Greetings, welcome to Perimeter Medical fourth quarter and year-end 2022 conference call. This time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jodi Regts. Thank you. You may begin.
Thank you. Good afternoon. Thank you for joining us on this call and webcast to provide the fourth quarter and year-end 2022 results for Perimeter Medical Imaging AI, or Perimeter. Joining me on today's call is Jeremy Sobotta, Perimeter's Chief Executive Officer, who will provide an overview of Perimeter's progress, and we will then open the call for your questions.
Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the future financial position, business strategy and strategic goals, commercial activities and timing, competitive conditions, research and development activities, projected costs and capital expenditures, research and clinical testing outcomes, the potential benefits of our products, including Perimeter S-Series OCT, Perimeter B-Series OCT, and Perimeter ImgAssist, the efficacy of our clinical trial designs, the timing and anticipated enrollment in our clinical trials, and the timing of potential publication or presentation of future clinical data. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEDAR filings. Our results may differ materially from those projected on today's call. We undertake no obligation to publicly update any forward-looking statement.
For additional information about the risks and uncertainties facing our business, management encourages you to review the company's public filings and press releases, which are posted on SEDAR at www.sedar.com. The news release summarizing this business update that was released today, April 11th, will be made available under the Investors section of our website at www.perimetermed.com and filed with SEDAR. I would like to turn the call over to Perimeter's CEO, Jeremy Sobotta.
Thank you, Jodi. Good afternoon, thank you everyone for joining us today. As we touch on the highlights and milestones from 2022, I will provide comments on both the commercialization activities underway with our S-Series flagship technology, as well as the clinical development of our next-gen investigational B-Series technology augmented with artificial intelligence software, which is currently being evaluated in a clinical trial under our ATLAS AI project. I'll provide a brief overview of our year-end financial results before opening up the call for your questions. As a brief reminder of our go-to-market strategy on the commercial front, we are targeting early adopters of Perimeter's transformative technology.
These surgeons are building the base of our future key opinion leaders, our team is focused on training and supporting these industry leaders to become long-term reference sites when future iterations of our technology democratize it for more widespread adoption. As noted on our last call, the ramp-up and pace of installations for the majority of the year did not meet our expectations due to a variety of factors, in the fourth quarter, we made considerable progress. Fourth quarter revenue was up over 70% compared to that of the third quarter, we completed three commercial placements of our Perimeter S-Series OCT, which doubled the total install base of that technology. Furthermore, we saw continued progress expanding within our existing customer base as two of our fourth quarter placements were at new sites within a large national healthcare system.
We believe these follow-on placements provide further validation that different stakeholders within our customers, including other surgeons and those in administrative leadership, see the benefits of implementing Perimeter's technology in the operating room. We are further encouraged by the feedback from our existing evaluations and the building of momentum in our commercial pipeline. While I am pleased that we ended the year in a strong position with additional deals nearing completion, we do get questions about the headwinds still facing our sales team and the broader med tech industry. The labor market continues to be a key topic of discussion with both our customers and our clinical investigators. As we've heard from some of those customers who have publicly reported their results, Q4 was another quarter of progress towards normalization, particularly in the nursing staff.
However, research staff and other specialties continue to be a concern in our conversations. Although these staffing and other macro pressures persist for our customers, we believe the caliber of users and institutions adopting the technology are incredibly strong indicators of the validity of our stated early commercialization strategy of building future reference sites and key opinion leaders with the flagship S-Series OCT. It is important to emphasize the positive results that continue to be experienced by these early customers. As the overall sample size of S-Series-enabled procedures continues to grow, you know, we know that the national average of reoperation rates is somewhere in the 20%-25% range, and our customer users are reporting early single-digit results when utilizing our technology to visualize their margins intraoperatively.
Turning to our ATLAS AI project, the high level of engagement from our existing customers continues to reinforce the belief that the next-gen B-Series OCT with ImgAssist AI has the potential to be a transformative technology that could democratize a new standard of care, which would easily be adopted at a mass market scale. As a reminder, the aim of the study is to assess unaddressed positive margin rates of surgeries utilizing Perimeter's technology compared to those of the standard of care. Our goal is to gather data from approximately 330 patients and complete the study by the end of 2023. We believe that this further enhancement of using artificial intelligence alongside our OCT imaging technology is going to empower surgeons with a toolset to improve healthcare outcomes.
During 2022, we activated the initial 8 planned sites in the pivotal trial of the investigational B-Series with AI. During the fourth quarter, we received FDA approval to expand the number of institutions involved in our trial, and we continue to engage in dialogue with the FDA to ensure we get the best version of our breakthrough designated device to market. We expect to announce additional sites in the near term, along with a more broad trial update as well. Further, just as we have seen with our S-Series customer base, the existing investigators in the trial are highly engaged and have provided positive feedback that suggests our B-Series OCT with ImgAssist AI has the potential to be a transformative technology.
In terms of future growth initiatives for Perimeter, we had opportunities to present at a number of leading industry conferences and scientific symposiums, including research recently presented at the annual meeting of the College of American Pathologists 2022, that validates the potential use of our Perimeter S-Series OCT to intraoperatively image specimens across a variety of tissue types with a process that does not interfere with surgical procedures or final pathology. Lastly, Perimeter had a strong presence at the International Conference on Surgical Cancer Care, hosted by the Society of Surgical Oncology, or SSO, in March. It was an absolute pleasure to engage with so many physicians across different surgical oncology specialties. With the number of users growing across both our commercial and clinical initiatives, it was great to see the level of physician-to-physician discussions, sharing excitement about the technology, as well as implementation best practices.
This included our spotlight session presented by Dr. Shawndeep Tung from MemorialCare Cancer Institute in Orange, California, and Dr. Neema Tamirisa from MD Anderson Cancer Center in Houston, Texas. I will now turn my attention to a brief financial overview of the year. As Jodi mentioned, we issued a press release summarizing our 2022 financial results earlier today. Before diving in, please note that during the year, the company changed its presentation currency from CAD to USD. The change in presentation currency was made to improve investors' ability to compare the company's financial results with other publicly traded businesses in the industry. In making the change to a USD presentation currency, the company followed the guidance in IAS 21 and has applied the change retrospectively to all prior periods as if the new presentation currency had always been the company's presentation currency.
Operating expenses for the year ended December 31st, 2022, was approximately $16.6 million compared to $12.9 million for the previous year. For the year ended December 31st, 2022, the net loss was approximately $9.9 million compared to $13.3 million in the prior year. From a cash flow perspective, for the year ended December 31st, 2022, cash used in operating activities was approximately $11.9 million. As of December 31st, 2022, cash and cash equivalents were $28.4 million. With our strong cash position and prudent fiscal management, we are confident that we will be able to support our clinical development activities and fund the continued commercial rollout of our products.
Before concluding the call, I would also like to reiterate our January 17, 2023 announcement of Suzanne Foster, President of Beckman Coulter Life Sciences, in her newly appointed role as board chair. Suzanne has a long-standing relationship with Perimeter as a director, and I look forward to continuing to work with her in this new capacity as we strive to transform cancer surgery. With this appointment, following the mid-year addition of globally recognized artificial intelligence expert, Anantha Kancherla from Meta, we continue to strengthen the talent and strategic leadership of Perimeter. Across the Perimeter team of employees, I'm proud of our unwavering commitment to improving patient outcomes and lowering healthcare costs through our innovative medical imaging and AI platforms, as we firmly believe in the opportunity to deliver a transformative technology.
I would like to extend my gratitude to each and every one of our team members and look forward to providing progress updates on future calls. I'll now turn the call over to the operator to open the line for questions. Operator?
Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets. Please proceed with your question.
Wanted to start with one on the two follow-on placements with the existing customer. Given a part of a major national healthcare system, I was hoping you could speak to that process a little bit more, and most importantly, talk to the potential opportunity that still remains within that.
That, major healthcare institution.
Certainly. So the, you know, the process were 2 follow-ons after another couple of installations within that network. We were really excited about what the surgeon, surgeons using the technology were seeing, and that word kind of spread through their colleagues and peers. You know, we were able to fast-track installation in, you know, 1 of those instances, even without an evaluation, given that the clinical data in the existing customer was so strong. In the other instance, it followed the routine process. However, you know, a big part of our sales cycle is in the procurement stage and the contracting stage of the sales cycle. We were able to get through that because kind of the playbook had been written.
You know, early indications of a, you know, really strong momentum in a large division of that hospital network. The opportunity really is there for the taking across the rest of that national network. We're seeing good momentum as that, you know, word spreads into other divisions, and expect to announce, you know, additional follow-on placements in the very near future within that network as well.
Got it. That's helpful. You kinda referenced, I think, one of the points I wanted to get at next, was just the clinical data within the existing customers and more specifically, the reduction in reoperation rates. I know you guys track that closely, so I was hoping you could comment on how the reoperation rate has trended in the installed base, now that you've got six systems out there.
That has continued to exceed expectations, I would say. You know, we've got a variety of users starting from more of the national average rates and some starting closer to, you know, what I would call best in class and maybe the early double-digit re-excision rates. You know, across the board, we've seen reductions down into the early to mid-single digits. You know, again, really, vast exceeding what I would have expected prior to, launching the technology. That's really encouraging. I think, you know, some of the more subtle features, you know, if you listen to our webinar that we hosted in December, is, you know, our surgeons are just feeling so much more confident in their decision-making, so much more informed. Actually, I think a quote from Dr.
Carpenter in the December webinar was, she actually believes she's seeing more disease at the point of care, because, you know, pathology is a sampling technique, so they're not able to do quite a growth assessment. You know, the, your current users are really bullish on the technology, definitely seeing the, you know, the benefit to their reoperation rates and what that means to patients. You know, I'd maybe add, like, another confirmation to what you're seeing there as, you know, what we're finding now emerging is, you know, patients are self-selecting.
If a surgeon operates at multiple locations where one location is using Perimeter's technology, the other location is not, they're actively telling that surgeon, "I want to go where you have the Perimeter technology," which I think is a big validation of its benefit.
Nice. That's great color. Just last one for me on the ATLAS AI trial. Saw the updated commentary around completing enrollment by the end of this year. Could you provide an update on where that enrollment stands today?
Yep. Yeah. We're about halfway through enrollment today. You know, actually we still anticipate being able to have top-line data, you know, earlier than that, maybe, you know, tail end of Q3, earlier Q4. Just, you know, the remaining process around that would be wrapping up the rest of the study. Still, you know, effectively holding the overall timelines. As I mentioned in the prepared remarks, we, you know, we're in ongoing conversations with the FDA and, you know, expect to have some updates there and working with them to make sure we get the best version of our technology to market as quickly as possible.
Okay, great. I'll stop there. Thanks for taking the question.
Thanks, Frank.
All right. Our next question comes from the line of Rahul Sarugaser with Raymond James. Please proceed with your question.
Good afternoon, Jeremy. Thanks so much for taking our questions. I was actually gonna follow on from the last question, recognizing that now that you're about halfway through your recruitment, I understand that you're the company's also looking at potentially expanding the number of clinical sites beyond the original eight. Could you speak a bit to, you know, that potential expansion and how that, you know, either meets the current timeline guidance or would potentially accelerate it?
Yeah, certainly. That really was done as a mitigation strategy around some of the resourcing constraints that we were hearing from our clinical sites. We've been through significant site diligence at the additional sites. Are feeling really good about 1 of those sites, which is a high volume, multi-surgeon site, and are you know, in the latter stages of diligence on another 2 sites to get through qualification and initiation. That will definitely bend the curve or accelerate the trend of enrollment. We're really pleased again at the level, you know, the quality of both institutions and surgeons that want to be investigators on this study.
you know, looking forward to getting them up and running, and that, you know, is a mitigating strategy to help us hold those timelines that we just talked through.
Perfect. Thanks, thanks for that clarity, Jeremy. And then a follow-on question is, you know, congrats on getting now an install base of six devices. Could you perhaps speak to how those are being nurtured as reference sites for once you have the B-Series, you know, hopefully cleared as well?
Certainly. Yeah. That, you know, continues to be front and center in our strategy. You know, I think just by the nature of what we're trying to do, we're getting, you know, users that are very patient-centric. They, you know, they wanna spearhead this new technology. They understand the value, and they're willing to, you know, kinda sift through the procurement process and lobby for this new technology. You know, we've stated all along that these early users will continue to get white glove service from us, both from a, you know, an after-sales support as well as a field-based clinical support for them. You can see the, you know, the Net Promoter Score from presentations like Dr. Carpenter that I just mentioned in our December webinar. You know, we had Dr. Shavdeep Tung and
Dr. Neema Tamirisa presenting at the Society of Surgical Oncology. Again, we've got, you know, Dr. Beth Anglin from, you know, the North Texas, Medical City Healthcare also presenting at the American Society of Breast Surgeons coming up. You know, that is one thing that, you know, I was extremely encouraged by when we were at the Society of Surgical Oncology conference, is just the level of excitement from people that were either investigators or in the middle of an evaluation of the technology. Just the, you know, the willingness to push this forward and to, you know, shout from the rooftops to their peers on how excited they were about the technology. I think that part of the strategy is definitely playing out.
Great. That's really helpful. Thanks, Jeremy. Just one last quick question for me then. Given, you know, sort of the timeline to the B-Series, you know, let's assuming the data is good, approval would be sort of mid-2024-ish. Of course you don't give guidance in terms of the number of devices, that you're, you know, looking to put out, but is six a sufficient critical mass? You know, what would be an optimal critical mass of reference sites in order to really give that B-Series the launching pad you would like to have? That'll be it. Thanks.
Yeah. Thanks for the questions, Rahul. I think that's a little bit of. You know, I would look at that both quantitatively and qualitatively. Certainly six is not where we want to be. We'll continue to drive that install base, and I think we're pushing for, you know, as we've said before, both a geographic mix but also, you know, some in the ambulatory surgery setting and some in the large major academic setting. You know, I think in support of B-Series launch qualitatively, I'd like to see that spread of both customer type and customer geography.
From a quantitative perspective, you know, we should be up into the double digits, you know, maybe 15 range to really support that launch with the number of reference sites that we can send people to kinda in their backyard.
Great. Thanks. That's very helpful. That's all from us today.
Thanks, Rahul.
As a reminder, ladies and gentlemen, it is star one to ask a question. Our next question comes from the line of Scott McAuley with Paradigm Capital. Please proceed with your question.
Thanks. Thanks, Jeremy. Just a few from me. Just to start off, can you speak to the utilization rates that you're seeing at kind of the 6 early sites? Are the surgeons using the S-Series for all of their cases? Are they using it for only some? And kind of are they hitting the number of procedures that kind of you would expect them to be at this point?
Yeah. Thanks for the question, Scott. It's been, you know, a little bit of a mixed bag. I'd say, you know, the majority have come out of the gate and wanted to use it for all of their cases and are hitting the utilization numbers we'd expect. Others have been a little bit slower to ramp, and I think, you know, there's a subset of surgeons where they're hyper-focused on their reoperation rate within ductal carcinoma in situ cases, or DCIS, which tends to be the lion's share of what causes reoperation. They're looking at, you know, using it on that subset of cases with preop diagnosis of DCIS.
That said, you know, the scary thing for these surgeons is when it's not diagnosed preoperatively and you end up having that be the reason for your callback. We have seen, you know, those early users that were self-selecting on some cases continue to expand their caseload. You know, we've also seen some early work on, you know, segmental mastectomy cases or even nipple-sparing mastectomy cases. I think the, you know, these early users that are seeing the utility are interested in maximizing the number of cases where they're using it.
That's great. Thank you. Just on the, you know, number of placements, I don't know if you can speak to kind of the sales funnel, you have now in terms of demos, or anything like that. I know you've mentioned in the past that there are some sites that are kind of waiting for the B-Series approval. Is that a significant number of sites? Or is it that, you know, once that approval comes through that you'll, you know, be hitting the pavement hard on those sites?
From a funnel perspective, you know, we continue to be very pleased with, A, the quality of candidates in the funnel or potential customers in the funnel, and B, the experience that those surgeons are, you know, reflecting back to us about their, you know, excitement out of the evaluations. The actual end user surgeon support, we're very bullish on and continue to build that momentum as we get through these evaluations. We're still, you know, in the double-digit evaluation phase, actively, you know, ongoing at the moment, so happy there. As for the, you know, the subset of customers that wanna wait for the artificial intelligence, you know, that definitely exists. I don't know that I would say it's a significant portion of prospects, you know.
It is there, you know, we try to figure that out pretty early on in the sales cycle. You know, definitely as you mentioned, want to keep them excited about the technology, keep them engaged through our webinars and educational events so that when they're ready, or when the technology is ready, they can adopt it quickly.
That's great. Just lastly for me, on kind of the expenses side, are you looking at, you know, expanding the sales team, you know, the clinical support staff, you know, as you're looking to expand the number of sites and again potentially get ready for that B-Series approval next year? Or kind of is the current headcount enough to support the operations at least for the next few quarters?
Yeah. I think we're in a good spot there, with the current headcount supporting those customers. Obviously, we'll continue to evaluate that as the top line dictates. As I mentioned earlier, you know, we want to make sure these customers are, you know, 5 out of 5 on the Net Promoter Score, and we wanna make sure they have great service. We will continue to focus on that. Based on our projections today, we feel pretty good about where we're at from a headcount perspective.
That's great. Thanks again, congrats, and looking forward to the rest of the year.
Yeah.
All right. Thanks, Scott.
That is all the time we have for questions. This does conclude our question-and-answer session. This does conclude our call. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.