Great! Yeah, well, I think we can get started here. Thank you all for joining. My name is Mike Kratky. I'm our Senior MedTech Research Analyst over here at Leerink. Really thrilled today to be joined by LENSAR CEO, Nick Curtis. So Nick, thanks very much for joining us.
Thanks, Mike. I'd like to thank Mike and the entire Leerink team, actually, for inviting LENSAR to participate. I'm really excited to talk to you a little bit about what we're doing and the markets that we serve, and give you a brief overview here before we get into the fireside. This is our disclaimer here, regarding forward-looking statements. You can take a look at it on our website. So, LENSAR really is a leading technology manufacturer, if you will, in the premium femtosecond laser-assisted cataract surgery space. The market is growing. Cataract surgery is the largest, if you haven't, if you're not familiar with cataract surgery, it's the largest volume procedure performed globally, 31 million procedures in 2023.
Femtosecond laser-assisted cataract surgery, however, is actually a pretty small subset of that, and there's a lot of reasons why that's the case and why we are very excited and thinking that there's a lot of room here to grow. One million procedures in 2023, and projected to grow to 1.4 in the current state by 2028. There's a high incidence of astigmatism in cataract surgery. For instance, if you were having LASIK or PRK or SMILE procedure, the doctor would never let you up off the table if you had any astigmatism that's remaining. However, 70%-90% of patients have visually significant astigmatism here, and the majority goes untreated. Less than 10% is actually treated globally. And this is a big area of focus for us to drive astigmatism management as mainstream to cataract surgery.
We've got 19% of the global femtosecond laser-assisted procedure market share as of the end of Q1, and this is significant because we've grown our market share significantly. LENSAR is known as a technology company, as I mentioned, and in introducing our next generation system, ALLY, we really lead the market in a next-gen system. We've got a lot of proprietary technology as well as IP involved here. And the ALLY system is actually the first platform to combine not only the world-class imaging, but all the treatment planning software on an automated basis, and incorporated a state-of-the-art dual pulse femtosecond laser in a single system. Talk more about that. We've moved into the operating room directly, and this has been one of the limiting factors to adoption of femtosecond lasers, not just in the U.S., but globally.
We're able to do a fully sterile procedure, and we're demonstrating we can save a significant amount of time, staff, and patient time here in the studies that we've done from a time and motion basis. As I mentioned, we're the first and only dual pulse tissue-specific laser out there. And what this means is that the laser automatically adjusts both the speed and the pulse width to be able to treat both the cornea as well as break up the nucleus of the lens to facilitate the rest of the surgery. We're also optimizing treatments here for surgeons. I believe that we're the only company right now that not only has a superior imaging system and a automated treatment planning software, but we're incorporated...
The buzzword now is with AI in the device, and so we've incorporated machine learning with proprietary software in both the astigmatism management piece, as well as the breaking up of the cataract and with this device. And we're able to guide the astigmatic correction for a refractive procedure, and this is important to the way that the reimbursement works in the United States from a cataract, and globally, from a cataract perspective. We're well positioned for growth. We've got a great management team with a lot of experience in this area. We've kept the core team together, even through COVID and whatnot.
We're designing ALLY to really address the limitations associated with the first generation of technologies that are out there, and we're driving a lot more revenue for surgeons and their surgical facilities with this product. Looking at outcomes are very important because it's one thing to increase the efficiencies, it's a whole another thing to be able to really improve outcomes. I want to show here that LENSAR's been agnostic to the lens technology here. The significance here is that we're getting well into the 90th percentile here within a half of a diopter unit of measure here in outcomes associated with cataract surgery. This is really unheard of from a cataract surgical perspective until recently in using this.
And so, as patients get better results, doctors are more comfortable in presenting this to patients, and patients are glad to pay, particularly as the baby boomers age here, and they've made significant investments in LASIK and other refractive procedures. And so, delivering better outcomes in cataract surgery is important, particularly with premium intraocular lenses. These are like LASIK-like results. And so, not only does it deliver better results, and we've demonstrated that through our peer review, but we've done several time and motion studies after introducing ALLY to the market.
And what we've been able to demonstrate here is that from a surgeon perspective, a lot of time, because we're moving into the operating room, prepping the patient one time, being able to do a fully sterile procedure, going from the laser directly to the cataract extraction. Staff experience, because the laser, again, can move into the operating room and is highly ergonomic. Competitive lasers can't be moved at all. You've got a 19-minute time savings just from an interaction of the staff with the patient, and then the overall patient time from the time they enter the facility to the time they leave, saving about 51 minutes. That all results in a reduction of overhead, significantly saving 90-120 minutes a day in an average cataract busy ASC practice.
And you can see that, you can either reduce your overhead or significantly increase your revenue in a busy setting where capacity is an issue and you've got multiple surgeons that are wanting to operate. So great ROI. This is an actual example of a practice that, you know, in the eight months prior to ALLY being put into the practice with a competitive femtosecond laser device, and eight months after the ALLY was put into the practice, they did 4.1x more femtosecond laser procedures. That's both due to the outcome as well as the high efficiencies. When they saw they were getting better outcomes, the staff and the physician became much more enthusiastic about presenting to patients and converting patients to these types of premium procedures.
And, just based on the averages from Market Scope, this increased the revenue of just on the surgeon fee side of just about $750,000 in that eight-month period. Our US procedure share growth, and I show U.S. here because we are just going to be launching outside the U.S. later this year with A ALLY lly. We're outside U.S. today with our first-generation legacy system, but ALLY hasn't been cleared for getting outside U.S. yet. And so we've gained 4.3%, you know, procedure share, market share since the ALLY launch. This has been a combination of both growing the market overall, dealing with some of the limitations that exist with first-generation technologies, and a significant conversion of competitive accounts to LENSAR.
We've got 65 ALLY systems in the field as of the end of the first quarter of 2024. Our financials are good. We've got cash. We have no debt. We grew the business year-over-year for Q1 25% in procedures, 23% in the U.S., and 26% globally, and we're nearly cash flow positive. With that, I'll turn it over to Mike.
Perfect. Yeah, that sounds great, Nick. I mean, what a really helpful overview, so appreciate that. You know, it might be helpful just to start maybe at a high level on some of the overall market dynamics. I mean, femtosecond laser-assisted cataract surgery procedures expected to see growth above standard cataract procedures over the next few years, by at least a few percent. So, you know, how are we thinking about kind of the building blocks that go into that? What is really driving the acceleration there?
There's several things that are, that are really interesting, you know, market dynamic wise. You've got a lot of investment from different companies into intraocular lenses. You've got a lowering of reimbursement in the way standard cataract surgery reimbursement works. And, and you also have a patient population, which is aging, that has invested in their eye care, you know, prior, prior to becoming cataract patients. And so the ability to deliver better outcomes and do that in a more efficient fashion as patients learn about this and as doctors begin to implement this, it drives the, the market dynamics so that the, the, the actual growth of the market is, is greater than what the organic growth of the cataract market is.
And so a lot of this is that, again, since 70%-90% of patients have visually significant astigmatism and less than 10% is treated, you can see where it sort of sets up a situation where there could be much higher penetration into this and a conversion of more patients, if you will.
Yeah, that makes total sense, and, you know, kind of beat me to the punch there, just in terms of thinking about, you know, the underlying growth of this market versus, you know, how is this kind of taking share from existing treatments on the, you know, standard procedure side?
It is significant. I mean, what we've seen, again, I can only compare our first-gen system, you know, because I don't know what people were doing beforehand, but we've seen a growth in procedures of about 21% just since people have implemented ALLY, as compared to what their utilization was with the LLS laser, our first gen. And that's significant because Market Scope data shows that on average, LENSAR lasers, because of some of the things that we do from an efficiency and from a treatment of astigmatism, we do on average 40% higher procedures than the competitive devices in the U.S. to begin with.
And so to see an additional 21% growth in there comes from both, you know, the astigmatism side, where the prevalence of astigmatism is high, as well as confidence level and doctors just converting more patients to premium IOLs.
Got it. Yeah, super helpful. You know, I think I'd seen that there's about 110,000 U.S. ophthalmic surgeons. You know, is that something that you're expecting to grow, and to what extent is that kind of factoring into the underlying growth dynamics from here?
In the U.S., there's only about 10,000 surgeons.
10,000, sorry about that.
But, a 110,000 is closer to the number of procedures that we're sort of performing in there with a market today in the U.S. that's doing in the neighborhood of 500,000+, you know, close to that percent share there. And what I see happening is that, you know, the femto market has been pretty polarized, and that only about 52%—So it's polarized, like 52% plus another 2.6, so about 55% of doctors identify with femto lasers or are gonna be doing them, and 35% percent have no plans to do it yet, and then about 11% are undecided. So you've got 55 and 45.
What we see happening is that we're converting competitive devices to LENSAR, the ones that we've been using competitive, 'cause they've been in the market and they're aging, and the bigger companies have no answer for this. And then the second aspect is that 45% of doctors, we've already seen several large volume practices come up and say that ALLY, for them, addresses what they felt were the deficiencies of the femtosecond laser market previous, and now they're starting to adopt. And so we're gonna see that happen over time, particularly as we gain some critical mass and more systems get into the field.
Yeah, and that's a perfect segue just to talk about kind of, you know, the differentiating factors there and a little bit of the value proposition for ALLY. I mean, what have you heard from the medical community on kind of what the main advantages are that are really driving them to this procedure?
So I've kind of beat up the whole efficiency factor.
Yeah.
So when you see from the slide, the time savings really are significant, and time is very important to physicians and practices. It's also important to the patient, by the way, because the less time that you take in the procedure, the less anxiety, you know, the patient is done, you get better visual outcomes and results, and so patient's happier faster, versus something that's gonna take a long time to sort of come back from. So they're telling us that those are definite factors.
The results, you know, we've spent a lot of time and a lot of resource, you know, really demonstrating better outcomes, and I think that as people see better outcomes, it gives them more confidence that they can deliver on these procedures where they're charging the patient out of pocket, which is, you know, the way that it works with premium cataract surgery, and so they're more comfortable doing that, and the patients are more comfortable paying, especially when the staff and everybody carries them, you know, a lot of confidence into their ability to deliver. From just a pure system perspective, without getting too technical, you know, the imaging system, the way we communicate with seven different pre-operative devices electronically.
And so talk about, you know, efficiency, instead of having to transpose data and manually mark the eye to do the procedure, we use something called iris registration. It measures for the cyclorotation of the eye. We're able to get that data into the system electronically. They don't have to do anything manual. They don't have to mark the eye. We use the AI to optimize the nomogram that doctors are using on an individual surgeon basis. So they can either take from the entire group, or we can optimize results on an individual surgeon basis, both in terms of the astigmatism management as well as custom density imaging that we do and custom fragmentation based on the actual patient's tissue morphology.
Yeah, and that's, I mean, one thing I would love to kind of jump back to just within that is kind of just the AI component in here. Obviously, it's kind of a topic du jour, but in terms of that being a differentiated factor for the platform, I mean, how does that kind of play into the advantage?
Oh, it plays into it significantly. On the surface, it, let's say it looks about the same as the first-generation laser. However, behind the scenes, because, you know, we were known for iris registration, we were known for the way that we manage astigmatism and these things previous, we were known for our ability to communicate with these different pre-operative devices. But in the background now is this whole machine learning optimization going on that allows us to further customize and continue to dial in even more accurately.
Like, in on the astigmatism side, we're measuring many more surfaces now on an automated basis, including eyelids, upper and lower, the rotation of the eye, these things automatically in the machine based on how a doctor just simply docks the eye to the laser, allows us to dial these parameters in much more so the accuracy continues to improve, and the ability for the doctor to not have to think as much about it. But this is also driving us into an area where this is not just simply, you know, the old femtosecond laser surgery. We're getting more into robotic surgery with this, and it's a collaboration with the surgeon from an automated treatment planning perspective and then the actual treatment itself.
Yeah. Yeah, no, that's incredible. A lot going on in the space, and-
I think that the market has a lot of room to expand and grow here as this becomes more known by people, and people understand it better.
Right. Yeah, no, understood. You know, going back to just kind of the size of the market, I mean, I think it's 70%-90% of cataracts, you know, patients have astigmatism, so obviously a huge opportunity here. You know, how are you thinking about kind of attracting these patients over time, just in terms of, you know, getting them on board?
Getting the patients on board?
Yeah.
I think a lot of it is education. You know, obviously now with, with, social media, with, practices, you know, having especially if they're a refractive practice and they've done LASIK, PRK, SMILE in these procedures. Educating cataract patients is more of an extension of their, of the overall practice, if you will. And so I think a lot of it has to do with education. You know, people just need to simply know that these technologies exist. I think also the identification of laser with any kind of surgery, you know, kind of is synonymous with reproducibility and precision.
And so I think as more patients begin to hear that, you know, doctors are using these types of technologies, that they incorporate AI, that they're automated in terms of identification of surfaces and whatnot, that they don't have to mark the eye, that they can get their astigmatism treated, and they can see better, even if they're choosing a standard lens to see distance. You know, if somebody says, "I can't afford, you know, a Light Adjustable Lens with a LENSAR, or I can't afford a multifocal or accommodative lens, but boy, that astigmatism management sounds great," because, again, 70%-90% managing astigmatism, "and you're telling me I can see distance without glasses?
Right.
Or I can have a monovision correction, where I can see near with one eye and distance with another, and I can, and I can have this laser as part of the procedure, you know, where do I sign up?
Yeah. No, checks a lot of boxes, for sure. You know, and then I think maybe just going back to kind of like the pricing and reimbursement strategy from here, how are you thinking about the path forward?
I can tell you that we're not thinking about a path forward from a reimbursement perspective.
Mm.
I think that the doctors like the opportunity to be able to offer, you know, some differentiated technology, number one, and number two, to be able to treat the refractive... It's important to understand reimbursement. Standard cataract surgery only treats the medical condition of the cataract, that as we age, we have two other issues. We have presbyopia, and that's our ability to see near and see far, and again, 70%-90% of patients have astigmatism. And so, you know, with the global population aging, there's a lot of pressure on reimbursement. And so that pressure on reimbursement, the governments generally want to pay less for the surgeries.
I think it's important that there be alternatives for people and for patients, and that people can kind of choose, 'cause this may not be important to people. But I think as we age today, people are much more active lifestyle-wise, and if they know that these types of things are available, then they find ways to be able to do some of these procedures, and particularly, like an extended depth of focus lens with an astigmatism correction is a moderately priced procedure that a lot of people would sign up to.
Right. Yeah, no, that makes total sense. You know, you mentioned kind of the 4.3% share growth. How are you thinking about some of the other utilization trends that you've seen to date, and some of the key factors kind of impacting the trajectory from here?
So our procedure growth in the first quarter was 23% in the U.S. and 26% globally, even though we haven't even introduced the ALLY laser outside the U.S. And so I think we're very excited here as we move on with this year to begin to introduce ALLY into some other markets outside U.S. And so the growth that we've experienced has been basically U.S. and then base procedures, which I think speaks to the utility of our laser to begin with and how people think about it. So I believe that as we get more ALLY devices in the field, and as we get into some additional markets, we've seen a 21% growth in the U.S. from an LLS to an ALLY.
We do 40% more procedures on average, this is Market Scope data now, not LENSAR data.
Right
... to than the competitive devices. And I think it's more of a when, not an if, as doctors begin to move out of these older technologies and move into something like this.
Yeah. Yeah, no, understood.
So I think we're, you know, 50% of our business in 2023, in the second half of the year, was new to LENSAR. And now in the first quarter, 70% of our business was of our new accounts, new ALLY, were new to LENSAR. And so this is gonna be significant to the, to our base business growth and in the recurring revenue piece.
Yeah, understood. You know, maybe just going kind of back, you know, since the August 2022 launch, how has kind of the adoption trended relative to your expectations, and what are some of the learnings that you're kind of implementing from that into your commercial strategy from here?
So, our trajectory has exceeded expectations. Where it's exceeded the most for me, that quite frankly, was a bit of a surprise, is that I thought it would take a while. I thought it would take two years for doctors to move from doing the procedure outside the operating room and in a procedure room, that they wouldn't be quick to change, 'cause, you know, people don't necessarily like change and embrace the change, and they've got their system sort of set up. But how fast, people have changed, how they... the patient flows and whatnot, and moved it into the operating room to do fully sterile procedures and embracing that, happened much faster than I thought it would.
Again, because it took a year or two for those people that you know, to kind of develop their own flow within these practices because of the limitations of the first gen.
Mm-hmm.
So how fast they were willing to move into the operating room, we've got multiple sites that have multiple systems.... And that was another surprise, because if you're gonna convert more than 50% of your patients and you have multiple ORs, then, and, and so the ROI w- was there for them as well. And again, these things take time to prove out, but they seem to be happening in a, in a, at a faster, at a faster rate than, than what I would have otherwise thought. And I think, I think those are significant. And then the last is really just, you know, people seeing that they're getting the outcomes. And so how enthusiastic they are when they're using a competitive device and they've moved to LENSAR, as example in my slide, where the doctor's volume grew 4x-
Right
over an eight-month period of time. Those, that word's getting out, you know?
Yeah.
Even though we're small, you know?
Yeah. No, that'll definitely attract some, some folks. You know, maybe would love to just kinda talk a little bit about the OUS strategy from here. You know, how have you gonna implement the learnings from the U.S. side, as you kind of expand to new markets?
So I didn't have the luxury when we introduced the first gen technology, because whereas now we're leading into the market with a next gen product, we came into the market, we ran the risk with gen one of being a company with the best technology that maybe was irrelevant because we were the fourth company entering the market at that time. And so I think for us, OUS, we have a direct business model in the U.S., so they're direct employees in the U.S. Outside the U.S., they're distributors.
And so I think the luxury of being able to launch in the U.S. and control the launch to start and going through the regulatory process gave us a lot of confidence that the machine was gonna operate as intended, and we've been able to continually tweak and adapt the device to work, and to do what we expect it to do. And so, you know, we're in the process of training those distributors now, and we'll be assisting them on the first installs. We've also been able to sort of seed the market. I'll be spending some time in Europe in June, you and I have talked about that.
Yep.
'Cause we're, you know, we're looking to get the MDR approval, you know, as I say, sometime in 2024. We're building a demand for the product now, particularly in countries like Germany, where the reimbursement profile is similar to the U.S., and people are very receptive to the technology.
Understood. A couple minutes left. I think, you know, the two areas I want to kinda get into, one of which is just, you know, a catalyst path from here. What are gonna be some of the milestones that investors should be looking for to really, you know, accelerate the business from here?
I think two things. Well, there's a lot more.
Yeah.
But one thing in particular here is getting MDR approval and starting to go outside the U.S. You know, we have a business model, there's a lot of demand to place systems, and from a small company perspective and utilization of capital and, you know, managing, sort of moving towards profitability, we, we've limited the placements, and we've primarily sold the majority of the lasers in the introduction. And as we move outside U.S., distributors buy all the lasers, and so they're selling the lasers. Albeit, the laser is at a little lower margin, but the procedure margins are very, very high. And so I think that as we move outside U.S., so milestone would be to see us going outside U.S., shipping first systems outside U.S., should see a spike in revenue.
It would take 30-90 days to start to see procedures out of these, and then we can be a little more aggressive on placements in the U.S. to run the right balance there of placements to sold systems.
Yeah, understood.
So those will be things. And then looking at us to continue to refine and bring more applications to the, to the device. We look at this as a, as a base, and if you've looked at our history, you see that LENSAR has a history of significant upgrades within periods of time, and I think you'll, you'll continue to see that from us.
Got it. Well, certainly an exciting time for the story. You know, in a minute or so left, would love to just hear how you're thinking about profitability and the path of profitability from here.
We're looking at. So we spent some money in the first quarter, primarily on inventory and some expansion of our commercial footprint. We're looking to get approval in the back half of the year and start to put devices outside the U.S., and I think you'll start to see us move towards profitability as we get into 2025.
Understood. Well, again, Nick, really, really appreciate the time today. Thanks so much for joining us.
Thank you, Mike. I really appreciate it.