI audits and that sort of stuff. So we're maintaining our applications and our regulatory approvals in those jurisdictions. The reality is it is for us with our current finances, a distraction to what the main game is, which is in the U.S.A.

It's a little bit like if we were born in America, we would be in Australia. It's a bit like that for us. The focus is very much on the U.S. market. Now that's not to say, and we have been working with a couple of parties there that if people knock on our door that we wouldn't do work with them, of course, we would. But we would be very diligent in our response and our timings with that because we are not putting out in jeopardy our U.S. applications.

[Danny Younis, executive]

Okay. The next question is around the competitive landscape, which I think is probably worth talking about. And the investors are asking, do you directly compete with -- clearly in the U.S.?

[Mathew Regan, executive]

We will do. What I would say is that we are the only point-of-care solution. Cleerly are not a point-of-care solution. We do all of our work within 10 minutes of the data being uploaded to the cloud. In fact, I know from our last [ 3 or 4 order ] that it averages 8 minutes for that work. Cleerly use a human in the loop. They have a fixed report that is -- the clinician cannot change. We give the control deliberately to the clinician, so that they can own the report and edit the report, as they see fit.

So once we have our SCP product available in the U.S., then we will be competing with Cleerly, but we also beat them on price as well and scalability. JK, do you want to add anything to?

[John Konstantopoulos, executive]

Yes. The big issue with the business model that Cleerly and HeartFlow take is the human loop, which means that the clinician has to request a scan that goes into a center somewhere in the U.S., and they've got humans that work on that scan, which comes at a cost and infrastructure. So for them to be able to scale across the U.S., they've got to scale with humans and the cost is substantial.

Our approach since the beginning has been to build everything in the cloud so that it is in a real-time manner that the commission has access to it. So our unit cost is low. Our profitability is high because we can discount off reimbursement rate. So it's $950 for Plaque, as an example, we discount about 20% of that so that we can make each one of these centers a profit center, whereas all our competitors are making these centers cost centers

So there's a lot of complaint and pushback on them at the moment. And for them to go reduce that cost is quite high because of this backing infrastructure they have of humans and the technical architecture that they can only change if they go rearchitect everything.

[Danny Younis, executive]

Okay. The next question is around the SCP rebates. So the SCP rebate available in the U.S. is around $950 per scan. What percentage of that will be Artrya revenue?

[Mathew Regan, executive]

Yes. So JK just sort of mentioned that, that we'll discount around about the 20%. So for our shareholders and investors doing their own numbers, we're looking at around about the sort of $750 mark, as our charge, leaving the clinicians and the hospital groups about a $200 profit on ordering any particular test. I would also just make sure everyone is fully aware, it is a frictionless test to order, as far as the software is concerned. The work is being done already because it can be done inside that 10 minutes, it is literally a mouse click away from ordering that test and getting the results instantly.

[Danny Younis, executive]

Okay. There is a follow-up question around your competitors. What is stopping HeartFlow and Cleerly from replicating Salix and removing humans from the loop and provide the same on-site service?

[Mathew Regan, executive]

Yes. So quite a few things actually. So they have architected their product to be that sort of stand-alone system, whereas we've architected it from the very start, which is great foresight from both our founders and the business as a whole right at the start. So that has allowed us to sort of sidestep that work. And I can tell you that's an 18-month process of rearchitecting if people want to do that.

The other moat is once they do that, they have to go through the whole FDA process as well. So we know that, that is probably a 12-month process minimum from start to finish if you have everything in order ready to go, but you can't really start that process until you develop the software. So there's quite a large moat for them to do it.

I suppose the other question that I would follow up with this and investor is what's stopping them coming to see us either as a partner or as an -- a buyer or something like that. So that's certainly something that we're cognizant of. We don't expect to see anybody like that until we've got our SCP product, but I wouldn't be surprised if we get inquiries around those clients.

[Mark Wainwright, executive]

Just Danny, we've got -- we also have additional 25 filed patents in place as well around that architecture and the real-time approach. So that those three, as Mike mentioned are the major blockers.

[Mathew Regan, executive]

Yes. So just to reinforce our IP security. [ That's right ].

[Danny Younis, executive]

Yes. Okay. The next 2 questions, and I'll do them separately around revenues again. So the first one around revenues is, is there a revenue stream that is targeted to data mine quality data of patients that has already been scanned? And can the technology be applied to markets in Asia?

[Mathew Regan, executive]

Can it be applied to market in Asia? Absolutely. That's not a problem at all. It just becomes regulatory hurdles to get in. As far as the data mining and producing revenue out of that, at the moment, that is not on our agenda or our list. We do have access in quite a few of our contracts, not all of them, but quite a few of them around data and data access, but it's mostly for our model production.

There's all sorts of patient authorizations that have to go through to use the data for other things and be able to package out and sell it. But I would say that at a macro level, as we start to get more and more clients that there will actually be opportunity to do that kind of data intelligence things to all of our clients. For instance, how often are people coming through at this sort of age, sex, demographic and how quickly are they getting reported, how -- that kind of stuff, the ranking type of things absolutely will be possible.

[Danny Younis, executive]

Okay. The other revenue question is, what do you expect that time frame to be from signing a contract with the Australian radiology companies to them becoming revenue generating?

[Mathew Regan, executive]

I would think that would be around about a 6-week process, 6 weeks -- maybe to 8 weeks. We know that from our history with Tanner and Northeast Georgia and Cone about how quickly that is to integrate. Of course, some of that will depend on our clients and how quickly they would like to run as well and how far they would like to see that process pushed out through their practices. But that would be my kind of timings on that sort of stuff, Danny.

I just have to couple that up with, obviously, the amount of resource I have and where that resource is focused and not upsetting any clients. So that will really change the dynamic of this business, as we start to get larger and larger clients into our organization.

[Danny Younis, executive]

Okay. Yes. The next question is rather long. Let me just summarize this. So it's really about your addressable market. the U.S. is 20x the Australian market. So if you're looking at 20x [ $15,000 ], you're looking at $1.2 million, so it's a significant uplift. So in regards to the addressable market, the question from the investor really is around, can you discuss on what basis you might achieve a run rate of multiple times the Australian market?

[Mathew Regan, executive]

Yes.

[Mark Wainwright, executive]

Mathew?

[Mathew Regan, executive]

You go first and [indiscernible].

[Mark Wainwright, executive]

So just to maybe [ started ] to step back, the Australian market is 150,000 CCTA scans per year. The U.S. market is about 4.4 million CCTA scans per year. The likes of Tanner and Northeast Georgia and Cone roughly do about 15,000 scans per year between the 3 of them, which gives us around about $11 million in U.S. revenue from those systems alone.

To give you a perspective on size, HCA is the largest for-profit group in the U.S. They do over 100,000 CCTA scans per year, that system alone. Ascension in the top 5 do about 80,000 and are looking to double that over the next couple of years because of their CT first approach. So it's not going to take a lot for us in the U.S. by finding either more of the same size customers like Tanner, Cone and Northeast Georgia to really grow our revenue or and land another substantial client like a MultiCare, they do about 45,000, Mass General, they do about 45,000 scans a year that can really help us get that uplift in revenue and profitability as a company.

[Danny Younis, executive]

Okay. We're down to the last question. So this is one more reminder for the last minute. If you want to ask a question, here's your chance. Otherwise, we'll wrap it up with the final question. And the question is around, Matt, you talked about you were looking to land 1 or 2 radiology groups in Australia in weeks, not months. What is there still to be done to land those?

[Mathew Regan, executive]

Not much. The ink on the paper essentially. But the reality is, it's a really big deal for us. It's maybe not as big a deal for some of our clients. They have say, quite large practices, obviously. Having said that, they are both very supportive of us and what we've been doing. They like our technology. They like what we represent, and they want to be partners with us, right? They want us to be able to engage with us and move forward. But the reality is it's urgent for us. It's not as urgent for them. But it's literally down to ink on paper.

[Danny Younis, executive]

Okay. That was the final question. Hang on. One more -- sorry, one more just popped up now. Are you offering discounts to these new Australian clients is the final question.

[Mathew Regan, executive]

Look, we are. But again, whether it's a small discount, large discount or whatever, the quantum in difference in what the Australian medical system is willing to pay for versus what the U.S. medical system is willing to pay for is literally chalk and cheese. What is similar is the sophistication of our systems. And that's why the real value for us is in the validation of our product with real clinicians that have real credibility in the U.S. and the size of the system that we're integrating into gives credibility along with Tanner, Northeast Georgia and Cone into the U.S. So it's all about preempting our market into the U.S.A.

[Danny Younis, executive]

Okay. Then that concludes the Q&A session. I'll now hand back to you, Matt, for any closing remarks.

[Mathew Regan, executive]

Yes. Thanks, Danny. Look, thanks, everyone. Look, I completely understand the interest around the FDA. It's certainly a key focus of us, as well as we hurdle towards sort of the end of March. Clearly, we want this as early as possible, and we'll be looking to put in our responses in as early as possible, but we want to make sure it's a tick in the box and when we get it done correctly and that we are the perfect FDA client because we're also hurdling fast along on our SCP product.

We -- I just want to make sure everyone is fully aware that we are laser-like focused on just 4 things, right? It's our SCA product. It's been our SCP product directly after that. Again, the development is done, and we are underway with some of the clinical studies we need to do. The SCF product, which will follow on beyond that. We're doing that concurrently. And then finally, integration of clients that we will get in Australia. And that's it. That's our focus.

[Danny Younis, executive]

All right. On that note, we'll close it there. Thank you to all the attendees, and thank you to Matt and his team. Thank you.

[Mathew Regan, executive]

Thanks, Danny. Thank you, everybody.