Hyperfine Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 13, 2024

There are 7 speakers on the call.

Operator

Good afternoon, and welcome to Hyperfine's First Quarter 2024 Earnings Conference Call. Currently, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Marissa Beitz from Gilmartin Group for introductory disclosures.

Speaker 1

Thank you for joining today's call. Earlier today, Hyperfine Inc. Released financial results for the quarter ended March 31, 2024. A copy of the press release is available on the company's website as well as sec.gov. Before we begin, I'd like to remind you that management will make statements during this call that include forward looking statements within the meaning of the federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker 1

Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward looking statements. All forward looking statements, including without limitation, those relating to our operating trends and future financial performance, expense management expectations for hiring, training and adoption growth in our organization market opportunities commercial and international expansion, regulatory approvals and product development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our latest periodic filing with the Securities and Exchange Commission.

Speaker 1

This conference call contains time sensitive information and is accurate only as of the live broadcast today, May 13, 2024. Hyperfine Inc. Disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Maria Saines, President and Chief Executive Officer.

Speaker 2

Good afternoon, and thank you all for joining us. On the call with me today is our Chief Administrative Officer and Chief Financial Officer, Brett Hale. We are off to a solid start in 2024 with healthy top line growth and a $3,300,000 revenue quarter. We continue to add flagship institutions in the U. S.

Speaker 2

And build strong programs, giving us a solid foundation to drive the development of these new markets of portable brain MR. We also recognized significant international contributions in Q1, driven by the addition of Select outside of the U. S. Market to our commercial focus. And I'm also very excited about the progress we made in the quarter on our Alzheimer's program and our stroke study.

Speaker 2

As a team, we delivered strong success across all fronts while maintaining spending discipline and preserving capital. I am very proud of the lean execution of the hyperfine team in Q1. Innovation, clinical evidence and commercialization drive our success near and long term. In 2024, we remain an early commercial stage company while investing healthily in development and clinical activities that will drive commercial growth through expansion into new clinical applications and new sites of care in 2025 beyond. We continue to have a significant focus on innovation.

Speaker 2

We launched our latest AI Power software in January and have received very positive feedback from users on the image quality of our DWI sequence, which is clinically important for stroke detection. The latest software includes proprietary AI and deep learning algorithms and expands denoising to all sequences available on the soup system. Looking forward, we continue to invest in all areas of innovation, including hardware, software and AI. We remain committed to launching a steady cadence of AI powered software and sequence development improvement, and we expect to release our next AI powered software by late summer. We plan to continue to improve the image quality and shorten acquisition time, which is important for the use of the soup system in acute settings.

Speaker 2

Technology improvements on image quality and usability make the portable SEWP Brain MR scanner more relevant across more clinical applications and sites of care. I want to now focus on clinical evidence. As I have mentioned before, we are developing a new market of portable brain MR. The value of our platform technology is that it enables timely and early clinical decisions at multiple sites of care. Our clinical work is intended to yield the data to drive awareness and adoption of our differentiated technology across different clinical applications as we already benefit from a very broad clear indication by FDA for brain imaging of patients of any age.

Speaker 2

The subsystem scans are also covered by the same reimbursement codes used for conventional MRI. 1st, our clinical development aims to position the TUP system as a clinical tool in the hands of clinicians that perform neuro intervention. In this area, our immediate focus is our study to assess the detection and workflow value of sup in acute stroke triage. Our second focus is on sup petition as a tool for clinicians managing and caring for patients suffering from chronic neurodegenerative diseases. Here, our greatest opportunity is our active Alzheimer's program.

Speaker 2

These two near term areas of clinical use expansion, stroke and Alzheimer's, are massive multibillion dollar markets for the soup system in the U. S. Alone. These are also markets with a net need that align with the strength of soup technology, namely soup supportability, small footprint, easy access and high ease of use. As a reminder, our technology aims to broaden the reach of brain MRI in the new clinical uses and sites of care, complementing conventional MRI.

Speaker 2

Turning to a more detailed update on our Alzheimer's effort. MRI is becoming a key component of Alzheimer's care and there is a strong potential for the soup system to become a very valuable tool to enable more scalable patient centric care model. Over 50,000,000 people globally suffer from Alzheimer's. Given the vast and compelling opportunity this presents, we have mobilized to be the comprehensive Alzheimer's program, beginning with our Alzheimer's Utility Study CARE PMR. CARE PMR is led by Doctor.

Speaker 2

Ben Zinger at Washington University School of Medicine. In the study, clinicians have placed subsystems at local lekembi infusion centers. The study comparing high field MRI and portable ultra low field MRI to assess the ability of Souq to detect ARIA complications in patients who are taking this amyloid targeting therapy. By bringing imaging closer to the patient than a conventional MRI, we expect to significantly optimize workflow and ultimately open up the opportunity for more patients to be treated safely and efficiently. We expect preliminary data from this study to be shared by the end of 2024.

Speaker 2

In stroke, we continue to enroll patients in our ACTION PMR study, which has now surpassed 100 patients. ACTION PMR is a multicenter evaluation assessing the use of subsystem in detecting acute ischemic stroke. We remain bullish about this opportunity, which will open up the placement of SUK units in emergency departments and hub unspoke stroke networks and look forward to sharing updates in the coming quarters. Additionally, our technology was highlighted in 4 abstracts at the International Stroke Conference, which was held in February. These abstracts highlighted the clinical utility and applications of portable ultra low field brain MR imaging.

Speaker 2

I also want to provide additional detail on our commercial progress in Q1. In the U. S, we continue to add flagship institutions to our user base. Most recently through the addition of MedStar Washington Hospital Center in Washington, D. C.

Speaker 2

We remain very focused on building stroke programs. We have newly established a soup user community to share best practices for the clinical use of soup to propel further adoption of this transformative technology. In international markets, we have established a distribution infrastructure to support additional commercial efforts. As we announced late last week, we have now appointed distributors in 3 key European markets and have hired an experienced market development resource to coordinate our international effort. The distributor model allows us to focus on driving international revenue growth without significant OpEx use.

Speaker 2

I am very pleased with the progress we're making on the three areas of focus and investment for our company and doing so while maintaining spending discipline. Our efforts in innovation, clinical evidence and commercialization support a comprehensive strategy, which will yield an acceleration of our business and growth in 2025 and beyond. The opportunities ahead are incredibly large and compelling and our execution is very strong. I will now turn the call over to Brett to review our performance in the quarter.

Speaker 3

Thank you, Maria. Turning to our financial results for the Q1 2024. Revenue for the quarter ended March 31, 2024 was $3,300,000 up 25% compared to the Q1 of 2023, driven by the sale of 13 Swoop systems. Although our global average selling price was lower in the quarter, primarily a function of heavier international mix, our value proposition has held very strong with U. S.

Speaker 3

Institutions. Gross profit for the Q1 of 2024 was $1,400,000 dollars compared to $1,200,000 in the Q1 of 2023, resulting in a gross margin of 41.1%. R and D expense for the Q1 of 2024 were $5,600,000 compared to $5,500,000 in the Q1 of 2023. Sales, general and administrative expenses for the Q1 of 2024 were $6,400,000 compared to $8,700,000 in the Q1 of 2023. Our year over year reduction in SG and A and flat R and D spend is representative of our focus to fund future growth catalyst while maintaining spending discipline.

Speaker 3

Net loss for the Q1 was 9,800,000 dollars equating to a net loss of $0.14 per share as compared to a net loss of $12,200,000 or a net loss of $0.17 per share for the same period of the prior year. The improvement in net loss was a result primarily of cost savings initiatives implemented across the business over the past year. Our cash burn for the Q1 was $12,000,000 and as of March 31, 2024, we have $63,200,000 in cash and cash equivalents on our balance sheet. Similar to prior years, our Q1 burn rate is seasonally higher than other quarters of the year. We remain on track to execute our cash burn outlook for 2024 and end the year with a healthy remaining balance of cash and cash equivalents.

Speaker 3

Now turning to guidance. We are maintaining our revenue outlook for the full year 2024. We expect revenue in the range of $12,000,000 to 15,000,000 dollars We continue to expect gross margins to be in the range of 45% to 50% for the year as we grow and scale commercially. Our current gross margin profile is attractive for an imaging company and we are very pleased to be driving healthy gross margins even at small scale, putting us in position for future margin expansion. We continue to anticipate total cash burn of approximately $40,000,000 for the full year 2024.

Speaker 3

We expect our cash burn to be lower than 2023 levels, and we will execute this plan while sustaining investments in our 3 focus areas, including our robust Alzheimer's program. We also continue to see a cash runway for the business into early 2026. At this point, I'd like to turn the call back to Maria for closing comments.

Speaker 2

Thank you, Brett. I'm proud of the progress the Hyperfine team made in the Q1 and I remain very optimistic as to what this team can deliver. The next few months will be busy for the hyperfine team with important clinical conferences as we will be participating in the American Society of Neuroradiology in May and the Alzheimer's Association International Conference in July. We also plan to host an analyst and investor webinar spotlighting our clinical advancements and strategy to actively expand into outpatient and office sites of care. We are committed to continue to drive execution at the highest level across technology development, clinical work and commercialization and do so with a strong spending discipline.

Speaker 2

With that, I want to thank you all for your time and open up the line for questions.

Operator

Thank you. And at this time, we'll conduct a question and answer session. And our first question will come from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Speaker 4

Hi, good afternoon. This is Simran on for Larry. Thanks for taking the question. Just first maybe starting off on guidance, you beat the Q1 guide or consensus estimates by about a $250,000 and you're on a run rate now of over $13,000,000 for the year, if we just take the Q1 performance. So why not raise the low end of the guidance range?

Speaker 4

Was there anything kind of one time or one time benefit in Q1? I know on the prior call you had mentioned some capital placements that might have slipped into Q1. So was that sort of beneficial to the quarter?

Speaker 2

Hi, how are you? So there wasn't anything that was one time. There is constantly a rolling of orders and POs that we get. Sometimes we think they're going to fall at the back end of a quarter and then they fall at the beginning of the following, but there was nothing abnormal in Q1. We issued guidance only 7 weeks ago, and I feel really good and I feel we're off to a strong start.

Speaker 2

But I also don't want to get ahead of ourselves. So it's prudent to stick with guidance until we get a little bit more time under our belt, especially as we have now activated international partnerships and other things. There could be a time to be a little bit more aggressive, but this time it feels best to not get ahead of ourselves.

Speaker 4

Great, very helpful. And then gross margin in the quarter was maybe a bit softer than the Street was modeling. And I think part of that was the device ASP came in a bit lower than we've seen in past quarters. So I guess, one, what gives you the confidence to reaffirm the full year guide of 45% to 50%? And 2, how should we think about pricing and pricing durability going forward?

Speaker 3

Yes, thanks for the question. So I'll take that. So you're correct, our ASP, I think we mentioned in our prepared remarks, was a bit lighter than our historical. If you recall, in the second half of the year, we had several U. S.

Speaker 3

Dominated quarters. With this quarter, we had a more international mix added to the portfolio. So that's lower ASP. That was the direct impact for margin, which was up from Q4, but maybe a little bit lighter than the full year guidance. And given the how we see how the year playing out, we feel very confident that the margin will fall in the 45% to 50% range.

Speaker 3

The ASP that we had in Q1, you think about that maybe as a lower end, the gross margin or the ASP that we had in perhaps Q4 of last year maybe at the higher end, but we'll bring that up from the lower end into the middle of those two ranges.

Speaker 4

Got it. That's very helpful as well. And maybe just one last one for me on the international kind of distributors that you guys have signed. So the initial focus is France, the UK and Italy. So maybe talk about the market opportunity and level of demand for SLUCE in these geographies.

Speaker 4

And it sounds like you have placed initial systems there. So how should we think about revenue contribution from these 3 geographies in 2024? And is this contemplated into the guidance?

Speaker 2

Sure. So let me take that. I think we mentioned that in our last call where some international revenue was already in the guidance that we're issuing as we were planning to do exactly what we just did, which is set up some relatively small, but some infrastructure to start being more commercial in Europe and potentially other select outside of the U. S. Market.

Speaker 2

Remember that we had received CE certification as well as UKCA certification already in 2023. And we had a little bit of a pipeline of interest that had actually represented or activated for us from a number of different countries, many of which now have a distributor in place accountable for our business. So we were able to accelerate some of the placements that came out of interest over the last several weeks or short months with the appointment of these distributors. They may not be the only distributors we appoint. Those markets tend to be the larger medical technology markets.

Speaker 2

We're also actively looking at signing a partner in Germany. We just haven't done that just yet. We want to make sure that we are signing the right partner. The other thing that actually was very helpful was the appointment of our own business development manager, who is a seasoned and very experienced person that was very quickly able to facilitate the number of distributors that we were able to sign up relatively quickly. All of these markets have the same level of opportunity that the U.

Speaker 2

S. There's nothing different there. They have less penetration of conventional MRI. They have the Alzheimer's drugs coming to those markets this year, so probably about a 6 to a 12 month delay from the U. S.

Speaker 2

They have a lot of neuro intervention that needs follow-up with brain MR. So we feel that going to those markets is just strategically an extension of what we're doing in our direct market here in the U. S.

Speaker 3

And the only thing I'd add to that is, I think you commented in our last call as well as today's call is that the distributor targeting and going to distributors versus direct makes a lot of sense for us at this stage. We it's very OpEx friendly and helps us drive the top line without a significant amount of spending. So it shows up mostly that investment in the gross margin line item.

Speaker 1

Understood. Thank you.

Speaker 2

Sure. Thank you.

Operator

Thank you. One moment for next question. And our next question comes from the line of Yuan Zhih from B. Riley Securities. Your line is open.

Speaker 5

Hi, this is Anderson on for Yuan. Just a couple of questions on our end. First, congratulations on the first patients enrolled in the Alzheimer's study. Can you provide us with an update on the study's enrollment and remind us when we can expect to see imaging and data updates from this study?

Speaker 2

Sure. So we're not going to provide sort of a month by month enrollment update. We have 2 sites actively enrolling, and I would say we're very pleased with the cadence of enrollment. I think it isn't a big secret out in the Alzheimer's scene that Washoe is one of the probably most active Lechembe infusion sites in the country. So we're very pleased to have partnered with Doctor.

Speaker 2

Tammy Bensinger to lead this study, given the fact that it does look like a lot of the activity on lekambi is happening right there. I would there are a couple of Alzheimer's meetings we are participating in this year, AAIC, which is in Philadelphia at the end of July and then there is CTAD, the clinical trials in Alzheimer's disease, which is at the end of October in Madrid. So for sure, by the fall meeting in Madrid, we should see something. It could well be as early as the July timeframe. And until you have confirmation that abstracts and papers have been accepted, it's just not prudent to give you any more granularity.

Speaker 5

Got it. Thank you. And then also, we have seen new AI laws introduced in Connecticut and Utah, considering the role of AI in Swoop's imaging. Can you just help us understand the potential impact of these laws on Swoop and adoption in these states?

Speaker 2

Okay. I think I'm going to have to get back to you on that question because it's not anything that our technical team has bubbled up as of concern for us. I would say all of our deep learning algorithms are proprietary. We do not use anything that is external, and we are primarily using it not with any kind of patient influence, but more around the denoising of the images as well as the reconstruction of images. But if okay, let me check with our technical team and get back to you and see if there's anything else that I am just not aware of.

Speaker 5

Okay. Thank you. I'll hop back in the queue.

Speaker 2

Sure. Thank you.

Operator

Thank you. One moment for our next question. And our next question will come from the line of Young Lee from Jefferies. Your line is open.

Speaker 6

All right, great. Thanks very much for taking the question. I guess to follow-up on the system ASPs question. So I mean heavier OUS mix drove the lower ASPs. I guess I'm kind of curious, how is U.

Speaker 6

S. ASPs? Was it still similar to prior record quarters as well?

Speaker 3

Yes. I'll take that one. So we don't disclose the individual ASP by different segments. We did comment, I think, in Q3 and Q4 that those were U. S.

Speaker 3

Dominated ASPs. And in our prepared remarks, we talked about the ASP in the U. S. Remaining very strong and strong value proposition. So the ASP for the U.

Speaker 3

S, you can think about it very similarly. I think what we're doing is we're entering into a period where we have a little bit of a mix that takes place between U. S. And international. In this particular quarter, we had a little bit heavier of an international mix versus prior quarters.

Speaker 6

Okay, got it. Very helpful. I guess, it seems like given the mix here, ASPs overall is kind of lower a little bit versus prior expectations or maybe our models kind of suggest that you maintain revenue guidance so that there should be more system sales to sort of offset some of that. I guess I'm kind of curious about the visibility for orders in the U. S.

Speaker 6

Or globally. Just thoughts on as your reps get more experience and the visibility they have in the business for the I guess for the rest of the year ordering trends,

Operator

If you

Speaker 6

have any color or visibility on that, that would be really helpful.

Speaker 2

Sure. So I remain very strong about the pipelines. You are correct that our team in the U. S, our direct team continues to gain experience in driving a broader pipeline. I would still say that the variability we have pointed to in previous quarters around when exactly deals close remains real, but the pipeline is richer and richer by the quarter.

Speaker 2

We also have now a mix component, which is why you are right fully pointing that there is some variability on our ASP because as we said, by choosing to use gross margin and operating through distributors to build our international initial sort of stream of revenue, We've paid a small price with our ASP since we transact that distributor margins. But we now have also a number of additional sales channels in international markets that are driving their own individual pipeline. So overall, it's a richer set of opportunities. It's more people playing on our behalf out in the marketplace. But again, there is this variability around mix, which is going to play some variability around ASP, and there is always a little bit of variability about the closing of the deals because we're still in complicated hospital buying processes that involve multiple functions

Speaker 3

from

Speaker 2

the legal connecting as well as the clinical stakeholders. We have now line of sight to continue to build our stable of flagship institutions, and that applies both adult and pediatrics. So I know we mentioned some adult flagship institution that we landed last quarter. The previous quarter, we had a mix of also pediatrics and adults. And I can tell you now we're working on something in the Southeast of the country that involves 1 of each, and they are also going to be a pretty important reference center for us in the Southeast.

Speaker 6

All right. Thank you very much.

Speaker 2

Sure. Thank you.

Operator

Thank you. And I'm not showing any further questions in the queue. I'd like to turn it back over to Maria for closing remarks.

Speaker 2

Well, thank you all for attending today's call and for your questions. We look forward to subsequent updates over the coming weeks and in our next call. Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.

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Earnings Conference Call
Hyperfine Q1 2024
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