Okay, good morning all, and welcome to day one of the Jefferies London Healthcare Conference. My name is Mike Sarcone. I'm an analyst on the U.S. Medical Supplies and Devices team, and for this session, we've got management from EDAP presenting. So from the company, we've got Ryan Rhodes, CEO, and Ken Mobeck, CFO. So gentlemen, thank you both for joining us. For this session, Ryan's going to give a presentation, and we may have some time at the end for Q&A. So Ryan, it's all yours.
Thank you, Michael, and thank you on behalf of Jefferies. I'm Ryan Rhodes, CEO of EDAP TMS, and I'm happy to be here today to give you an overview. EDAP Focal One, we are the global leader in innovation and delivery of advanced ultrasound technologies for both the diagnosis and treatment of disease. When we turn our attention to a core focus of the company, it's in the domain of prostate cancer. As noted, prostate cancer is a large addressable market. Here, just looking at U.S. figures, nearly 300,000 newly diagnosed cases each year in the United States, over 1 million biopsies performed on men annually, and sad to say, over 35,000 deaths each year just alone in the U.S. But I think what's important to understand is that over 3.3 million men are living with their disease.
Prostate cancer is a heterogeneous cancer, and that means it's not the same cancer for every man. So risk stratification becomes very, very important when we look at the market. Here, looking at that risk stratification, we can see an addressable market coming from really three distinct areas. At the time of biopsy, 48,000 + men would meet the criteria of low to favorable intermediate risk disease. Additionally, we have men on active surveillance protocols today who will progress because of disease progression or anxiety-induced decision-making. At five years, 50% of men will progress from active surveillance. And then, of course, in the area of salvage treatment, we know primary radiation may lead to a recurrence, and men don't have a lot of suitable options to treat their cancer, and HIFU is written actually into the NCCN guidelines as a formidable treatment.
If you turn your attention to the large global market opportunity across six various regions of the world (Europe, Asia, North America, Latin America, Africa, the Oceanic region), it's nearly 1.5 million newly diagnosed cases each year. So the number one most common cancer diagnosed in men. When we look at treatment trends for prostate cancer, what's exciting to see is that there is an emerging new market in play. The traditional market has been surgery, radiation, and active surveillance, but the new emerging market includes the emerging category of focal therapy and HIFU. But this market, at maturity in the near future, will be a large market that could represent the same size markets of standalone surgery or radiation. Turning our attention to Medicare data, government data from CMS, this shows you calendar years 2022 and 2023.
As you can see here, HIFU is growing, while other treatment therapies, to include surgery, robotic radical prostatectomy, brachytherapy, cryo, are all declining, so HIFU is on a growth trajectory already and will probably see increased numbers as we reflect back this coming year at the calendar year 2024. Focal One is best-in-class technology, and when we talk about Focal One, we're talking about advanced imaging and robotic ablation.
Whether it's targeted fusion biopsies today, leveraging all the current advances in imaging really allows us to be where we are today with focal therapy, and then applying robotics in the case of Focal One, we can be very purposeful in targeting defined cancers found within the prostate gland. Our core technologies and what's unique to Focal One is HIFU, high-intensity focused ultrasound. We've treated nearly over 50,000 patients since the inception of creating HIFU therapy at EDAP.
We also incorporate robotics into our platform, which is very unique. Advanced imaging, and then, of course, now the onset of AI or artificial intelligence. Our system has some very core proprietary functions. One is in the area of fusion. HIFU is a proprietary fusion software built into Focal One. We can take imaging from any source, bring it directly into the machine through the PACS system. It can be marked up MRI images, 3D biopsy maps, etc. We bring it straight into the machine. We're agnostic to its format. We set up the treatment plan in real time. We deliver that treatment plan through our robotic positioning system, which is a five-axis robot. We have very known proprietary technology to include our dynamic focusing probe, which allows us to treat using contoured advanced sound waves around the delineated borders of cancers.
Then we have an integrated flexible workstation that can be moved around various treatment rooms within the facility. Focal One has a very notable and growing install base. When we look to the U.S., we can see here, first of all, we have seven global subsidiaries around the world in various markets, but also noted 350 clinical sites, both including the U.S. as well as outside the U.S. Our U.S. install base, which is an impressive list of hospitals, is made up both of cancer centers, that is, academic centers and community hospitals. We are in Cleveland Clinic, Mayo Clinic, Memorial Sloan Kettering Cancer Center. We're in every University of California teaching hospital running Focal One. We're in large IDNs, Kaiser, HCA Corporation. Even in New York, within the Mount Sinai Health System, we now have two Focal One systems placed.
And so we're getting busier as we place more systems, both in academic programs as well as large community hospitals. Of that, seven out of ten of the U.S. News & World Report hospitals in the United States are now running Focal One. We're in nearly half of the Society of Urologic Oncology Fellowship programs, which are the prestigious fellowship programs that have a defined focus in training urologists and urologic cancers. And we're also in 42% of the National Comprehensive Cancer Network participating hospitals, which are some of the top hospitals in the United States. Turning our attention to reimbursement. Proud to say that our reimbursement, effective in six weeks, January 1, will actually go up 5.4%. And again, this is Medicare reimbursement, CPT code 55880. As you can see, compared to other treatments, the reimbursement is very strong and very favorable.
Our average treatment times are about 40 minutes to an hour of treatment time, so it's a very efficient procedure, which has optimal workflow. Turning our attention to the physician payment, we are at 17.73 relative value units or RVUs for the physician's time, which is important to understand, again, because the physician can treat multiple patients throughout the day based on the workflow and the shorter treatment times afforded by Focal One's technology.
We have strong supporting clinical evidence. If you think about it, in the published literature, over 10,000 peer-reviewed publications support use of HIFU therapy in prostate cancer. And we talk about the trifecta outcomes. Those are providing adequate oncologic control, preservation of urinary control, and preservation of sexual function, which is really important. It's what the man is faced with after his individual treatment, what he will live with in terms of quality of life outcomes.
One of the most important studies that is coming out and has just been accepted in European Urology, and we will see published here very soon, is the HIFI study. The HIFI study is the largest study ever conducted comparing focal therapy to a gold standard treatment surgery. It was over 3,328 patients across 46 centers in Europe using exclusively EDAP TMS. This is our HIFU technology, of which 90% were procedures performed with the use of Focal One. We showed equivalent cancer control, and that's how the study was powered, based on salvage treatment-free survival rates compared to surgery, and we showed excellent or outstanding outcomes on the functional outcomes, that is, preserving sexual function and urinary control. We're very excited for the study coming out, and I think it's going to have a very big impact in opening up the market for HIFU therapy.
We'll share more of that with you in the near future. Additionally, we're working on expanded indications in two domain areas: BPH and endometriosis. If you look at BPH or benign prostatic hyperplasia, we know this is a very large market, and looking globally, 94 million men are diagnosed annually with BPH and BPH-related symptoms. Alone in the U.S., 15 million men will suffer from BPH or lower urinary tract symptom scores, and over 600,000 U.S. men will be diagnosed annually with BPH, so it's a large market opportunity. We've got currently a phase I/II study that we're recruiting for today. We've completed a nine-patient feasibility study. We have now three active centers, and we're going to add more.
But with this phase I/II study, our goal really is to focus on our first patients treated and then work on treatment parameters so we can expand the study to more centers. And then we'll go through a scoping exercise with the FDA next year, 2025. Turning our attention to endometriosis. And we know in the U.S. market, endometriosis affects nearly 6.5 million women, of which 1.3 million women of that subset are diagnosed with what we call stage four or deep infiltrating endometriosis. And so this affects a large patient population. And these women commonly don't have a lot of suitable treatment options. Currently, it's typically surgery: a rectal resection, partial rectal resection, or a serosal stripping procedure, which carries a fair amount of morbidity.
In terms of where we are, we've completed a phase I study, a phase II study, a phase III study, and now we're in the follow-up phase of the phase III study. What we can declare today is that we've shown that the treatment provided by Focal One in terms of using HIFU has an excellent safety profile. We've shown a reduction in primary endometriotic implant lesion size under MRI visualization, so the technology is working at shrinking these implants. And three, in this clinical trial, we've unblinded the patients who were in the blinded treatment arm. 86% of those patients have crossed over for treatment now, which shows you that we have a strong probability of treating these patients and having effective outcomes.
Turning to key financial data, again, I think the important thing to understand here is we're growing on an annual basis, but importantly, our HIFU business alone is up 51% year- over- year and is improving our gross margin equally for 400 basis points or 4%, notably driven by HIFU. We also have very minimal debt on our balance sheet as we continue to make investments for top-line growth. And in closing, we've got a great story position for growth: large addressable market not only in men's health, but emerging in women's health.
A growing install base I've noted of some very large hospitals, both academic and community. We have differentiated robotic technology that fulfills a very important unmet need in prostate cancer, BPH, and endometriosis. Strong clinical evidence, and we got the HIFI study coming out, a strong balance sheet, and an approved management team from some of the top capital equipment and robotic companies around the world. Thank you.
Great. I'm happy to kick off the questions, and if anybody else has them, feel free to chime in.
Hi, this is Ryan. Great presentation. You talked about in the U.S., 95,000 prostate cancer procedures per year. Can you just give us a little more color on where focal therapy, from a share standpoint, among those 95,000 procedures stands today? Where do you think that could get to in, let's call it, five years? And what are the catalysts to get us there? You mentioned some in your presentation, but maybe elaborate a little more.
Yeah, so I'd say today, I think we can all say focal therapy is early in its adoption life cycle. If we look categorically, it's in the mid-single digits in terms of adoption. So we have a lot of upside potential for growth. If we look out in the outer years, I see growth evolving on an annual basis, and we're seeing some of that with some of the data I presented today. HIFU is growing where other treatments are in a state of decline. I think we're kind of just on the tip of the iceberg in terms of where we are in our growth cycle. I think things that are going to really alter that state of growth are a number of things. One is more data. We have the HIFI study coming out, which I think is going to open up an opportunity to discuss broader, not only amongst clinicians, but also payers. Right?
We have reimbursement in place, but we don't have a coverage policy yet written by commercial payers. Commercial payers are paying for this, but we would like to see a coverage policy written. Also, the ability to change guidelines. As you know, we're already written into the NCCN guidelines as a salvage treatment, but we're on the cusp of being able to have an influence of changing guidelines. And for those who follow guidelines in the U.S., they tend to lag standard of care. But I think we can accelerate some of this needed change here quickly with some of the new data coming out, such as the HIFI study.
Yeah. That's helpful. And you showed the chart with the CMS data. So let's call it among focal therapy, which you said is about mid-single digit penetrated. Where does HIFU stand in terms of share versus cryo, other modalities?
Yeah. So the good news is HIFU is growing faster than anything else in the category. Again, we're very early. If we're saying the whole category of focal therapy is mid-single digits, then we're probably a little bit below that, of course. What excites me is that the interest in focal therapy is being embraced by urologists across the globe. And certainly, when I look at the U.S., the academic programs that are now teaching residents and fellows use of focal therapy and the defined role of focal therapy. And so that will play into the adoption rates. I think the reimbursement we have is very good today and, as noted, will go up in January 1. That is CMS, Medicare reimbursement. Commercial payers, I think, is the last opportunity for us to really kind of accelerate growth.
But I would say outward, most hospitals are talking about focal therapy today and see the need to adopt this. I see it, and when we talk to hospitals, as a clinically necessary strategic revenue-enhancing service line, and they recognize that. And so I think we're really at the tip of some exciting growth here as focal therapy tends to be adopted globally.
I noticed on the physician payment on the physician payment line, you had it's a relatively high payment. Can you discuss what's involved for the physicians? Is it more work than the other modalities? And how long it would take to run one of these procedures?
Well, our treatment times with Focal One through our robotic system are optimal around 40 minutes to an hour in terms of running treatment time. The procedure may take longer because patients are under general anesthesia. But I think when we look at an interventional cost basis comparing to other treatments, it is financially acceptable and probably rewarding for a doctor to adopt this procedure.
I mean, they perform the procedure on its clinical merit, but reimbursement for the professional fee or for the physician is not a hindrance for people to adopt this. And as you can imagine, if you look at comparable to surgery, there's about a $207 difference in payment. And I can tell you from surgery, every surgery is a puzzle. You get into the pelvis, you got to look at the anatomy, you've got to set up your operation. There's a lot of unknowns, and those treatment times tend to be longer. So I think the takeaway message is that there is no hindrance on behalf of the professional, that is, the physician, to take the time to learn this.
Importantly, these are patients also that may have a secondary series of billable events with a confirmational biopsy and a reimage of their prostate via MRI. So I think the goal here is that we can manage this cancer for a subset of men. Where in the old days, we were going from no treatment or active surveillance all the way across over to radical treatments such as surgery and radiation. We know the morbidity for radical treatments is real. That morbidity is real. We can offer something that is efficacious, that provides adequate cancer control and does not burn a bridge for a future salvage procedure if they, in fact, have a more aggressive cancer later on, but preserves the quality of life for that male patient.
Just a follow-up on that, Ryan. If I think my memory is correct, that gap between the professional fee for HIFU has narrowed over time versus surgery, right?
That's correct.
I think two or three years ago, it might have been a $400 difference.
Yeah. Back in 2022, the APC or payment level for the facility was at APC 5. We're now at APC 6, where surgery started to decline back in 2016. January 1, 2016, the facility payment went down 30%. And I think that pointed to the proliferation of adoption of robotic radical prostatectomy or da Vinci. And so what's exciting here is that reimbursement is not a hindrance to growth. It's not an obstacle for us. And I think more importantly, people realize that we were overtreating disease with radical treatments in that era.
And now we have an offering in focal therapy, and that's why most urologists today who are educated see the value of offering focal therapy to their patients. And with Focal One, we believe we've got best-in-class technology. We have the shortest treatment times. We leverage imaging from any format into the machine. We've got a lot of domain expertise in delivering HIFU therapy, not only with Focal One, but our previous generation platform, which was called Ablatherm. And we've got great data coming out with the HIFI study that we're excited about.
Hi. Thanks. Really interesting presentation. A couple of maybe dumb questions. So when you talk about salvage therapy, what exactly does that mean? Is that when other forms have ceased to be effective, or?
Yeah. Salvage therapy would be an example. A man has, let's say, primary radiation, external beam radiation, and has been treated. Suddenly they notice their cancer or their PSA score going up, meaning that there's something active in their prostate gland. Upon biopsy, it's determined that they have a growing cancer still inside their prostate gland. Men don't have a lot of really good options there.
Usually, it's going to be surgery, which is a salvage surgery. That is a radiated prostate gland that will have to be cut out. It'll cut through the blood supply, the delineation of the musculature, the neurovascular bundles, the apex, some very key important anatomical landmarks. Or they may put that man typically on hormone deprivation therapy, ADT, or a combination of hormone deprivation therapy and radiation. The concern with radiation, and there was a great paper that just came out that talked about the secondary risk of cancers attributed to radiation, either radiation-induced rectal cancer or bladder cancer.
HIFU, being the fact that it incorporates sound waves, is a very safe treatment to offer men who fail primary radiation therapy. And so that's what we call salvage in that context. So we're written actually into the guidelines, which is a recommendation that it is safe and efficacious. And now we move in the direction of primary treatment in terms of guideline change.
Okay. Thank you. And so just to be clear, it's managing the cancer, not. It's not a cure. Or could it become a cure?
Yeah. It could become a cure. Remember, not all cancers are the same. So for some men, HIFU will be the end-all treatment for them. They may need nothing else. For others, it's a repeatable treatment, which is safe to repeat, different profile than radiation. And so here, again, today, think about it. If a man would be diagnosed with a Gleason 6 score, which is 3 + 3, he most commonly would be put on active surveillance.
If they progress to a 3 + 4, or even maybe potentially a 4 + 3, we have something now to give them as an option for focal therapy. So management of cancer in the context of prostate cancer is not a failure. Unlike other cancers, which are lethal, deadly, and grow very quickly, prostate cancer tends to grow slower. And we understand the epidemiology through the biopsy process. So we can use focal therapy accordingly.
Okay. If no one else has a question, just really quickly, how would you compare it, and this is maybe a big question, with diagnostics as a treatment? Diagnostics?
I'm not familiar with that technology.
So targeting of radiopharmaceuticals, basically.
Yeah. I don't know enough about that. I will tell you, HIFU combined with immunotherapy is being investigated now because of the immune response post-treatment of HIFU. So that's a field a lot of academics want to go study. I think we're really on the cusp of using HIFU therapy throughout the body in soft tissue ablation.
I think we're at time. So thanks, Ryan. And.