Thank you for standing by, and welcome to the ImpediMed Limited quarterly results conference call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Michael Bassett. Please go ahead.
Thank you, Sari. Welcome, everyone, and thank you for joining us today. We're hosting this conference call to discuss our 4C for the financial quarter ending 30 September 2022. I'm Michael Bassett, the Senior Vice President of Corporate and Strategic Development. Joining us today on the call is Rick Valencia , the Interim CEO, and Timothy Cruickshank, our Chief Financial Officer. We'll be referring to the 4C and speaking from the quarterly activity report we launched this afternoon, Australian time, with the ASX. This presentation is a summary of a more detailed 4C. After our remarks, we'll be taking questions. Before I turn over to Rick, I'd first like to bring your attention to the record that we've shown on page two of the presentation deck. The presentation deck, as I mentioned, can be found on the ASX.
Now I'll hand over to Rick and Tim to run you through the presentation. Over to you, Rick.
Okay. Thanks, Mike, and good afternoon, everyone. I will begin on page three with some observations of my first few months as interim CEO and our focus areas. It's coming on three months since I was appointed the interim CEO. In that time, I've taken a thorough review across all aspects of our business, and my initial assessment remains intact. In the previous call, I stated my focus areas would be, number one, utilizing my experience together with the great work of our CAP team to help to obtain reimbursement. Second was cost control. Looking to managing costs while not stifling growth with a focus on achieving break-even with our existing capital. Number three was transition ImpediMed's culture from a continued promise to one of effective execution. The fourth, the final focus area was stakeholder engagement. Three months on, I'm pleased to report the following.
First is reimbursement. It remains the key to unlocking growth. Overall, our core business metrics continue to incrementally improve, but we need more than that. The growth will accelerate as widespread reimbursement is achieved and as we leverage the work that has been done in establishing the beachheads in corporate accounts and IDNs. Specifically, in reimbursement, we made strong progress over the quarter. Our focus has changed from a provider support services unit to working with payers for coverage and medical policy determinations. We have two payers currently paying under coverage determinations and two others willing to receive a policy determination proposal in the next few weeks. Additionally, as we mentioned in our last 4C, we have seven payer meetings scheduled, four in November and three in December. There will be more specifics regarding our reimbursement strategy after Tim's report.
In this quarter, we also expect to see updates to the NCCN guidelines. If the BIS technology is included, we expect to see an acceleration in the activities surrounding policy determinations from the U.S. payers. It's going to be a very exciting quarter coming up for our company. Finances. The company remains in sound financial position with enough capital to reach break-even. This is an area of focus, and we have options to dial up or dial down costs, subject to the success and timing we see in reimbursement over the coming months. We will take a measured approach to cost with a lens of achieving profitability with our available capital.
Tim will go into the financials shortly, but just quickly, I wanted to mention there was an increase in cost last quarter, but that was expected, and we expect a little more cost rollover in this quarter as we realign some of the areas of the business. Going into the second half of the year, we forecast cash outflows to drop and to achieve a run rate of less than 3 million on an ongoing basis. I'm happy to be held to that number, but we would actually like to do better. Our interim target is 2.5 million. Third is shareholder engagement. I'm extremely happy to say that the chairman, Donald Williams, and myself, and Tim arrived in Sydney this morning.
We are looking forward to a week of meetings with investors in Sydney, Brisbane, and Melbourne ahead of the AGM next Wednesday. As I mentioned the last time, myself and the board are committed to better two-way communication with the shareholders, and we are here and very interested to get your feedback and to share our thoughts on the vision for ImpediMed's future with you. Now I will pass it over to Tim to run through the financials.
Great. Thank you, Rick, and good afternoon, everyone. I'll take you through some of our key financial highlights from the past quarter, which is Q1 FY 2023. All figures presented are in Australian dollars unless otherwise indicated. Let's turn to page four, go through the top-line results. We finished Q1 FY 2023 with 2.9 million in total revenue.
Incremental increase over the prior quarter, but still a continued record result for the business. 2.7 million related to SOZO revenue, which is 8% growth year-over-year. Most notably, our software as a service, SaaS revenue from our core business increased by 34% year-over-year. This is a key metric as growth in the core business, SaaS revenue is expected to be the strongest long-term growth accelerator for the business. We finished the quarter with 34.9 million in cash on hand based on our normalized recurring cash run rate that equates to over 10 quarters of cash available. This is prior to considering the impacts of significant sales growth on reducing the cash burn and moving the organization further towards our breakeven targets. Two quick things to note before we move on in the presentation.
First one, all figures stated today are based on the applicable exchange rates from Q1, that being a spot rate of approximately 64.5 cents Australian dollars for every one U.S. dollar and an average rate for the quarter of approximately 68 cents Australian for every one U.S. In order to keep the presentation clean and easy to read, all percentage changes presented are based on those actual FX rates. We have included a slide in the presentation that will walk you through the overall impacts that FX is having on certain comparable figures and what that means on a constant currency basis. Then second, Q1 of each year often contains a number of annual fees, and that's the case this year.
We've included a slide that discusses cash flow in detail, including an update on our normalized recurring cash flows and what they will look like moving forward, as Rick has already indicated. As we turn to page five, total revenue, SOZO revenue, SaaS revenue, all record results. Again, incremental growth, but continued steady growth as we work towards reimbursement. Unit sales were below expectations in Q1 FY23, but the quality of accounts closed remains at an extremely high level. Of note, Q2 is typically a strong quarter for unit sales due to a large number of U.S. hospital systems having a 31 December financial year end. In addition, the underlying fundamentals and metrics that drive the long-term value of our business model continue to be very strong. Let's walk through a couple of those metrics quickly.
ARR, annual recurring revenue ended at 9.2 million, and within the core business, which was up 20% year-over-year, ended at 8.2 million. CRP, contracted revenue pipeline, increased to 19.1 million, up 32% year-over-year. The key here with that metric is we're currently seeing 90%+ gross margins on our SaaS revenue. As we've stated in past presentations, we expect 90%+ gross margins on that entire pool of 19+ million dollars of future revenue. We signed over $4 million in contract value in the quarter between our new and renewal contracts in our core business and as well as a continued contract extension in our clinical business. This indicates two key things. One, average monthly license fees are continuing to increase and are driving total contract value growth.
With unit numbers below expectations for the quarter, our growing TCV shows how critical it is for us to drive additional value on every opportunity that we renew and expand while working through reimbursement. Two, we have a diverse service offering showcased by the ability to sign and renew contracts in both the core business and the clinical business. This diversified offering will only increase when other markets come online in a meaningful way, such as heart failure. In addition, churn rate remained negligible, dropping to 1%. Contract renewal rates remain at a healthy pace. To date, approximately 900 SOZO units have now been sold commercially since the launch of SOZO. The key here, again, is the quality of accounts remains at an extremely high level.
As we'll discuss later in the presentation, the addition of GenesisCare and the expansion of key IDN and NCCN institutions will serve as a key foundation for the acceleration of growth as reimbursement takes hold. Let's talk some more about renewals as we move to page six. This continues to be one of my favorite slides in the presentation in terms of really helping people understand our business model and how it's starting to take hold. We know that last quarter we achieved a 34% increase in the average monthly license fees across our renewal contracts. We also noted that a more reasonable expectation for this growth was strong double-digit growth moving forward. We were very excited with the 38% increase in average monthly license fees achieved in the quarter, as it was above our internal expectations.
When you look at the contracts up for renewal in Q2, our current quarter, it would be reasonable to expect a similar result this quarter as well. We're achieving these results because of, one, our continued software enhancements that we offer our customers. Two, our ability to add licenses to contracts. And three, our stairstep pricing model that ensures a partnership between us and our customers as we help them to improve both patient outcomes and their health economics. The bottom of this page is where you can really start to see how our business model can show its power. I mentioned earlier our ARR in our core business, 8.2 million. That represents the very next twelve months of revenue on all the SOZO contracts signed to date in our core business.
If you look out one further year, the twelve months after that, those same contracts equate to $10.9 million of revenue over that next twelve-month period of time. That's a 33% increase in revenue prior to selling an additional unit. Our stairstep pricing model locks in growth before any additional unit sales occur. On to page seven. This is where we look at some of the FX impacts. With the recent volatility in the Australian dollar, foreign currency rates are clearly a topic of discussion. To give some insights, revenue and cash flow, they both utilize the average exchange rate in the period, which was 0.68 AUD. That was just a two-cent drop from the prior quarter when you look at the average rate.
Heading into Q2, if the rate stays at an average rate of somewhere between 62 and 64 cents, that would be a 4%-6% or four-cent to 6-cent drop from the prior quarter. A bigger impact in Q2 than you would have seen in Q1. When you look at our numbers, a continued drop in that rate, it's gonna have a positive impact on the revenue numbers we're reporting and the SaaS metrics as well as cash receipts, and it would have a negative impact on cash outflows and expenses. If we look at a couple constant currency numbers, when you look at Q1, the FX impacts weren't as volatile on the numbers from a revenue perspective as might be expected, but they did positively inflate revenue figures. One example, total revenue growth was reported 10% growth on the Australian dollar.
That equates to 2% growth on a constant currency basis. What's important to note here, though, our SaaS revenue from the core business. As I mentioned earlier, this is a key metric, and it's expected to be the largest long-term growth accelerator for the business. When you look at SaaS revenue from our core business in U.S. dollars, which is the right-hand side of page seven, we saw our largest increase in over two Years coming in at 14% growth in USD. That's taking all currency out of the equation for our U.S. Business, and you saw that 14% growth last quarter. The underlying key metrics in the business are continuing to grow strong regardless of foreign currency impacts. In terms of cash holdings, we hold the cash and currencies that we anticipate we'll need for operating expenditure.
The vast majority of our cash is held in U.S. dollars, with some held in Australian or euros as well. I'll note in this past quarter we received the R&D tax refund in Australian dollars, so our Australian balance jumped slightly from the receipt of that refund. As September 30, 2022, approximately 80% of our cash reserves were held in currencies outside of AUD, primarily U.S. dollars. A lot of the FX impacts that you see is strictly from a reporting standpoint in terms of the impact on the business. The underlying cash is already held in U.S. dollars. Then lastly, quickly to go through page eight and cash flow. As I mentioned, we have a cash balance of AUD 34.9 million. In the quarter, cash receipts from customers, AUD 2.7 million.
Very positive to see cash receipts continue to track closely to revenue on a quarterly basis. Our net operating cash outflow is 5.7 million. As David mentioned, and as we outlined in the prior 4C in July, cash outflows temporarily increased in Q1 related to non-recurring or annual fees. Q1 contained our annual corporate insurance program fees related to the change in management and staff short-term incentives from the 2022 financial year. When you remove those things as well as the R&D tax incentive on a normalized recurring basis, you've got spend that equates more closely to 3.4 million- 3.6 million for net operating cash outflows. This therefore yields the 10+ quarters of cash prior to the acceleration of sales.
As we look to Q2, this quarter will also contain some additional one-time fees related to the continued measured cost controls. Starting in the second half of FY 2023, as Rick indicated, our net operating cash outflow is expected to be below 3 million per quarter for the second half of the financial year. This puts us in a sound financial position, ensuring we are putting in place the building blocks with reimbursement and coverage that will lead to an acceleration of sales, all the while remaining diligent in finding measured opportunities to reduce our cash burn. Rick, I'll turn it back to you now.
Okay. Thanks, Tim. I'm gonna turn to page nine. As mentioned up in the last quarter, the last time I spoke with you, one of the most impressive aspects when I took over is the groundwork that's been laid in our large corporate accounts and our integrated delivery networks, some of which have been discussed by Tim. How those accounts can be leveraged in a post reimbursement environment. That market is significant. They could potentially provide the avenue to significant growth closer reimbursement as the top 25 IDNs represent over 1,700 hospitals and 24,000 medical facilities according to the recent IQVIA report. We have relationships, significant number of relationships in these, a number of these IDNs already, which can be leveraged and can help to accelerate growth.
Also, this quarter saw the signing of the global strategic partnership with GenesisCare. GenesisCare is one of the largest providers of cancer care in the U.S., in Australia, in Spain, and they are also in the U.K. In the U.S., GenesisCare operates 120 radiation oncology centers. We are starting with one SOZO in five different GenesisCare locations. There will be implementation learnings on both sides. The corporate agreement will allow us to roll out the program to additional sites in the U.S. and globally.
As such, we are absolutely focused on successfully implementing the pilot programs. In addition to signing with GenesisCare in this quarter, we renewed or expanded programs in IDN such as the City of Hope, the University of Pittsburgh Medical Center, Sutter Health in Northern California, and Trinity Health, and within the NCCN institutions as well, such as the Mayo Clinic, the University of Texas Southwestern Medical Center, and the Fred Hutchinson Cancer Center up in Seattle. When you look at these graphs on page 10, it's easy to see the trends. They are impressive, and the trends are accelerating. This month, we will reach a milestone total of 500,000 patient tests on the SOZO digital health platform. As you can see, we are achieving every successive 100,000 testing mark faster and faster with the last 100,000 taking just over 6 months.
It just really does speak to the health of the business. I see another indicator of future health of the business when I think about the economic return that can be achieved once reimbursement's in place. The economic equation is compelling. In the U.S. last quarter's 47,000 tests at a blended rate of Medicare patients and private pay patients equates to in excess of 50 million in revenue per annum of reimbursement for our clients, our providers. Tim demonstrated that the growth that's already inherent in our business model, and this will only strengthen with reimbursement, and that's a topic for the next slide. I believe this is on page 11. This slide shows graphic evidence of our progress. The title of the slide says it all.
Reimbursement is the key to unlocking value, and that has been built within the business, and that which we want to leverage. We're approaching it from dual paths. First is private pay reimbursement, second is NCCN guidelines. We've had a busy quarter as with private pay reimbursement, as previously mentioned. The CAP program continues to provide the evidence required to assist in achieving the goal of policy determinations within the regional payers. We have been successful in obtaining initial coverage determination payments to our providers from two payers already, with consideration from two more in the next 30 days. Additional meetings, as previously mentioned, will occur over the next two months. The second pathway to reimbursement is through NCCN inclusion. Most companies only have the traditional path available to them. We're fortunate to have the NCCN pathway also available to us as well.
As we announced earlier this month, an additional submission has been made to the NCCN, this time for inclusion of the BIS technology in the survivorship guidelines. We see this as a very positive development on several fronts. First, the additional submission effectively gives us two shots on goal instead of just one. It's increasing the probability of inclusion. The breast cancer guidelines reference the survivorship guidelines, so any change in the survivorship is applicable to breast cancer as well. Three, if successful, it broadens the application across many different cancer types. And lastly, the survivorship panel are subject matter experts, so there will be clear understanding of the issues and the unique solution BIS offers cancer survivors. Our expectations around this timing haven't changed.
The breast cancer submission, submissions were heard on August 25th and 26th at the annual meeting, and we would expect to see any changes to the guidelines published before the end of this calendar year. The survivorship submission will be heard today, actually, and in next week's meeting at their annual meeting next week. Again, we have an expectation of an outcome before the end of the calendar year. It's indeed an important quarter for reimbursement and for ImpediMed's future. Turning to page 12. Earlier in the month, we provided an update on the clinical program at the request of a question from our last meeting. I won't go over all of it here, but I do wanna mention the two Cleveland Clinic sarcopenia papers that were published.
These publications demonstrate the power of the data contained within the SOZO Digital Health Platform. The two papers were derived from data already captured through Cleveland Clinic's lymphedema prevention program. They used the data to test the validity of BIS data in assessing sarcopenia in that same patient cohort. The results were extremely promising, opening up the possibility of an additional oncology indication. What I wanna emphasize is that the Cleveland Clinic initiated these studies. The study was fully funded by the Cleveland Clinic. This is just an example of the value of the data that we potentially see long term within the SOZO Digital Health Platform. Turning to page 13. We've covered off on most of the key achievements from the past quarter, but I will briefly give an update on heart failure and renal segments.
Firstly, on heart failure, we continue to make progress with the Advocate Aurora pilot program. We presented to them last Friday on two important outcomes. First was the clinical evidence covering a number of case studies that clearly demonstrate the utility of SOZO with the HF-Dex™ in tracking patient fluid volumes. Two, the pilot shows that because of the high percentage of heart failure patients that are covered by Medicare reimbursement payments are currently sufficient to more than cover the cost of delivering this service to patients without relying on private payer reimbursement. We also made progress with the SOZO II project, which is critical to the viability of both heart failure and the renal failure segments. Removing contraindications is a critical success factor in the SOZO 2 project.
I'm very pleased to say that the initial testing suggests that we will finally be in a position to submit an application to the FDA for removal of the contraindications. We are on track for a SOZO II FDA clearance in January, and the contraindication submission will follow immediately thereafter. With a number of upcoming milestones, we are positive on the outlook for the heart failure program going into calendar year 2023, so in just a few months. In renal failure, after a slow start with the observational study, because mostly due to COVID-related staffing shortages, which plagued the entire dialysis industry, recruitment really picked up last month and has allowed us now to close the study. The final patients will complete their protocol this month.
A preliminary review of the data looks promising, and we will now complete a data review and to discuss the outcomes with the principal investigators with a view to establishing our next steps. Finally, I'd like to turn your attention to a summary of our key focus areas on page 14. These are much the same that we saw in our last discussion. We made good progress over the last quarter. This quarter is shaping up to be pivotal to the future of ImpediMed. The key areas of focus are advancing reimbursement through private payer policy determinations and potentially NCCN guideline inclusion. Two, for revenue growth, focusing on both accelerating unit sales and further increasing the average monthly license fees. Third is cost control.
If we execute in these focus areas, then we'll reach our goals of achieving profitability with the capital that we now have available. With that, I want to thank you for your support, and I look forward to meeting many of you over the next week. Sari, I think we are ready for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up a handset to ask your question. Your first question comes from Shane Storey from Wilsons Advisory. Please go ahead.
Afternoon. Maybe first question to Tim, please, just to further characterize that lift in average monthly license fees. Tim, is that 38% increase that you called out, is that on a constant currency basis? That's question one. Are you able maybe to give us a rough estimate of the proportion of the installed base that's, you know, available for over the next 12 months for such renewal activity?
Sure, Shane. Yeah, thank you for your question. Great to hear your voice. 38% is based on Australian dollars, so that I don't have the constant currency number for that in front of me, but I would guess it would be somewhere in the order of 28%-30% on a constant currency basis.
Okay, that's fine.
In terms of the magnitude of contracts, we see right now we have a pretty heavy cohort of contracts coming up for renewal over the last two quarters we have. We've averaged about 30 contracts that have been renewed in the US each quarter. That trend should continue in Q2 we're in now. We have a big group. There's a small break in Q3, and then it picks up to about that level again. If you track our unit sales as well, and this is something that we can potentially put together in a slide, you can tell, you know, the contracts that we signed three years ago in terms of our unit numbers, those would be coming up for renewal now.
Typically, we were seeing about 30-40 units being signed, you know, this time three years ago.
Oh, okay. It's as simple as just tracking back through the historical.
It should be. Yeah. With broad strokes, you should be able to do that.
Yeah. Okay. Yeah, we've got that data. I mean, it reads like a reasonably large increase to absorb on the surface of things even so, maybe if you could give us some color on how the customers are thinking about that. I mean, are any of them billing on the CMS code, or are they offsetting it in other ways? Are there other forms of reimbursement or other efficiencies that they're sort of justifying it to themselves with?
Yeah, that's exactly right. A lot of these customers are joining our case assistance program, and so they're really ensuring that they're starting to see the health economic side of it kick in for them. Then a number of them are just seeing the software increases that we have, you know, the enhancements that we've made to our software. A lot of these customers signed up when we were on our 2.0 software, and we've come a long way with 4.1, which includes analytics and really, a lot of these real-time kind of, not alerts, but real-time indicators that we're giving to our accounts. The enhancements that we've made strictly from a software perspective are strong enough alone to carry the increases.
when you add CAP on top of that, it makes it a pretty easy conversation to have with the customers.
Okay. My last question, probably one for David, please. Just, you know, given the recent success there in signing GenesisCare, and you've provided a nice update there on the corporate and IDN business development front. I guess my question is really around The U.S. Oncology Network, which is now. I appreciate that the pilot with them probably had its challenges during the pandemic, but a status check on that would be, you know, pretty useful, I guess, in the lead up, you know, to this reimbursement quarter that you've called out.
Yeah, Shane, I'll take that one as well, but I'll turn it over to Rick to add any additional comments he might have. The U.S. Oncology program is growing slowly. They actually added another unit during this quarter, but it's really at more of a site level that these additions are being made at present. Their former CEO moved on from the company about a year ago, and so we're rebuilding that relationship within their network. We continue to see site-by-site growth within U.S. Oncology.
Reimbursement.
Yeah.
Reimbursement is key there, Shane. I mean.
Oh, thank you. Yeah.
They effectively, you know, they've put the program in place. They haven't made the money that they thought they would make on it. Site by site, that's why the case assistance program is going in, and they're becoming more commercial. They're expanding. We see great potential in this with U.S. Oncology once we have reimbursement across the states that they're in.
Okay. That's all the questions I had. Thanks, because I'll see you all soon. Thanks. Bye.
Great. Thank you, Shane.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will pause for a moment to allow for questions to register. Your next question comes from Richard Mees from Pacific Union. Please go ahead.
Thanks for a very good presentation, and I hope all the good things come true. I just wanted to ask, probably innocently, what is the internal process of the NCCN when it hopefully adds you to the required list? Is there a lot of politics or is it reasonably simple? Can they defer a decision and so on? Probably difficult to answer.
Thanks, Richard, for the question. It is a little difficult to answer because each particular group is very different, and they're made up of about 13 people each. When you look at breast cancer, for example, it'll be made up of surgeons, it'll be made up of oncologists, and it'll be made up of radiation specialists. They will get together. There's normally NCCN staff that sit on those panels, about four-six per panel. They will actually do a lot of the background work on the clinical aspects of the product and the papers that have been produced. They will have some sort of recommendation to that panel, who will then bring their own expertise and talk and vote on it.
It is actually hard to tell how these things progress. One of the reasons why we're quite positive on the survivorship panel is that there are, as Rick mentioned, subject matter experts that really work on breast cancer survivorship. It's obviously, you know, they see a lot of lymphedema. They understand the problem, and they understand the solution that we provide. We're quite positive on that one. They've got together, they vote, and then it really comes down to the NCCN staff writing up the changes and then releasing them in the guidelines.
That we just go back to history to see when those sort of things and how often frequently that they have been released after the annual meeting, and that gives us the guide between now and the end of the year.
Yeah. I would add, Richard, that they typically publish their findings in the minutes of the prior meeting. What you generally find is you find some of that result or the result when they reconvene at the next meeting. That meeting is expected to be in November. However, they don't have any particular obligation to any particular meeting schedule. But if they follow their normal pattern, that meeting would be in November, and we would expect and be hopeful that our review would be in the minutes of that to be approved at that meeting of the prior meeting in August. That's what we expect. Again, we can't predict it exactly, but that's why we're making the comments we are.
Are there any reasons for people to oppose you, specialties that perhaps don't like your product or, cost or something like that? The cost is infinitesimal compared to cancer, obviously. There's always somebody who wants to produce a counterargument. Do they get what I would call the no presentation from somebody, not just on your product, but on other products?
Yeah. There's always submissions that get knocked back. Just wait one second. Get rid of that. Thanks, Leon.
Mm.
Okay, there's always submissions that get knocked back. Our last submission was made with the interim results. As you remember, we had a P value on that clinical trial of 0.14. At the time, they still made the changes that said you should have a lymphedema prevention program in place. You should be taking baseline measurements, and early detection is optimal for optimal outcomes. They actually made those things. The only thing they didn't do is specify what is the best technology. Now, they could again leave that blank, but what they do know is most hospitals are meeting their obligations using tape measure, which we've now been told basically doesn't work and is not as effective as our product.
The NCCN, when you think about their guidelines, if you jump onto their website, you can see this. It's all about improving patient outcomes. That's why we have, you know, a high level of confidence that we'll see the changes.
Yes. Thank you.
Thank you. Your next question comes from Gregory Ward, from Trafalgar Capital Management. Please go ahead.
Oh, hi, guys. Congratulations on the momentum and thanks for the presentation. If you refer to slide nine, I just wanted to ask you if you can segment the market. You've called out IDN, corporate account and NCCN institutions. Can you just break out for lymphedema the kind of revenue potential for those three different pools, please?
Greg, thanks for your question. I guess the way we look at those different parts of the market are, you've got corporate accounts which are. We typically name something a corporate account when we're talking at a high level at the organization, and it's something like GenesisCare that could be implemented quickly once, you know, in this specific example, once the pilot program is proved, you're looking at a more massive, faster uptick in terms of devices and revenue. When we talk about IDN, that's specifically those top 25 IDNs. I think we mentioned there's around 1,700 hospitals that we would be targeting overall. What we look to do with the IDN is we get a master service agreement in place, and then we effectively have a license to hunt.
Right now, pre-reimbursement, our sales team is going out and selling them on an individual basis. With reimbursement, you would anticipate that there would be an acceleration in that adoption as well, even when you're hunting on a site-by-site basis. NCCN institutions, I believe there are 36 NCCN institutions. We're in over half of those. The NCCN is obviously a very specific market, but they're the thought leaders and they're the hospitals that the rest of the market follows as well. We really look at them as the leaders in terms of seeing the adoption there will lead to a larger presence across the market.
I didn't give a lot of specifics in terms of revenue size in those markets, but hopefully that gives you kind of directionally what we're attempting to accomplish there.
All right.
It's probably something more to work on, Greg, to be honest. I mean, Tim and I keep talking about doing the work on number of hospitals and opportunity within hospitals, and we've started doing work on the size of hospitals and how many SOZO machines that they can take. We're actually looking at some data at the moment, acquiring some data at the moment, so we can actually look at the Medicare numbers, the breast cancer numbers, and in particular how many, you know, SOZO units can be borne. It hasn't been a high priority because we know there's a significant market out there at the moment and we're only touching such a small portion of it, but it is work that we need to do more on.
Right. Okay. Just on the 25 IDNs, what portion of the market do you think that those 25 have of the IDN market as a potential revenue pool?
I can show you the report. It's pretty high. I mean, when we think about 5,000 U.S. hospitals, these guys are about 1,700 of them, all up as of beginning. You know, they're gonna be a fair percentage of the overall market, and they tend to be on the larger side as well. From that particular point of view, they're probably, you know, taking up a even larger portion of the amount of SOZOs.
Right. Okay. Of the 16 that you're in, what portion on average of those 16 have you penetrated the potential market within each of the 16?
Very little. I think we made a statement.
about a quarter of our SOZO units are in those IDNs. You know, that's around, you know, it's a few hundred units in the IDNs that we have out there. That's still a small percentage. We're talking, you know, 10% of the coverage area at most.
The main reason why we call it out, Greg, is that some of these IDNs have taken more than 12 months to get into. By the time we do the BAA with them, the time we do the tech assessments with them and everything else. We're actually through them now. Because of that, we might only have one or two units. As reimbursement comes on, then we can send our sales force in to really hunt within those units because there's still US Oncology was a great example there, where they're looking for economic outcomes as well as clinical outcomes. Once we have the economic outcome, then we can go, you know, specifically hunting, and we don't have to go through all those tech assessments, BAA or anything else.
You can actually get growth quite quickly, as opposed to, you know, on a hospital-by-hospital basis.
Greg, I would say that one of the other reasons for our focus there is most of the IDNs have a variety of segments of healthcare segments where BIS and technology could be used. Once those relationships are established, then if as we enter the heart failure market or the renal market or other segments where BIS can be used, then we can leverage that relationship within that same IDN. Once that foothold is there, then we should be able to accelerate growth into the other segments more easily than starting from scratch.
Right. Okay. Have you got a case study in those 16 of where you've actually penetrated a lot quicker, throughout the hospital group, versus, another example where, you know, you've been there for some time, but it's actually been quite slow to penetrate? Understanding the differences.
It's really coming down to reimbursement, and we still don't have reimbursement. We will see that coming. We know from dealing with the likes of U.S. Oncology that it is the sticking point. Where we're going at the moment with those guys is because of the case assistance program where we can get them reimbursement. When we've proved that up, we've actually got other physicians within those sites saying, "We'd like a machine now too." The case assistance program is what I would define as clunky reimbursement. We have to work hard to get it. When once it becomes automatic reimbursement, we think that'll accelerate even further. That's one example.
There is an example of what David, Rick just mentioned in terms of moving from lymphedema into heart failure, and that's actually under the same master services agreement as well. That allows us to do both.
Okay. To your point just then, Mike, I think you've said in the past that these reimbursements have very much come down to kind of regional to regional combat with these funds and actually going through the court process and then them losing, them putting up the white flag, essentially. Is that literally how you penetrate these IDNs on a regional basis?
Yes. It is, Greg. One of the primary strategies is to go to the areas where we have volume, particularly in testing, and we have favorable regulatory environment as well as, you know, a multidisciplinary provider. Because they typically have most of their volume patients at regional health plans, and which is predominated across the country because of the Blue Cross Blue Shield system. The strategy is to go to where we have volume, where we have relationships, where there are strong regional players, and then get policy determinations done. Which once that happens, then you've moved past reimbursement.
A policy determination means it's actually in the coverage that payer is providing to its members. That means it's systematic. There's no level of approval for that claim to be paid once it's in coverage. That would be done by getting the policy determinations that we've mentioned that we're working on now. We start with the regional payers, and then we leverage into the national accounts as well.
In the case of like when you look at the national market shares, the United might have a large national share, let's call it 10%. In the regions, a Blue Cross Blue Shield region, regional player might be 40% market share. Where United's worried that if it has a policy in California, although it doesn't need to have it state by state, it's very hard for them to stand up and say, "We think it's medically necessary for the Californian people, but not New York people." What you find is it cascades across their country. They're what you'd call slow to adopt. If you're a regional player where you've got, you know, three large hospitals that are asking for this, then, you know, a large part of your market comes from those hospitals.
You tend to have. When you've lost appeals in those states, which has shown both medical necessity and efficacy of product, then they tend to roll over quicker.
This may be in the weeds a little bit too much, but there is also an interesting angle on this particular issue in that the national players, the UnitedHealthcare, the Aetna of the world. Much of their client base and their membership base is self-funded by the employer. Self-funded accounts are not regulated by states. They are regulated under a federal regulation under ERISA. The regional players, such which is typically the Blues and other smaller regional plans, tend to write employer plans that are fully insured and therefore they are regulated by the state in which that contract is held. To get support through the process of the regional players is a little easier because once the state regulator issues circular letter for policy determinations, then the regional players have to follow suit.
The national players, for all of their membership governed by ERISA, do not have to follow that regulation by a state regulator. It's a little more effective to start with the regional players, and then over time, the national players follow suit because they wanna compete in that state and they need to have similar coverage determination, but it takes them a little longer to get there.
Excellent. That's very, very clear. Thanks, guys. Thanks for the answers and good luck for the next quarter.
Thanks, Greg.
Thank you. Your next question comes from Richard Meisz from Pacific Union. Please go ahead.
Thank you. You say you sold 18 units in the last quarter, which was slightly disappointing. Obviously, if you get NCCN validity, you would hope to sell quite a lot more each quarter for, hopefully a long time. Can you just indicate the capacity you have to make and supply the right number? Hopefully, perhaps a little bit more color. Thank you.
Great, Richard. Thank you for that question. That's obviously the million-dollar question, how many units will that be going out? The good news is we feel that we have adequate inventory at this point to satisfy that. We've got a couple of things going. With the last capital raise, we earmarked a number of funds to make sure that we stayed ahead of the supply chain. We've actually bought a lot of parts so that we can build. The other thing we have going for us is we have our SOZO I product, which is currently on the market, and we'll have our SOZO II product out in the market in the next calendar year.
You've got two different product offerings that will work for different hospital systems, depending on their pricing and what they're trying to do with their programs and if they're expanding beyond oncology. We've got a number of different levers to pull from an inventory and supply standpoint. We're very confident that we've got what we need, and I look forward to getting to a place where that's the topic of conversation of how we're gonna keep up with the number of devices.
Thank you. I mean, could you put a figure to what your capacity on a quarterly basis to manufacture would be or manufacture and supply?
We could expand the manufacturing to almost anything you'd like to get to. Where we would start to run into problems is actually the implementation. We need to bring on bodies for the implementation. We're a fair way from that at the moment. You could easily raise that up to, you know, 100 a quarter, I'd say, off the top of my head without any problem whatsoever.
Yeah. We have the same contract manufacturer as a number of the largest medical device companies.
Yes. Yes.
Great question, though. Great. If there are no other questions, then I think we can wrap up the conference for today. I appreciate everyone joining and listening in, and for especially for all the questions. Again, I look forward to meeting many of you over the next week and a half in person, and hopefully we can continue the conversation. Thank you all for joining.
That does conclude our conference for today. Thank you for participating. You may now disconnect.