Artrya Ltd

ASX:AYA

Earnings Call Transcript

[Danny Younis, executive]

Good morning, and welcome to the Artrya Third Quarter Investor Webinar. My name is Danny Younis and I help with Investor Relations from Artrya. With me this morning, we have the CEO, Matt Regan; the Co-Founder, John Konstantopoulos; and the CFO, Mark Wainwright. Before I hand over to Matt, just to 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. Please go ahead.

[Mathew Regan, executive]

Thanks, Danny, and good afternoon to everyone on the East Coast and morning to all those on the West Coast. Yes, welcome to just a run-through of the quarterly results and also a bit of a look forward. Very, very satisfying quarter we've just had. Some big milestones in their own right and we've got at least 3 of those to talk through. So obviously, in the last quarter, we had probably one of the biggest milestones of the organization's history. We got our FDA clearance during the quarter and it's a really, really important clearance. So I just want to take a moment just to explain just how important that clearance is.

So not only does it allow us commercial access into the U.S. market, which is very important to us, it also locks in our point-of-care solution. So our ability to turn around results within 8 minutes and present that back to clinicians at the point of care is absolutely crucial. And that clearance helps us lock that in. It's certainly a competitive advantage for us over every other competitor in the market. The other thing it does for us is it also locks in our platform. So the approval sees us with our Salix Coronary Anatomy product with a platform that allows our other products, our future products to seamlessly plug into. Essentially, those products will be presented with not much more than a radio button or a drop-down menu for our next product's release, so -- and we'll talk about those products in a second because a fair bit of work went on in the quarter for that one and also in the quarters to come.

The other thing that was really important for us during the last quarter was the signing of 2 household names in our industry; Sonic Healthcare Australia Radiology and Lumus Imaging. It's 2 household names, 3-year agreements, and that really solidifies and validates our product in the Australian market. We're not actually searching for more customers in the Australian market, but anybody that came to us, we would absolutely help and support. But really, what we're looking to do now is to focus our attention on the U.S. market and we'll walk through a little bit of what that looks like in a moment.

We've made very good progress in our coming -- upcoming 2 products. Most importantly, our Salix Coronary Plaque. That is our next product that we're looking to put in with the FDA and still searching for clearance in and towards the end of July this coming year. So we'll talk through that in a moment, but a lot of work has gone underway in that area. And we've also brought a lot of work forward to help get us ahead of the curve on those as well. So we'll talk through that in a minute. We've also sort of kicked off our flagship study, SAPPHIRE that validates our novel Plaque Dispersion Score. I'll get JK to talk through that in a moment, but we've kicked that off now. And that also is really important for us in a lot of different ways. One is obviously clinically and how our product performs and the types of things that it can help advance in this industry, but it also helps our commercialization into the U.S., and we'll explain how that looks in a moment.

And of course, the other major thing that happened during the quarter was our successful capital raise. So we raised $15 million in the quarter. In the quarter that went, we realized, I think it was just about $4.6 million, $4.8 million net into our bank, and then we subsequently received the rest. So just towards the end of March, start of April, we had about $17 million left in the bank. So we're well funded. We've derisked the organization with our clearances into the U.S. We're providing further validation with getting both Sonic and Lumus on board, along with the cardiac center. We feel very confident in how we're going to step forward. We've made great progress in SCP and SCF, and we'll talk through those in a second. But we feel like we've really set the foundation now to look forward and beyond the current quarter of very satisfying work to what's coming next.

So just to recap and just to make sure everyone is crystal clear. So we got our clearance on the 28th of March. I'm very happy with that. And as I explained, that sets the foundation for us to commercialize our product into the U.S. It locks in our point-of-care approach, which no other competitor has and it also locks in that platform approach for us that allows us to seamlessly put in our other 2 products.

You'll notice our Salix Coronary Plaque product. So we were targeting delivery of an application around about now into the FDA. We've just taken our time a little bit more with that. We've learned a fair bit out of our previous FDA application. And really, that's around how we put in our data, how we present it to the FDA, how we make it more seamless for them to process the application. So we're just taking our time a little bit more to deliver an application that the FDA can seamlessly approve. We're still targeting this quarter that we're currently in. My expectation is towards the end of this month, we'll put in that application. But that would still see us cleared by around that sort of July 31. But we won't know -- we'll know more of that after we put our application in. But at this stage, I'm still expecting that clearance to flow at about that same time.

On the Coronary Flow product, we've made a great deal of work in that space as well. We put a lot of work forward in that area, both in our software development, but also in our clinical studies, our process and how we're going to approach the FDA. Just so everybody is crystal clear, the group that approves our SCP product is a different group in the FDA that approves our SCF product. The group that approves our SCP product or will be assessing our SCP product is the same group that processed our SCA product. So that's why we're taking our time on this next one, but we're not going to take too long. We'll be hopefully putting that in sometime this month.

On that, I thought we'd also take a moment just to walk through how we're looking to commercialize into the U.S. and maybe just expand on that a little bit. I'll pass across to JK.

[John Konstantopoulos, executive]

Thanks, Matt. I appreciate that, and thank you, all the shareholders for joining the call. As Matt mentioned, now that we've got the Salix Coronary Anatomy product cleared, it really helps us now push forward with our commercialization plans and strategy into the U.S. And it's really focused in 3 areas.

The first is moving our 3 strategic partners of Tanner Health, Northeast Georgia Health System and Cone Health to clinical use and generating revenue from those 3. It will be a structured approach for them where we'll start off with Tanner Health first and then move to Northeast Georgia and Cone so that we can learn some of the key requirements we need from a resource perspective to support those respective partners that we already have. The second part -- sorry, before I mentioned, those 3 generate roughly about 15,000 scans per year. So it really helps us towards our revenue targets over the coming 6 months to a year.

The second part of our approach into the U.S. is very much leveraging our key opinion leader network, which is a group of clinicians that we've built relationships with in the U.S. They are introducing us to the senior levels of organizations in that the CEO level as well as the Chief Medical Officer level. And we're really starting to build a core group of systems that we will look to move towards commercial agreements over the coming 6 months to a year and beyond. The third part then which also leads from this key opinion leader network is the SAPPHIRE study, which I'll talk into a little bit more detail on the next slide. But many of these systems that we've engaged with now beyond the 3 strategic partners will all form participants within the SAPPHIRE study and we'll look to move those participants as part of the study into commercial agreements while the study is ongoing.

And the final thing is we really want to take a structured approach into the resources that we bring into the U.S. as well. We don't need a big sales team at all because of this key opinion leader network that we have as well as the SAPPHIRE study. So a very big focus for us will be more around account management, integration and customer support as we bring more of those customers on board. And as Matt mentioned, the existing customers in Australia will start generating revenue as we go forward as well.

So the SAPPHIRE study is very much a platform for us to test a novel algorithm that we've developed over the course of the last year, which looks to move beyond just looking at plaque. We all know that plaque can create an adverse event, but not all plaques are equal. And what this dispersion score really looks at is it tries to assess the risk of a patient based on the type of plaque, the complexity of that plaque and the density of that plaque over a coronary artery and compare that to current risk methods. And we believe that this risk score will be a better predictor of adverse events going forward. The second part of what the study will look to do is also show that we can appropriately guide medical treatment better than what's currently happening. And that will either mean we will escalate -- be able to show clinicians that they can either escalate or deescalate or withhold treatment for specific patients as we go forward.

From a commercial perspective, the primary focus for us is many of the participants in the study and there are about 6 to 8 of them, we'll look to move to commercial agreements during the course of the study. We don't need the study for our commercialization process, but we are leveraging this as a marketing and a sales approach in the U.S. where we can bring many medium- to large-sized hospital systems into the study, give a lot of those hospital systems access to our software and the clinicians using the software and then moving them to commercial agreements during that process.

Of the 6 to 8 systems that we already identified and we're in deep discussions at the moment, they roughly perform about 400,000 CCTA scans per year. So it really helps build a core pipeline for us of customers that we want to focus over the coming year. And as we go forward, you'll start seeing more news flow around the study as we bring more participants onto the study and the progress of that going forward.

[Mathew Regan, executive]

Yes. Thanks, JK. And just to once again reinforce to everybody on the call, sort of our revenue model, if you like. So that SCA product along the bottom. So we have that ticked. That's FDA cleared now. You'll see there is a reimbursement for all the activities that happen in that space. We are looking at charging our SCA platform as a subscription fee in and around that $50, and then you'll see the other products that we have in our planning and in current development or in current studies at the moment. Obviously, we have SCP, which we're looking to put our application imminently and look to get cleared towards the end of July at this stage. And then we have SCF coming after that. And I just want to walk through what a 10,000 scan system might look like as far as revenue, just to reinforce this for everybody on the call and you can do your own math as we go.

So for every 10,000 scans that come through, everybody will get the SCA product. We want them to have that product. It is the platform that we have. It's a productivity and efficiency tool set that helps them process those clients quickly. And that's charged in and around the USD 50 mark rate. We know through our studies and through our work with our clients that for every 10,000 scans that go through, about 7,000 warrant an SCP application as well -- assessment as well. So about 7,000 or 70% of those 10,000 will go through for an SCP study and that is as simple as opening up from your outlook into calendar and then switching back to mail. That's how simple it will be for these clients and that will unlock the $950 reimbursement, of which we will be charging $750. That leaves $200 per scan as revenue for the hospital system.

The other thing to note there is that also undercuts the current market as well. So it should be quite attractive for our clients to be involved in that. We also know about half of the people that go for an SCP study, a plaque study, they will also then attract a blood flow assessment, our SCF product. So of the 7,000 people that would have that assessment done, that would be 3,500 that would go through for the noninvasive blood flow assessment, SCF. And you'll see there there's a reimbursement of just over USD 1,000, of which we'll be charging around the $800 mark. So you'll be able to do your weighted average numbers on that for 10,000 clients and you can see how that multiplies out quite quickly.

So we will be starting our approach with Tanner, as John outlined a second ago. But obviously, we've got Cone and Northeast Georgia, our other strategic partners, which we're looking to commercialize as quickly as we can and implement and start that process straight away. And then you'll also see the importance of SAPPHIRE and how we've introduced it today, but we'll be talking more and more about SAPPHIRE as we move forward. And that really is the way we're generating more and more pipeline leads into the U.S. So those participants in that study, we'll look to sign them up and we'll look to move towards agreements into that space. And you see that, that unlocks another 400,000 potential scans for us to chase. And there's a lot of reasons to chase it. Obviously, there's a revenue of it, but the data is absolutely crucial for us as an AI company moving forward as well.

So with that, Daniel, what I thought we could do is now ask questions from the shareholders on the call.

[Danny Younis, executive]

Absolutely. Thank you, Matt. We will now move to the Q&A session, as Matt noted. [Operator Instructions] The first question is around the PDS. So is the PDS part of coronary product or future add-on?

[John Konstantopoulos, executive]

That's a good question. Thanks, Danny. Yes, it will be an extension of our Salix Coronary Plaque product. It will not be part of what's been cleared in this new submission that will be going in shortly. But it is one that we'll bring in over the course of the study as well. We're using the study to validate and really change how treatment of patient occurs in the world effectively with PDS.

[Mathew Regan, executive]

Yes. Daniel, I might just add to that, too. So whilst it's not part of our current SCP application, what I want our shareholders to understand is that the 3 FDA studies that we're going for, the one that we've got cleared and the next 2 that we've earmarked, they are by no means the only FDA studies we're expecting to do. And I think I've spoken about this previously that this organization is going to get very good at a cadence around how we're putting in FDA applications over and over and over again, which is why the first application took a little longer than we wanted because we wanted to be the perfect FDA client, and we want to build on that because we are going to go back to the FDA in a consistent basis for more and more applications.

So with the PDS, that Plaque Dispersion Study, I know that we've been involved in papers around this as well and that sort of stuff. So there'll be all sorts of things going in. And at the right time, we will submit an application to the FDA for that. But it will build on that current $750 charge for that rebate code around SCP.

[Danny Younis, executive]

Okay. I've got a couple of questions from Andrew Wilkinson from Venn Brown. So maybe we'll touch on the first part of the question, which is around the FDA next steps. So around the SCP, will you have a Q-Sub meeting for that?

[Mathew Regan, executive]

No. So we've already had a Q-Sub meeting for that. So thank you for that question, Andrew. So we had that Q-Sub meeting -- well, geez, it will be 18 months ago, 19, 20 months ago even. So look, as you would recall, we took the step to have a second Q-Sub meeting before our last FDA application. whilst that wasn't directly related to SCP, that gave us enough guidance on how the FDA want to deal with applications. We've certainly learned from that. We're not going to do another Q-sub meeting for this current SCP application. We don't feel we need to with both the data that we're doing and the way we're just readdressing how we're going to present that to the FDA. So we feel comfortable that we've got what we need to put in that application. We're just taking our time to get it just right.

But for the SCF product, we will absolutely be doing a Q-Sub meeting. We haven't done one for that yet. We're not ready to do that just at the moment, but we'll let the market know once we've decided to do that SCF Q-Sub meeting and be ahead of that curve. But it's a good question and we're always cognizant of whether we should be talking back to the -- how and when we should talk to the FDA.

[Danny Younis, executive]

Yes. And Andrew's next question is around the SCF product and I think you've just partly answered it, Matt, but how close to completion is the development of SCF? And does having a different group assessment add significantly additional complexity to approval?

[Mathew Regan, executive]

Okay. Yes. So look, a different group means that we can do things in parallel. And again, this talks back to the importance of the first SCA FDA clearance that we got. So both our products, SCP and SCF are using SCA as a predicate to put in our application. So that's where the line is really important for us. By running a Q-Sub with the FDA around SCF, we will understand exactly the road map that the FDA require in regards to SCF. As far as development goes and clinical studies and protocols and all the rest of it, we're advanced in that space. We've still got a bit more to do, but we're not talking months and months. So we'll be ready to do a Q-Sub in pretty much due course, allowing us to put our application in time to get cleared by probably the start of January next year. That's sort of the target period that we've got at the moment.

[John Konstantopoulos, executive]

Just on the complexity, Danny, no, we don't believe it will add additional complexity because that pipe of understanding for the SCF type of product, the Salix Coronary Flow product has already been cleared by one of our competitors with the FDA, Heartflow. And we're following a very structured approach to how they've done it. And it's a very well-trodden pathway for us within the FDA and they understand it. It's slightly different to AI because it's not a black box, which the FDA sees but this is more algorithmic, which is a lot more open and a lot less complex.

[Danny Younis, executive]

Thanks, guys. A couple of financial questions. First one is, do you expect OpEx to remain around $1.5 million per quarter for the next 12 months?

[Mathew Regan, executive]

Yes. No, we don't. For the next quarter, it will be elevated towards those numbers because I have bought so much work forward. And I think rightly so, we would rather get these products into the market as quickly as we can. So we bought as much as we can forward. A lot of that spend is U.S.-centric. So that's -- we lost out in the first quarter on the Aussie dollar, probably starting to claw that back a little bit. But no, once these applications go in and we get closer towards the Q-Sub with SCF, that spend will drastically drop away back to a more sustainable spend.

Probably a follow-up question from there, Danny, a lot of people would have would be around capital. We obviously did the capital raise, enormously derisked this organization. Capital management is sort of a responsibility of the Board. And I can tell you as a CEO, I am certainly not asking the Board for more capital at this stage. So no, no, it won't stay elevated for much longer, a little bit into this next -- in the current quarter that we're in. And after that, it will fall back to a much more nominal level. Of course, we are shifting some of our development spend to support spend. So it will come back towards that $1.2 billion, $1.15 billion sort of mark I would expect.

[Danny Younis, executive]

Okay. And that segues very well into the next question from Barry. By the way, good job with everything. At what point will the company reach positive cash flow to avoid further dilution?

[Mathew Regan, executive]

So we're expecting -- is it FY '26 aren't we -- so we're expecting FY '26 to be cash flow positive. Obviously, look, we're all on the same boat. We all would rather that came forward, but we're trying to be very balanced and methodical about how we approach the U.S. market. But at this stage, that's our expectation.

[John Konstantopoulos, executive]

Sorry, just to clarify that, Danny, FY '26 will be close to breakeven. FY '27, cash flow positive.

[Mathew Regan, executive]

Cash flow positive.

[Danny Younis, executive]

That's clear. We're down to the last 3 questions. So what's the time frame on the SAPPHIRE study?

[John Konstantopoulos, executive]

Thanks. It's a good question there. So we're in the process of developing the study protocol at the moment and our key -- our primary investigator is a very well-known clinician out of Mass General. So it's a substantial win for us having an organization and this clinician working with us in the study. So that will happen over the next month. But the SAPPHIRE study is broken up into 2 phases, a first phase, which is a primary validation phase, which just tests the accuracy of our dispersion score. We expect that to be about 6 to 8 months for that study once it's kicked off.

And then the second phase, which will validate the score being a better assessment for risk of patients and potentially treatment changes, we expect that to be about a 10- to 12-month study. They are both retrospective. They are not prospects, so we don't have to recruit patients. Effectively, we're setting up a data registry where many of these centers that I mentioned, those 68 will contribute data into that registry and we'll use that as the basis for our assessment from there.

[Danny Younis, executive]

Okay. There's a question from Tanushree Jain from Petra, but I think you've just answered it. So congratulations Artrya team on all the progress. Could you please provide some color on the timing of the SAPPHIRE study, which I think, John, you've just touched on, kicking off in the announcement of any hospitals involved. So maybe talk a little bit if you can about the hospitals.

[John Konstantopoulos, executive]

Yes. So we're busy working on that at the moment. We're working to get all the collaborators signed up. It's small process to go through. You get the protocol that has to go to those hospital systems with the collaboration agreements. They get that reviewed and they get signed off with those respective hospital systems. Once that's done, we'll definitely be looking to make an announcement on the kick-off of that SAPPHIRE study with some of the key collaborators...

[Mathew Regan, executive]

Yes. And we said who they are.

[John Konstantopoulos, executive]

Yes.

[Danny Younis, executive]

Okay. And the final -- now we just had another one come through. Okay. The second last question. How resources intensive for Artrya is the study? Will any of the new U.S. clients be involved in the study? Or can you on board new customers without them being involved in the study?

[John Konstantopoulos, executive]

Yes. So as I mentioned earlier that the study is not dependent on us getting customers. We are using the study to bring new systems on so that we can get people access to the software really quickly. The intensity on our local team here won't be that much because it is retrospective. A lot of the work will be done by the systems themselves with access to our software. So I hope that answers that question for that one.

[Danny Younis, executive]

Okay. And the final question, it's a common question that gets asked on these quarterlies in a timely manner. So it's around the Trump tariff war. Are Trump's policies a risk to FDA approvals? Is he affecting their funding? Your funding?

[Mathew Regan, executive]

Yes. So look, we are cognizant of DOGE and Trump's policies and the impact that they had on the FDA at a macro level at our level and with the people that we're dealing with, we know that they are unaffected from funding for reviewers and that sort of stuff for FDA. But of course, people are people and they are impacted by the surrounding environment that they're in. So we're cognizant of that, which is why we're also just making sure we're putting the data together in such a way that it is as frictionless as possible for the FDA and for our reviewers. We're very cognizant of that.

More broader than that, do the Trump tariffs and all the rest of it affect us and all that sort of thing. So at this stage, we don't think they do. We have structures in place where that doesn't matter. We're certainly going to start to look a lot more U.S.-centric anyway. And it's something that the Board and management are very aware of, and we're doing constant reviews and seeing how that assesses us. And the other question we get asked a little bit, Danny, is if there's a recession in the U.S. and all that sort of stuff, how does that affect?

Well, health care is one of those few industries that are very limited in their effect on -- through a recession. And certainly, with the rebates and the pull of the U.S. medical systems, we don't expect that to impact us much as well. In fact, quite the opposite, we're one of those things that provides opportunity and efficiency and revenue to some of these hospital systems. So in some ways, it will help us. So I hope that answers those questions.

But look, we feel like we've -- just to sum up, I suppose, the last quarter didn't just happen in that quarter. There's obviously a lot of work going into that. We saw the outcomes of all the work leading into it. We feel we have laid an enormously strong foundation for this business, both in the capital and the product we have, the validation with the clients that we have, the SAPPHIRE study kicking off and how we look to commercialize our product now into the U.S. And we feel really poised to make that next step. Of course, the work hasn't stopped. We continue to focus now on turning what we think is a great product now into commercial reality. Now that's really where a lot of hard work will start to kick off, but we're up for that challenge and hope in the next 3, 6 and 9 months, we can really show that we have a real business here and we're ready to take advantage of the opportunity ahead of us.

[Danny Younis, executive]

Fantastic. Thank you, Matt, John and Mark. And thank you to all the participants on the call.

[John Konstantopoulos, executive]

Danny, just a quick comment. Just on SAPPHIRE, I just want to reiterate that the opportunity for SAPPHIRE commercially for us is substantial because of those 6 to 8 groups that we have engaged that perform roughly about 400,000 scans per year. We will look to move a lot of those to commercial agreements during the course of the study. So the study -- the commercial agreement is really not dependent on the study. We're really using that study as a mechanism for gaining clinical credibility in the U.S., bringing some of those hospital systems on board so that we can move them towards commercial agreements. And it really helps us by not having to put a big sales team in the U.S., an expensive sales team on the ground over there. So we feel our structure around tapping the U.S. is very, very -- is very appropriate for how we want to go forward with this company over the next 6 to 12 months.

[Danny Younis, executive]

Fantastic. On that note, thanks again, gentlemen, and thank you to all the participants on the call. You may now disconnect. Thank you.