Mike Cavanaugh; Investor Relations; Nano-X Imaging Ltd
Erez Meltzer; Chief Executive Officer, Director; Nano-X Imaging Ltd
Ran Daniel; Chief Financial Officer; Nano-X Imaging Ltd
Ross Osborn; Analyst; Cantor Fitzgerald & Co.
Jeffrey Cohen; Analyst; Ladenburg Thalmann & Co. Inc.
Scott Henry; Analyst; Alliance Global Partners
Operator
Ladies and gentlemen, thank you for standing by. Welcome to Nano-X third quarter 2024 earnings call. (Operator Instructions) Please be advised that today’s conference is being recorded.
I would like now to turn the conference over to Mike Cavanaugh, Investor Relations. Sir, please go ahead.
Mike Cavanaugh
Good morning, and thank you for joining us today. Earlier today, Nano-X Imaging Ltd released financial results for the quarter ended September 30, 2024. The release is currently available on the Investors section of the company’s website. With me today are Erez Meltzer, Chief Executive Officer and Acting Chairman; and Ran Daniel, Chief Financial Officer.
Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements regarding the company’s financial results, research and development, manufacturing and commercialization activities, regulatory process operations and other matters. These statements are subject to risks, uncertainties and assumptions that are based on management’s current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied upon as representing the company’s views as of any subsequent date.
Factors that may cause such a difference include, but are not limited to, those described in the company’s filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided with our press release, with the primary differences being non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses and non-GAAP gross loss per share.
With that, I’d now like to turn the call over to Erez Meltzer.
Erez Meltzer
Thank you for joining us today for our financial results call. I’m happy to share the progress we have made deploying our innovative Nano-X ARC technology as well as further progress with Nano-X AI and the other components of the full Nano-X solutions. Since its commercial deployment at the beginning of this year, there are now 47 units, almost 50 that are in various stages of shipments and deployments for both commercial and clinical use.
In the US, we are deployed across seven states. Our strategic growth plan is well underway and we are committed to accelerating our efforts to expand our footprint and enhance our technology. This is a multipronged effort, which includes doubling our pipeline, expanding our sales, service and support teams on the ground in the key US market to drive sales to raise awareness with imaging centers and hospitals as well as supporting our growing customer base and the installations and ongoing use of Nano-X solutions. Hand in hand with these efforts, we are also continuing to advance our regulatory efforts with the US FDA for additional clearances and securing the CE Mark in European Union, while also continue to generate trial data supporting the use of the Nano-X ARC.
The positive feedback from health care providers and patients alone reinforce our belief in the transformative potential of Nano-X ARC, we are confident that our continued focus on innovation and strategic partnership will drive significant value for our shareholders.
We also signed several new deals for Nano-X AI solutions, including Oxford University Hospitals, NHA’s Foundation Trust in the UK. I will share more detail on this and other agreements later in my remarks. But I will say that all of the Nano-X ARC are excited to partner with such prestigious institutions. We at Nano-X were also humbled and proud to have Nano-X AI selected for a special mention in Times Best Inventions of 2024 List. This annual list highlights groundbreaking products that are transforming industries and Nano-X AI is certainly beginning to change how we diagnose and manage population health.
I’m also pleased to report that our USARAD business continued to produce meaningful revenue for our organization, generating $2.6 million in revenues, which is a quarterly record, and we anticipate its continued growth to complement our business lines. These milestones across all our business segments are a testament to our team’s dedication and the growing demand for our cutting-edge medical imaging solutions globally.
As we look ahead, we remain confident about the opportunities that lie before us. Our mission to make advanced medical imaging accessible and affordable is more critical than ever, and we are poised to lead the industry with our pioneering solutions.
Thank you for continued support and confidence in our vision. I look forward to discussing our financial performance and future plan in more detail. Now let’s dive right into some details around our deployment of the Nano-X ARC in the US, a highly sophisticated and competitive market. I’m proud of our market penetration, a notable job demonstrating the benefits introducing the Nano-X ARC to imaging and medical centers in the US, which are by nature sophisticated buyers and are exposed to the latest technology the world has to offer.
Our accelerating commercial traction demonstrates not only the skill and the tenacity of our sales team, but also the value that Nano-X ARC brings to health care providers, as our customer base increases, along with rising awareness of the Nano-X ARC within the medical community, we will add to our team accordingly as the result, during the quarter, we strengthened our sales team with representative as well as expanded our clinical team, along with enhancements to our operational team.
As we accelerate our US commercialization, we doubled our sales and service personnel in the US to support our expanding client base, along with various channel partners. Our team on the ground will be critical to our accelerated rollout, and we will steadily by carefully continue to add to this team. We have an internal target of 30 to 40 sales service marketing and support personnel in place by the end of 2025, in alignment with our commercial progress. Additionally, we are focusing on expanding our network of strategic collaborations and distributors.
I mentioned on our last call that we have engaged with three prominent imaging groups in the US. And during Q3, we continued to gain traction with additional imaging groups. Our sales team continues to actively engage imaging groups across the US. In consultative discussions demonstrating the added clinical utility to be gained by adding the Nano-X ARC to their practices. It is our aim as more stand-alone imaging groups adopt our technology that the Nano-X ARC eventually be viewed as a standard equipment alongside traditional x-ray and CT technologies.
We are also working with multiple distributors in Europe charged with expanding our footprint in the EU. This is an important as we anticipate receiving the CE Mark designation for the Nano-X ARC in the coming months. To further assist our commercial core technology OEM rollout we have created the demo kits to more effectively educate potential buyers on the Nano-X value proposition. We have now shipped several demo kits to the prospective clients to more easily allow them to experience our unique technology.
Clearly, we have been ramping up our activity in the US, and we know we must continue with this momentum and drive even greater adoption going forward. While we view the key US market as a strategic priority, we continue to advance commercialization efforts in the rest of the world. In Mexico, where we have already made commercial inroads, we are waiting for the import license needed to deploy the Nano-X ARC.
The system allocated for the Mexican market has been manufactured and tested and is today ready for shipment and our partner has already designated the first two sites for the Nano-X ARC in Mexico. In Chile, the Nano-X ARC is in registration process after a successful site visit in our demo center in the US. Also in Europe, we were excited to showcase the Nano-X ARC technology at Medica 2024 in Dusseldorf, Germany recently in November, Medica is one of the largest medical B2B trade fairs in the world. Our team was well prepared and did an excellent job raising awareness to the 3D digital tomography as a key tool in the future of medical imaging.
Turning to the regulatory front. We have maintained ongoing communication with both the US FDA and the European regulatory bodies. As you are aware, we have pending 510(k) applications to the FDA for the general use of Nano-X ARC, which could cover general use, including chest. We continue to work closely with the FDA and provide any supporting information as needed in a timely manner, including in recent weeks.
In the EU, we continue to work with our notified body in the process aimed to securing the CE Mark designation for the Nano-X ARC. Both new designations when secured would be, in our view, a considerable expansion for the Nano-X ARC technology and help to make it standard part of medical imaging equipment worldwide and results in a significant increase in our total addressable market. We are not able to comment specifically on timing, but we are doing everything we can to assist in both review processes and hope to receive the clearances in the coming months.
Turning to our clinical update in Beilinson Hospital more than 40 patients were already recruited for both the CHEST trial and the multisite trial. Together, with the staff, we have reviewed more than 25 of the patient’s data sets, and the results are impressive, continued the trend we have published in a recent white paper from the first 12 patients.
In Ghana, the multicenter trial site is actively recruiting and the Nano-X ARC system is actively scanning patients, both for the clinical trial as well as part of the clinical practice. Furthermore, Nano-X is in active discussions with a prominent site in Europe for incorporation into the multi-site clinical trial. I’d like now to discuss the Nano-X AI business segment, which is generating revenues and is also gaining commercial tractions worldwide.
As previously announced, during the quarter, we secured a new 510(k) clearances, from the US FDA for Nano-X AI Health CNG version 2.0, the upgraded version of Nano-X ARC solution, which has already shown clinical utility in several health care systems by identifying patients at high risk of coronary artery disease and enabling earlier intervention. The solution is also easy to use being seamlessly integrated with existing picture archiving and communication systems and electronic medical record systems.
As we know, AI has been the forefront of the news worldwide for some time, highlighting its groundbreaking benefits to many industries, use case, much of which is largely hypothetical at this point. Conversely, the Nano-X AI application has been fully developed into a product tool with significant clinical utilities in many imaging and diagnostic users. Its advanced algorithm and robust data processing capabilities have been trained on thousands of images and enable health care providers to identify health problems in much earlier stage than was previously possible.
With that, let’s look at some recent Nano-X AI being used in the rail world. Corewell, formerly Spectrum Health, one of the early US-based adopters of the Nano-X AI solution after two years of successful collaboration and having seen the clinical utility of the Nano-X AI Health CNG solution, the system will implement the health OT bone solution into its clinical system. The health host algorithm automatically detects vertebral compression fractures and low bone mineral density to help identify patients at risk of MSK disease with a focus on osteoporosis without a need for discrete imaging.
We are looking forward to another exciting and productive collaboration with Corewell and it is very gratifying to see sophisticated health systems validate the use of Nano-X AI solution. As previously reported, the UK National Health Services initiated the DAPT trial to evaluate the use of Nano-X AI bone solution. Through this study, the NHS discovered that it was able to identify 6 times as many patients with osteoporosis in routine scans as they were without Nano-X AI.
Following on those powerful results, one of the national health services sites, Oxford University Hospitals NHS Foundation Trust decided to secure a three-year contract for the Health host bone solution. AdAPT will continue into Q1 2025, but it’s already decided to secure the solution plus the new Real plus bone management tool for three years. This is the first time the Real plus bone management tool has been mentioned, and I’d like to take a few moments to describe this exciting new offering.
We have developed this application for use either as a stand-alone applications or alongside the Health host solution, and it is specifically designed to support fracture liaison service clinics in managing the entire patient life cycle more effectively from initial detection, whether through AI or other diagnostic in real plus bone management tool will facilitate the comprehensive management of treatment and ongoing disease management, including follow-up exams, update letters, and medication management.
These are the latest examples of prominent health systems, validating the utility of our Nano-X AI solution, and that is not just a concept, but a real value-add solution. We expect many more to come. In other AI business news, Dandelion Health extended its cooperation with Nano-X AI solution available on its clinical AI marketplace. Dandelion Health is a health care data platform that focuses on AI analytics, it offer life science companies, the ability to leverage Nano-X AI products to extract clinical insights from their multi-model, longer patient data sets of over 10 million patients.
During the quarter, we also signed a new reseller agreement with Spanx Medical, Inc., a distributor of medical equipment based in Florida. Spanx will distribute the Nano-X AI solution in the large Florida market, and we look forward to a productive partnership. Looking to the future of Nano-X AI, the strong validation of these solutions by multiple health systems around the world drives us to develop additional algorithms that can identify more health problems.
We are now working on a pulmonary solution, which is expected to be the first AI application designed specifically for the Nano-X ARC. The algorithm aims to automatically identified patients with pulmonary nodules with a goal of identifying chest diseases, essentially lung cancer through routine chest scans, the Nano-X team will provide timely updates on the development of these exciting new AI solutions as we advance its development.
Turning to our OEM efforts, which will help to ensure we have the manufacturing capacity for our expected client base of the future. As mentioned in the past, we finalized the establishment of our technology development centers based in our headquarters. The primary purpose of the center is to consolidate our core assets and knowledge and to advance the development of the chips and the tubes and to lead our future road map.
This center has eight R&D labs and is manned by a highly credentialed team of engineers and researchers who are also advancing now chip and tube technology from the robust technology patent library. The library includes dozens patents and families for Nano-X and Nano-X AI. The team at the center is tasked with the ongoing work on Nano-X future technology innovations as well as the development of our next products in our road map, and I know our future development is in a very capable hands.
I’d now like to provide an update on our OEM partners who will play an important role in ensuring that we have the supply of systems to meet our accelerating growth trajectory over the coming years. There are many manufacturing agreements in place, as well as multiple development projects in motion at various stages and sites globally, an increased pipeline of potential leads, and I’d like to provide a high-level overview of some of these activities.
Nano-X has completed assembly of the first ARC tubes with Nano-X proprietary, and we have taken delivery of them at our manufacturing facility. We are now performing systems integration and pre-FDA submission testings on the tubes, which will be used in the Nano-X ARC. Nano-X is also engaged in development of a multisource modules utilizing mentioned Nano-X meters testing of this unit should commence in Q1 2025.
As part of our efforts to raise awareness of Nano-X value and security applications such as screening Nano-X attended the International Security Expert in September in London, where over 300 international exhibitors showcased products and solutions from across the entire security spectrum. As a result of this event, we are following up on multiple opportunities to expand our penetration in the security vertical.
A leading global medical and diagnostic solution provider is assembling the first prototype tubes utilizing the Nano-X meter. We are working closely with them and have delivered Nano-X ARC demo kit to serve a test bench for a prototype under development. We have been partnering with the US government security application projects to develop noninvasive screening applications. The team has successfully completed component build, assembly and testing. We have since received the follow on purchase order to finalize two unique tube designs for advancing prototyping, which are to be delivered in the first half of 2025.
We also delivered in Q3 Nano-X demo it to Viewworks a global X-ray imaging solution provider for assessment of our technologies. Viewworks recently completed their assessment, issued their findings and have since requested to acquire Nano-X tubes towards specific application testing and development. We are pleased that our demo kit at increasing with our meter cube high-voltage power supply and software has already enabled multiple global solution providers to more easily experience our technology.
Additionally, the first tube utilizing CCM chips have been successfully built and the initial fab of production quality chips is scheduled to commence in Q1 2025. This is another example of the Nano-X team’s dedication to secure new manufacturing agreements to ensure the supplier of Nano-X ARC system can meet our expected demand.
That concludes my business update, and I would like now to turn the call over to Ran Daniel for a review of our financials. Ran?
