Earnings Call Transcript - EDAP Q1 2021

Operator, Operator

Greetings and welcome to the EDAP TMS First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeremy Feffer with Investor Relations. Thank you. Please go ahead.

Jeremy Feffer, Investor Relations

Thank you, Donna. Good morning and thank you for joining us for the EDAP TMS first quarter 2021 financial and operating results conference call. On today's call, we will hear from Marc Oczachowski, Chief Executive Officer and Chairman of the Board; and Francois Dietsch, Chief Financial Officer. Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements which include statements regarding the company's growth and expansion plans. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause the actual results to differ materially from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. I would now like to turn the call over to EDAP's Chairman and Chief Executive Officer, Marc Oczachowski. Marc?

Marc Oczachowski, CEO

Thank you, Jeremy. And good morning, everyone. I will start by providing a brief operational update, and then turn the call over to Francois Dietsch to review our financial performance. First, let me start by saying that we believe the first quarter of 2021 and subsequent periods mark an important point in the growth trajectory of our business. Without a question, the successful commercialization of any novel technology must be supported by prudent and timely investment. In April, we had the opportunity to raise substantial capital that will enable us to fully support our ongoing US Focal One commercialization effort, while also advancing the key clinical program in endometriosis. This capital raise was strategically important for several reasons. First and foremost, our strengthened balance sheet now provides us the additional resources to fully engage multiple channels across the US healthcare market. In addition to investing further in market access and reimbursement, which I will discuss in a moment, these additional funds will allow us to attract top-tier talent with vast expertise in driving the adoption of innovative technologies, such as Focal One. In addition, we are building out our US clinical marketing and sales organization, so that we are well positioned in this most important market. With HIFU gaining broader acceptance as an effective and less invasive paradigm for the management of prostate cancer relative to surgical options, we will firmly establish ourselves as the leader and clearly be in the right place at the right time. To that end, we will continue to invest in our US infrastructure. These activities will be complemented by the many top-tier hospitals that have already adopted Focal One that are serving as important reference accounts for our company. Some of these include Mount Sinai, Cleveland Clinic, Ochsner Medical Center, UCSF and many others, and our pipeline continues to grow, notwithstanding restrictions on some sales and outreach activities resulting from the pandemic. While our strategic marketing efforts will clearly involve engaging leading KOLs, it's equally important that Focal One reaches a wide breadth of urology medical practices. The added resources provided from this funding will help us maximize the opportunity to develop these important relationships. Secondly, our recent financing was also a clear sign of investor confidence that our HIFU technology represents an important advancement in the management of prostate cancer. As we all know, clinical data generated from well-controlled trials ultimately drive medical decision-making over time. Without question, the capital we raised during the first quarter clearly reflects a recognition by the investment community that Focal One is becoming an important new treatment option for patients battling prostate cancer. Finally, I would also like to add that we truly appreciate the high-quality healthcare-focused investors that participated in this offering. It is gratifying to know that after spending so much time conducting due diligence on our technology and settling the competitive dynamics of our end market, these firms have placed their capital with us based upon a shared vision of bringing an important new innovation to the market. This also resulted in extending research coverage, which we believe will help raise the recognition of our company and the significant unmet need that we are addressing. Of course, launching the new medical technology in the US healthcare market brings several challenges, notably navigating the complex reimbursement and third-party payer landscape. Changing the funding medical practices is never easy, and while adding superior technology, sufficient capital, and sizable marketing authority are all essential elements to a successful product launch, we also recognize that building productive relationships with private insurers and government entities like CMS are critical to establishing Focal One as an accepted mainstream procedure. In early March, we announced increased partnerships with two of the leading reimbursement consultancies: MTP and Argenta Advisors. These partnerships are off to a strong start, and we anticipate positive momentum on the reimbursement and market access front across key hospital networks and finishing practices throughout the remainder of the year and beyond. Securing effective reimbursement levels and achieving the broadest possible patient coverage for Focal One remain top priorities for our company. These two strategic partnerships, coupled with the previously announced establishment of the Category 1 CPT code and reimbursement to physicians performing ablation of malignant prostate tissue with HIFU in the US, will help us drive further adoption and growth across the US. From a sales perspective, our combined Focal One executive offering continues to resonate with healthcare institutions as the only end-to-end urology suites available on the market today. Now, I will provide a brief update on our endometriosis program. As noted during our last conference call, this Phase 2 study will enroll a total of 38 women across five major hospitals in France who will be assessed over a six-month follow-up period. Investigators will evaluate the safety and efficacy of HIFU pathology. At the end of April, we opened a second trial site that has already successfully treated two patients across both trial sites. We have now treated a total of 19 patients. Enrollment is tracking closely with our internal expectations, and we are pleased to be able to execute this study according to our original timeline. We believe the treatment of endometriosis could be greatly improved with the application of our technology, and the use of HIFU technology could offer an important, minimally-invasive treatment option for these patients. We look forward to updating you on this important program throughout the year. Francois will cover the financials in a moment, but let me provide a few highlights from the first quarter. I am happy to report that we generated first quarter total revenue of EUR 10.3 million or $12.4 million, representing a strong growth of 35.4% year-over-year and a new Q1 record for the company. We expanded our gross margin to 42.4%, an increase of 220 basis points compared to 40.2% in the first quarter of 2020. The revenue growth and margin expansion led us to achieve a profitable quarter for the company, both on the operating and net income basis. Our HIFU revenues were down slightly versus the fourth quarter of 2020. This was a difficult comparison as we had a particularly strong December signing key accounts, a few of which we outlined in the press release on December 30th. We also experienced a softness in HIFU treatment-driven revenues in Q1, particularly in Europe, where the pandemic has hit especially hard. However, it is important to note that there is a natural oscillation between treatment-driven revenues and cases performed at hospitals by clients over time. In the US, particularly, we are pleased by the continued growth in the number of treatments performed in Q1. Most of our key academic centers have increased their HIFU treatment numbers as compared to Q1 of last year, and also sequentially compared to Q4 of 2020. This is impacted by the adoption of the Category 1 CPT code since its official implementation in January of 2021, as well as the broadening awareness of HIFU as an important addition to the urology landscape. Turning to a very strong cash position, we ended the first quarter with cash and cash equivalents of EUR 24.4 million or $28.6 million, compared to EUR 24.7 million or $30.2 million as of December 31st of 2020. As noted earlier, subsequent to the end of the first quarter, we completed an underwritten public offering of American Depository Shares that yielded gross proceeds of approximately $28 million. We have a strong balance sheet with which to advance our accelerated growth plan in the US and elsewhere. And now, our CFO, Francois Dietsch will provide some details of our financial results.

Francois Dietsch, CFO

Thank you, Marc. And good morning, everyone. Please note that all figures, except for percentages, are in euro. For conversion purposes, our average euro-dollar exchange rate was 1.990 for the first quarter of 2021. Total revenue for the first quarter was EUR 10.3 million, an increase of 35.4% versus EUR 7.6 million in Q1 2020, reaching a new record level for our first quarter. Total revenue in the HIFU business for the first quarter of 2021 was EUR 1.8 million, a decline of 6.2% compared to EUR 1.9 million for the first quarter of 2020. The moderate decline is driven primarily by the effect of the early pandemic, which continues to have an impact on volumes, although we are noticing a positive trend. Total revenue in the LITHO business for the first quarter of 2021 was EUR 2.9 million, roughly flat compared to EUR 2.9 million for the first quarter of 2020. Total revenue in the Distribution business for the first quarter of 2021 was EUR 5.6 million, a 102.5% increase compared to EUR 2.8 million for the first quarter of 2020, due to the Exact Imaging and major sales developments. Gross profit for the first quarter of 2021 was EUR 4.4 million compared to EUR 3.1 million for the year-ago period. Gross profit margin on net sales was 42.4% in the first quarter of 2021, compared to 40.2% in the year-ago period. The increase in gross profit year-over-year was due to the sales effect on fixed costs. Operating expenses were EUR 4.1 million for the first quarter of 2021 compared to EUR 12.5 million for the same period in 2020. Operating profit for the first quarter of 2021 was EUR 0.2 million compared to an operating loss of EUR 1.5 million in the first quarter of 2020. Net income for the first quarter of 2021 was EUR 0.8 million or EUR 0.03 per diluted share, taking into account EUR 0.2 million in financial terms linked with the US Paycheck Protection Program, as compared to a net loss of EUR 1.2 million or EUR 0.04 per diluted share in the year-ago period. We ended the first quarter with cash and cash equivalents of EUR 24.4 million or $28.6 million, compared to EUR 24.7 million or $30.2 million at the end of December 2020. Subsequent to the end of the first quarter, we completed an underwritten public offering of American Depositary Shares that yielded net proceeds of approximately $25.6 million; as a result, our pro forma cash currently stands at approximately $64 million. Our pro forma ADS share count stands at approximately 33.4 million shares, including 4.15 million ADS issued pursuant to the underwriting offering. And we now turn the call back to Marc.

Marc Oczachowski, CEO

Thank you, Francois. Before turning the call back to the operator to start our question-and-answer session, I would like to impress upon our investors that we now have in place the essential ingredients necessary for an accelerating commercial run: a clinically proven technology leading to better patient outcomes, a clear and consistent messaging into our distribution channels, a strengthened balance sheet capable of supporting our future growth, and key strategic partners who are helping us secure attractive reimbursement for Focal One procedures. Despite continued challenges from the pandemic, 2021 promises to be a year in which our company transforms the treatment of prostate cancer, and in the long-term, we remain extremely confident in the potential of our HIFU technology to address multiple therapeutic opportunities. We will now open the call to your questions. Operator?

Operator, Operator

Thank you. The floor is now open for questions. Our first question is coming from Jason Bednar of Piper Sandler. Please go ahead.

Jason Bednar, Analyst

Hello. Hope everyone's well. My first question, Marc. You mentioned growing demand with HIFU here in the quarter. Has the uptick in utilization continued thus far into the second quarter? And then can you talk about how new Focal One conversations have been going here just the last few months?

Marc Oczachowski, CEO

Hey, Jason. Thank you for joining. Yeah, what I said is that the trend and the number of cases performed in the US during Q1 has shown significant growth as compared to last year Q1 as well as Q4. So again, that shows some momentum in the adoption and in the recruitment of patients, you know, different machines that have been bought by academic centers and many KOL sites. I didn't get the other part of the question, sorry.

Jason Bednar, Analyst

It was just on what time; just how new Focal One conversations have been going here just the last few months, basically what the funnel looks like from a demand perspective?

Marc Oczachowski, CEO

Yeah, and as I said, we continue to grow a pipeline of projects. We continue to get more and more leads in our pipeline. So it's going pretty well.

Jason Bednar, Analyst

Okay, great. And then maybe a two-part question on the investments that you're planning. Are you willing to talk about the pace and sizing of this deployment over the coming quarters? And then, understanding you still need to make the investments, can you talk about when we should expect to see returns from these investments and account for this in our models?

Marc Oczachowski, CEO

Can you, sorry, Jason, I believe the line is not too good, but I didn't get the first part of your question. Can you repeat that?

Jason Bednar, Analyst

Yeah. I was just wondering if you could talk about the pace and sizing, you know, how quick and how much we'll see as far as the investments go? You know any kind of just guidance or color there for the rest of the year? And then the second part of the question was you know kind of similar on the pace and sizing and when the returns might be showing up, whether that's, you know, how much of a lag should we be building in and I understand this won't come immediately, but should we be expecting to, you know, a 3-month to 6-month lag, 6-month to 12-month lag and when these, the, again, the fruits of the investments start showing up?

Marc Oczachowski, CEO

So, actually, as I said a few times, it’s too early. The beginning of the year, the beginning of the budget cycle, and within the context of the pandemic, it’s still difficult to have very clear visibility on the assessment of the different projects and leads that we have. So it will be difficult for me to clearly answer your first part of the question. Now for the second part, again, we work on building coverage and market acceptance, and as we discussed several times, it’s something that takes a lot of time. Though we expect to achieve milestones and increase covered lives at a significant pace. As this grows, definitely the return on investment will start building. So one is linked to the other. And again, we will put in action and execution all for accelerated plans and actions in order to get into that as quickly as possible and therefore, generate returns as fast as possible as well.

Jason Bednar, Analyst

Okay, right understood. And then maybe just one last one for me. Marc, you mentioned some key wins on the reimbursement front. Could you expand on what these wins were and maybe again, expectations on what further progress there might be on the reimbursement front from a coverage standpoint here for the remainder of '21?

Marc Oczachowski, CEO

It's all about coverage. Again, as I said, we got the CPT code implemented at the beginning of the year, and now we need to build coverage. We need to get more covered lives. So this is the goal and these are the milestones. Again, the idea is to get as much reimbursement for the CMS part as possible, having automatic coverage and positivity issues. On the other hand, the idea is to get private payers to start including HIFU reimbursement in their policies. So this is the plan and these are the next steps.

Jason Bednar, Analyst

Right, understood. Thanks so much.

Marc Oczachowski, CEO

Thanks, Jason.

Operator, Operator

Thank you. Our next question is coming from Andrew D'Silva of B. Riley. Please go ahead.

Andrew D'Silva, Analyst

Hey, good morning. Thanks for taking my questions. Just a few quick ones for me to start. Could you start by just letting us know how many Focal One, Ablatherm, ESWL, and Exact Vu systems were placed in the quarter? And while that info is being pulled? I'm just kind of curious why Exact Vu seems to be moving at a much stronger pace than even the HIFU segment. Can you just talk about, I mean, what's driving that relativity, even Focal One, which has its own reimbursement and is really a very complementary offering? Both have capital equipment needs, so I was just very surprised by the product mix.

Marc Oczachowski, CEO

Okay. Hello and thanks for the question. So it's a long question so I may ask you to repeat the second part of the question. But as far as equipment sold, we got 6 LITHO printers, 5 Exact Vu machines, and we had no HIFU devices in the first quarter, the same as last year. And the rest of the question, what was about?

Andrew D'Silva, Analyst

Just really trying to understand why Exact Vu is progressing so quickly, even relative to Focal One, particularly since they're both capital equipment items and very complementary to one another. So I've just been very surprised by the overperformance of Exact Vu, particularly in regard to HIFU.

Marc Oczachowski, CEO

Yeah, actually it’s a good question. The capital investment is significantly different in purchasing a Focal One or an Exact Vu; it's over three times more expensive to buy a Focal One. The indications are different as well. I mean, the Exact Vu is used to perform diagnostics of prostate cancer, while Focal One is for the treatments. So these are two different things. Just to give you an idea, in the US, there are about 1 million biopsies performed every year on prostates, and typically Exact Vu addresses that market of diagnostics. Meanwhile, for newly diagnosed cases of prostate cancer, there are about 250,000 cases in the US every year. So it's a different type of market, and the volume of equipment sold will be different between an ultrasound diagnostic tool and a surgical minimally-invasive equipment tool. Even though, as you said, they are very complementary, we usually have much more diagnostic equipment in the field.

Andrew D'Silva, Analyst

That makes sense. And as it relates to Ablatherm versus Focal One, is there a strategy with that system? And the reason I ask is I noticed that last, during the fourth quarter, you actually placed a couple of systems. So I wasn't sure if we should be thinking about Ablatherm in any sort of material way going forward? Or if those are more one-off situations?

Marc Oczachowski, CEO

Yeah, no, that's more punctual. The important thing is that we don't manufacture Ablatherm anymore. The Ablatherm machines we sold are usually secondhand or refurbished equipment. In the case of the equipment we sold at the end of last year, those were secondhand machines. We did some trading programs for our Ablatherm users in the US to upgrade to a Focal One. So they were buying a Focal One, and we were trading in the Ablatherm. So, for those that want to invest a little money in getting into HIFU, secondhand Ablatherm are good opportunities. So it's really a punctual and optimistic business.

Andrew D'Silva, Analyst

Okay, perfect. And last quarter, you referenced your partnership with MTP and Argenta. I was just curious to how things were progressing with commercial reimbursement. And maybe let us know what initiatives we should be looking for next out of those partnerships?

Marc Oczachowski, CEO

We just started, and actually, we announced the increased partnership with those companies last time, but we started to work with them before. That’s how we got the C-code and CPT code. This is a long relationship that we've had. We increased the relationship now because we want to focus on coverage. Most of the initiatives are to get started on connecting with private payers, and we have already started to meet with the medical directors of private insurances. We also built our hotline to give support to our existing users so that they can claim in the right way and properly with support for their cases and get covered. All of these are initiatives, and as I said, we now have completed the final work, and we will increase further the action plan in helping our sites, in lobbying the payers, and in building more coverage with business partners and key people that we will be bringing into our team.

Andrew D'Silva, Analyst

Okay, but nothing should really materially deviate beyond what we've previously talked about, as far as the commercial coefficient multiplier being 1.5 times to 3 times higher than that of Medicare, correct?

Marc Oczachowski, CEO

Yeah, we're not there yet. But that's ultimately when they decide to cover, they will use their usual multiples that can be viable from one to the other.

Andrew D'Silva, Analyst

Okay, and last question. Just trying to get a little more granular on what kind of investments we should be expecting from a US commercialization standpoint, now that you've got the recent capital infusion? Could you maybe just discuss where you are today with your salesforce and support of the reps that are focused on US sales and maybe where you hope to be by the end of the year from a sales rep standpoint? And then if someone could just talk around what we should kind of think about OpEx looking like for the year that would be helpful. Obviously, the first quarter was very well managed, particularly relative to the fourth quarter of last year. So any guidance or assistance would be very useful. Thank you very much.

Marc Oczachowski, CEO

Yeah. Thanks for the question. I don't have the exact numbers, but we're talking with a number of people. The idea, like I said today and I said that before, we really want to build and increase the company. We really want to bring and strengthen our clinical marketing and sales team. It’s not only about salespeople; it's also about helping to build coverage through more marketing initiatives and gathering clinical data from our top-tier academic centers that are already using the technology. So we will definitely grow significantly before the end of the year. Not only will the salesforce increase, but also in the marketing and clinical departments, so that we have more actions and initiatives on that side as well.

Andrew D'Silva, Analyst

Okay. But just say today, do you expect it to be like 2 times or 3 times bigger as far as the size of the salesforce and marketing team and clinical teams domestically in aggregate?

Marc Oczachowski, CEO

Yeah, that will be, you know, again, as much as possible. Now we have all the ingredients like I said, to move forward and deliver and execute. Now it's another question as well of opportunity. The idea is not just to double or triple the salesforce; it’s to get the best people. So, I don't want to double my salesforce with people who will not sell. I want to get the best salespeople. That's what we're building. So we're looking for speed, but we're also looking for quality. The idea is to strike a good compromise. Again, that’s the difference between theoretical and practical; I can tell you we're going to double it in theory. If I can triple it because I find the right people, I will; if I can just increase it by 50% because I only find the right people, that’s good too. So it’s a compromise between quality and speed, and again, our idea is to go the fastest way possible with the best quality of people and partners involved in our programs.

Andrew D'Silva, Analyst

Very good point. Thank you very much. Best luck—really looking forward to watching the progress.

Marc Oczachowski, CEO

Thanks, Andy.

Operator, Operator

Thank you. Our next question is coming from Frank Takkinen of Lake Street Capital Markets. Please go ahead.

Frank Takkinen, Analyst

Hey, thanks for taking my questions. Wanted to start with Exact Vu? Marc, could you update us on roughly speaking the overlap of sites with both Exact Vu and Focal One? And then I wanted to kind of target the sites that do have an Exact Vu installed, and how you view that opportunity to sell Focal One into?

Marc Oczachowski, CEO

Yeah, that's a good question. The complement between the two technologies and devices is evident in the synergies as well. Again, one is very dedicated to precisely and targeted diagnosing where prostate cancer is in the prostate. So that's Exact Vu. And then once you have that capability of diagnosing prostate cancer, you certainly want to do some targeted and focal treatments. That's where Focal One fits perfectly with Exact Vu. So again, that's really the way it has good complementarity. On your second part of your question, it is true that the pipeline of projects, or the install base of Exact Vu, which is about 100 systems around the world now, certainly for those who don't have a Focal One yet, the logical next step when you're able to do targeted diagnostics is to be able to do focal treatment or targeted treatment. So these are extremely good candidates to initiate a Focal One project. So indeed, all those existing Exact Vu users are excellent candidates and targets for building projects in Focal One and generating data.

Frank Takkinen, Analyst

Perfect, thank you. And then next on endometriosis. I think this is kind of a little bit of a hidden gem here, given all the attention given to HIFU for prostate cancer. Could you just update us, I heard the comments about the new site enrolling a couple of patients, but could you just update us on expected milestones over the next 12 months to 24 months? If I remember correctly, I believe Focal One is already the regulatory landscape for Focal One already has endometriosis in place. You don't have to go through another regulatory process; rather, it's more about generating data to support the use of the system and indication. Am I thinking about that correctly?

Marc Oczachowski, CEO

Not really, not exactly. Focal One is approved for prostate tissue ablation or prostate cancer treatment depending on where you are in the world. But the device is the exact same in the investigation for the endometriosis program. Now, the study that we're doing, the Phase 2 study, and probably a Phase 3 study that will be conducted after this one will be key to the regulatory path towards CE marking and then FDA clearance. So it's not yet approved or cleared for endometriosis treatment. As far as the milestones and the regulatory aspect, that is one of the milestones ultimately. The milestones are to complete recruitment for the Phase 2 study within the year, and hopefully, that will also depend on how the pandemic will impact us. But so far, we're doing very well. We've treated 19 out of 38 patients, and enrollment is tracking closely with our internal expectations. We opened the second site, and we will soon open other sites. As a reminder, we have 5 centers involved in this multi-centric study Phase 2. The idea is to conclude recruitment and treatment of patients within this year, after which we have a follow-up period of six months. This gives you an idea of the next milestone, which is the end of the study. Based on that, the idea would be to discuss with healthcare authorities to see if the data gathered during the Phase 2 studies are sufficient to initiate a regulatory discussion or if we shall need to start a Phase 3, which we will also start to gather some clinical data. This is a bit the program and the different milestones in front of us.

Frank Takkinen, Analyst

Got it. That makes sense. And a last one for me, given the higher mix of distribution in the quarter and the expectation of HIFU trending back up through the end of the year. Is it safe to assume we should expect gross margins to trend upward through the end of fiscal year '21?

Marc Oczachowski, CEO

Yeah, that's a good assumption, looking at it that way, as you know, HIFU contributes very positively to increasing the gross margin. So that's what we see.

Frank Takkinen, Analyst

Perfect, thanks for taking all my questions.

Marc Oczachowski, CEO

Thanks, Frank.

Operator, Operator

Thank you. Our next question is coming from Swayampakula Ramakanth of H.C. Wainwright. Please go ahead.

Swayampakula Ramakanth, Analyst

Thank you. This is RK. Good afternoon, Marc.

Marc Oczachowski, CEO

Hello, RK.

Swayampakula Ramakanth, Analyst

Hi. Ablatherm and Focal One have been with some of the tier one organizations for quite a long time, you know, some of them probably starting from when you had the clinical program going on with some of these folks. At this point, do you think that you've exhausted all the leads within the tier one institutions? What learnings have you gotten from these experiences that you can take to the next level? Now that you have the CPT code, probably the discussions are a little bit easier to get to the tier two institutions.

Marc Oczachowski, CEO

Well, thank you, RK for the question. No, we have not yet covered all the tier one institutions. As we discussed several times, there are 5,000 hospitals in the US and about 1,500 to 1,700 of them have a urology department dealing with prostate. The tier one hospitals are about 10% of those, so it's about 150 to 170 hospitals in the country that are considered academic centers or reference centers for the management of prostate cancer. As you know, we have about 15 Focal Ones, and we have had a few additional other terms. So we’re far from saturating the tier one market, and we have a lot of potential on that side. Most of our current leads in the pipeline are within that category of tier one hospitals. Again, we still have a lot to extend in that segment, and the more covered lives we have, the easier it will be to convert those leads into sales. As we expand further the coverage and adoption of the technology, we can start including tier two hospitals. So we still have a long way and great potential in front of us.

Swayampakula Ramakanth, Analyst

Great, great. And as you stated, it looks like the coverage is becoming the key now in terms of trying to increase the adoption. So towards that end, obviously, you have picked up and you've been working with these consultancies for a while now. In this road to getting complete reimbursement or more reimbursement wins, what are the potential next steps, now that you have the CPT code, and does that help some of these centers to increase the procedural rate? Because last time we were talking, some of these folks were still trying to figure out how to use the code and how to get through the paperwork. How far are they into that, and just highlight to us a little bit about what ways you as an organization are trying to help these folks increase their procedure volume now?

Marc Oczachowski, CEO

So basically, that’s a little bit what I said before today. First, we need to— the next steps are getting more covered lives, which involves getting LCDs from the Max on the CMS Medicare patient side. That’s by getting more and more private insurance to include HIFU in their policies. These are the next milestones to recruit these payers and to have them covering the technology on an incremental basis. What we are doing and, like I said, when you have a new technology, when you have a new code, it’s always a challenge and it always needs support and notification, even on big reference centers, to help them claim properly. That's what I explained earlier, in discussing some of the actions we are putting in place—particularly the hotline we've created to support all of our users in completing their claims correctly and quickly, so they can receive coverage and reimbursement. These are initiatives, and again, that's part of what I said before—now that we have concluded that financing, we will increase further the clinical marketing and sales initiatives so that we can generate more leads, more sales, while also helping our current and future users to increase the number of treatments and procedures performed on our equipment. It's all about volume.

Swayampakula Ramakanth, Analyst

Thanks. Thanks for taking my questions.

Marc Oczachowski, CEO

Thank you, RK.

Operator, Operator

Thank you. At this time, I would like to turn the floor back over to management for any additional or closing comments.

Marc Oczachowski, CEO

Thank you, operator and thank you, everyone, for joining us today. We will update you on all of our programs and initiatives as we move forward, and we'll be happy to have you on the call for the second quarter earnings call in the summer. Thank you very much. Have a great day.

Operator, Operator

Ladies and gentlemen, thank you for your participation. You may disconnect your lines at this time and have a wonderful day.