ImpediMed Limited (ASX:IPD) CEO and Managing Director Mr Richard Carreon and CFO Timothy Cruickshank present on the company's Q4 FY21 results, providing an update on the PREVENT trial and discussing reimbursement progress.Trina Raymond:
Good morning, everyone, and thank you for joining ImpediMed's (ASX:IPD)
quarterly results investor webinar this morning. Today's webinar will feature a short presentation from ImpediMed Managing Director and CEO, Mr Richard Carreon, and CFO, Tim Cruickshank. This will be followed by Q&A. If you do wish to ask a question, we encourage retail investors to type it in the Q&A panel at the bottom of your screen at any time. Alternatively, you may press the raise hand button to ask a verbal question. Please note we will hold all questions until the conclusion of the presentation. I would now like to hand over to Richard Carreon, Managing Director and CEO.Richard Carreon:
Thank you, Trina. 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 June 2021. Joining us on the call today is Tim Cruickshank, our Chief Financial Officer, and Mike Bassett, our Senior Vice President of Corporate and Strategic Development. I'll be referencing the 4C and speaking from the quarterly activity report we logged this morning, Australian time. This presentation is a summary of the more detailed 4C. At the conclusion of our remarks, we'll be taking questions. I'll begin on page three.
Today we'll be covering three key topics: the ongoing strength of our business, our PREVENT trial and our commercial payer reimbursement strategy. Page four, please.
Once again, we delivered a very strong quarter of growth in every key metric of our business, and left the quarter with an annual revenue run rate of over $10 million. We continue to drive double digit growth, despite the ongoing global pandemic, and without any commercial insurance coverage of our lymphedema business. Patient testing grew significantly in the quarter, despite a fall-off in Australia, due to the ongoing COVID lockdowns. And, finally, our software as a service business, which now makes up 74 per cent of our total revenue, grew 111 per cent year over year. Again, a very strong record quarter of growth, and we are very pleased with these results. I'll now ask Tim to provide a more in-depth analysis of our financials. Tim?Tim Cruickshank:
Great, thanks Rick. Good morning, good afternoon, everyone. Yeah, I'll be taking you through some of our key financial highlights, on pages five to eight of the presentation, and all figures presented are in Australian dollars unless otherwise indicated. So if we go to slide five, please, Trina?
We had another very strong quarter across the business. Total revenue, which comprised our SOZO and legacy businesses, was up 117 per cent year over year to a record $2.6 million. As Rick stated, this puts the company at a $10 million plus revenue run rate, heading into FY22. Cash on hand at 30 June 2021 was 19.7 million, with cash receipts from customers growing to a record level of 2.3 million, and net operating cash outflows for the quarter of 3.4 million. To give some additional colour on cashflow, as we have now entered FY22, year over year from Q4 of FY20 to this past quarter, Q4 FY21, quarterly cash receipts have increased by almost one million dollars. And, at the same time, a reduction to R&D, admin and other staff costs has occurred. So, this has led to an overall improvement in quarterly net cashflow before government assistance, of over two million dollars year over year. And in Q1 FY22, we expect net operating cash outflows to remain well below four million dollars, in line with this past quarter's cashflow expectations. So, we've made great progress of late with the $10 million revenue run rate, and costs down year over year. But we expect to see further progress post-PREVENT. Based on this, we would therefore expect to see a significant drop in operating cash outflows, as we head into the back half of FY22. And on to slide six.
This slide highlights the key metrics we use to measure the health of our business. SOZO revenue, 2.3 million, SOZO patient tests over 37,000, both were increases of 109 per cent year over year. SOZO annual recurring revenue, or ARR, grew by 67 per cent year over year, to 8.7 million. All three of these metrics were record results for the company. And we continue to show strong metrics in our other key areas. Contracted revenue pipeline, or CRP, finished the year at 14.5 million, led by over $12 million in contract value signed during the FY21 financial year. Gross margins on SaaS revenue continued to be in excess of 90 per cent. Churn rate remained negligible, at just one per cent, and our renewal rate on contracts was a hundred per cent.
As we move to slide seven, the graphs here are quarter over quarter visuals for SOZO revenue and patient tests. The graphs highlight the growth and record results achieved by the company each quarter. These results have been achieved prior to commercial insurance coverage policies, as Rick stated, in the lymphedema business, and in the face of continued headwinds from COVID-19. Of note in the revenue graph in the middle, software as a service, or SaaS, revenue grew by 111 per cent year over year, to 1.9 million. This includes 1.2 million from the core business and 0.7 million from the clinical business. Patient tests continue to grow, as they did in Q4 FY21. As Rick mentioned earlier, we expect some choppiness in patient testing numbers in Q1 due to the lockdowns in Australia, but we don't anticipate any material impacts to revenue in Q1 FY22 from this. Even amidst the challenging environment, overall patient testing continues to accelerate. We now have over 261,000 patient tests on file, as more tests were performed in the last four quarters than nearly all of the quarters combined since the launch of SOZO.
And finally, on slide eight, our land and expand strategy continues to be a key component in our commercial growth. As a result of this strategy, as we mentioned, the ARR from core and clinical businesses combined is now 8.7 million. During the quarter, we saw 47 additional units sold, resulting in over 770 units sold to date. Of note, approximately 80 per cent of these units in the US came from newly added accounts. This includes the addition of another NCCN member institution, and between the new accounts and renewals, contracts were signed during the quarter with 10 of the top 100 US health systems and hospitals. Also of note during the quarter, New South Wales Health expanded their program to over 50 units, and the company also signed its first customers to the new segmental analysis licence, which became available to license in June 2021 with the version 4.0 software release.
So, in conclusion, it was a very strong quarter across the business. The addition of new key accounts, increased patient testing, contract renewals, and the expansion of accounts with both additional devices and new licences, has led to continued increase in ARR for the company, now totaling 8.7 million at 30 June 2021. Thank you, all. Rick, I'll hand it back over to you now.Richard Carreon:
Thanks, Tim. Please turn to page nine. The PREVENT trial manuscript is still under peer review. This is not unusual, given this is a landmark study and the global pandemic has slowed the entire review process for all major publications. However, we are very confident the manuscript will be published in the next 90 days. And although we have not been made aware of the outcome of the trial or its conclusions, we are extremely confident they will be positive.
As I've stated in the past, this confidence comes from the interim analysis of the PREVENT trial data published two years ago, and the recent meta-analysis publication, which examined 50 studies involving more than 60,000 patients. Recall: the meta-analysis showed statistical significance, and the interim analysis concluded our technology was practice-changing. Like everybody else, we are eagerly awaiting the publication of the primary end points of this study.
While waiting on the results, though, we are aggressively executing a number of key initiatives to ensure the maximum impact of these results. First, we're developing a series of physician seminars, explaining the trial in detail, as well as the significance of the outcomes. Our objective is to ensure a thorough and complete understanding of this landmark trial and the impact it will have on cancer survivors. Secondly, we are working with several national patient advocacy groups. It is our intent to have them inform their members of the study and the outcomes. And third, we will launch a series of direct-to-patient outreach programs, to ensure high-risk cancer patients understand why they should be demanding to have regular L-Dex testing.
The publication of the PREVENT trial is the single most important short-term milestone we are focused on. And because of its significance and the sensitivity of the peer review process, I'm unable to provide any further details or insights. I'm sure you'll understand. I will reiterate, though, we are extremely confident in the positive outcomes of the trial, as well as the manuscript being published in the next 90 days. Page 10, please.
Reimbursement of our L-Dex testing is the reason we sponsored the PREVENT trial in the first place. The data necessary to obtain insurance coverage is much more demanding than that which is required to obtain an FDA clearance. As such, PREVENT was designed as a head-to-head study versus the gold standard. It is a level one evidence study, meaning it's prospective, randomised and multi-centered. We believe the outcome of this study will provide the genesis for payment and coverage by insurance carriers.
Let me walk through how we will build a foundation from which we will capitalise on the publication. First and foremost, we have moved the reimbursement function in-house, replacing our outside consultant. This has allowed us to substantially expand our efforts while decreasing costs. Our new team is led by a seasoned professional, and they're focused on assisting hospitals, cancer centres and physicians, in filing the necessary documentation to fight denied insurance claims. These efforts are building up case files at key insurance carriers, and showing a growing usage and demand of our testing.
To put how far we've come into perspective, a year ago, we were fighting zero insurance claims for our providers. Through our consultant, we were dealing with just over 400 cases, and today with our own internal team, they're working on more than 1,300 cases, and these are growing weekly. And finally, ensuring key regional and national insurance companies are aware of the latest data, such as the meta-analysis, and laying the groundwork for presenting the PREVENT data upon its publication.
In addition, the lead investigators have agreed to submit an application to the NCCN for inclusion of our technology in the cancer guidelines for lymphedema, should the statistical significance be achieved. As you can see, over the last two quarters we have aggressively increased the resources and focus on reimbursement. We're doing this for two primary reasons: the first one is we're confident the results of the PREVENT trial will be positive. Now, this is based on the data, and studies already peer-reviewed and published. Also, we regularly review the adoption rates of our technology. Today, we have sold almost 800 SOZO devices. We regularly expand the number of SOZO devices in key cancer centres globally, and the number of patients tested continues to grow double digits each quarter. For us, this data points to a technology that is medically meaningful, and significantly improving patient outcomes. And second and most important reason is to minimise the time from publication to when commercial payers begin reimbursing for testing. Normally this can take from nine to 12 months, and we believe our efforts will shorten this gap to approximately three months. Page 11.
We achieved a number of milestones in Q4. For oncology, we released our next generation software for SOZO. This latest version, 4.0, offers significant enhancements from the previous versions. One of the key benefits is the ability to conduct segmental analysis on patients, for which we have already signed up our first paying customers for this new licensing scheme. For heart failure, an abstract was published in the American College of Cardiology on the use of SOZO for risk stratifying heart failure patients. Two posters have been accepted by the prestigious Heart Failure Society of America for presentation at their upcoming September scientific meeting. Once presented, we'll make those posters available. For renal failure, we continue to successfully deploy and support the two global clinical studies of AstraZeneca, and we continue to progress the regulatory and commercial strategies for renal failure. Page 12.
As I stated earlier, the key upcoming milestone is the publication of the PREVENT trial manuscript. And certainly, we'll notify the market immediately upon its release. Other upcoming milestones. We will continue to aggressively pursue reimbursement of our L-Dex testing with commercial payers. We continue to prepare for the submission of the PREVENT data to the NCCN guidelines. And we've begun expanding our engagement at key corporate accounts. For heart failure, we continue to work on expanding the commercial sales for SOZO, for the use of monitoring heart failure patients. And we continue to work with the Food and Drug Administration on the removal of the contraindications for use of our technology on patients who have implantable defibrillators and pacing devices. For renal failure, we will continue the deployment and support of AstraZeneca's global clinical studies, and continue to advance the regulatory and commercial strategies.
In closing, this is an exciting time for the company as we await the publication of the PREVENT trial. We have put all the pieces in place, and are fully executing a number of key initiatives to put us in the best possible position to take advantage of the clinical outcomes of this trial. As I've stated before, the publication of the PREVENT trial data will open up a whole new set of opportunities for ImpediMed. These conclude our remarks. Trina, we're now ready to take questions.Trina Raymond:
So, first question: "If the PREVENT trial is overwhelmingly positive, and opens up market access in the way you hope, how should we think about the rate at which your sales and marketing organisations expands over the next two to three years, to support adoption? What is the rate at which you will onboard and train new sales hires, and what target revenue should we work toward in our models?"Richard Carreon:
Very good question, so let me try to answer them within the context. So first of all, again, we believe the PREVENT trial will be very positive. We've already laid the groundwork, and we should start to see reimbursement come on stream within the first three months, and build after that. So this is going to be a process, but we feel very confident in that process. Now, we will add sales, and we will expand our marketing as we see the revenue start to come on. As we've always said, we want to make sure that we use our funds judiciously, and we grow when we start to see demand, or we start to build into that demand. So, right now, we're not giving any projections on how we see that coming on stream, because again, we haven't seen the full publication, the conclusions or the analysis. So once that occurs, we'll be in a better position to give you more details on that.Ends