TRANSCRIPT
Participants
- Amelia Tower, KOL
- Adrian Mendes, Perimeter Medical CEO
- Deniel Mero, PropThink Editor
PropThink
Good afternoon everyone, welcome to PropThink’s Digital Conference. My name is Deniel Mero, Editor of PropThink. I will be hosting today’s event. PropThink Digital Conferences is a platform designed to give you access to subject-matter experts, including prominent physicians, investors, executives, and others with unique insights into the healthcare space.
Before we jump into the discussion, just as a reminder for the audience that there will be forward looking statements made, which are based on assumptions. We are not registered investment advisors so nothing in this presentation should be taken as investment advice. Always consult a professional before making any decisions.
Alright, with that said, let’s get into the agenda and speakers today. We’ve invited 2 renowned experts in breast cancer and Artificial intelligence to discuss the current landscape and ongoing trends in the space.
The experts include Dr. Amelia Tower, a Board Certified surgeon and Fellow of the American Board of Osteopathic Surgeons and the American College of Surgeons. Dr. Tower serves as the Medical Director of the Breast Program at Texas Health Harris Methodist in Fort Worth, as well as the Program Director of the General Surgery Residency.
We’re also joined by Adrian Mendes, the CEO of Perimeter Medical Imaging. He’s a seasoned executive in the technology space, having built and scaled several companies. Most recently, Adrian was Chief Operating Officer at Groq, an AI hardware company, where he was critical in scaling operations from a small team of under 10 employees to over 200 across US/Canada and achieving unicorn status with a valuation greater than $1B.
We will open the call with a roundtable discussion and close with Q&A. With that, let’s get to it.
Dr Tower, Adrian, welcome. I’ve been looking forward to this discussion as it combines two important and trendy topics. Adrian, this first question is for you.
You have a lot of commercial tech experience most recently at Groq, the AI hardware company that hit a billion dollar valuation. Earlier this year, you joined Perimeter, which is an early-stage commercial medical device company. What about the technology, data and people drove you to make this move?
Adrian Mendes, Perimeter Medical CEO
Yeah, thanks for having me, Deniel. So, you're right, it is quite different to be in a medical devices company versus a computer AI hardware company, but there's a lot of similarities.
When I first got introduced to Perimeter, I looked at it from the same way probably many of your audience look at it. From an investor standpoint. The first thing I looked at was, is there a big problem that this company's trying to solve? The answer is, of course, yes. A very big problem from a human level for obvious reasons.
Then a very big economic problem as well. So, there's a big problem here. Okay, great. Does the technology this company has address the problem? Do the customers like it? As you'll hear from Dr. Tower today, the customers like it. The technology does address the problem. Alright, so there's checkbox number two checked.
Then the next thing I looked at was the technology itself inside the company. Does the company have depth to what they're doing? Or is it sort of a one trick pony or a little bit of a surface amount of technology? And the answer is no. There's actually a lot of technology within the company.
The two major tracks are along the OCT track, which is the optical coherence tomography, which we'll talk a little bit about more. An entire area of expertise there that the team has. Then also on the AI side, a very world-class team on AI. So, it's got depth of technology that they're bringing together in a very interesting way.
I then had the chance to meet the team, and what I found was a very committed team. The co-founders are still with the company since 2013. 10 years still obviously very involved, full-time employees here. We've got a deep team, good technology, a big market, customers that like the product.
For me, that checked all the boxes from a company standpoint. Then at a personal level, I, as you mentioned, I came from a company called Groq, which was a AI hardware company. I'd spent the last seven years there. Grew it from very small company to the size that you described.
AI is something that's really, I think, going to change a lot of aspects of our lives. That was very deep in the technology stack hardware all the way down to the semiconductor level. What this offers up is an opportunity for me to see firsthand and participate firsthand in AI impacting everyday people lives in a very meaningful way.
When the option was presented to me, it was kind of a no-brainer by the time I did my homework. I've been here for the past six months, it's been wonderful. All my initial theories have been confirmed, and it's been very exciting.
PropThink
Let's talk a little bit about the story itself. Studies show that about 23% of lumpectomy patients must return to the operating room for a second surgery to get clean margins in breast cancer. Breast societies have called this the re-excision epidemic.
This question is for you, Dr. Tower. As a board-certified surgeon with advanced training in breast surgical oncology, can you talk to us about how these re-excisions impact patients and what strategies have surgeons such as yourself used to address the re-excisions?
Dr. Amelia Tower, KOL
Good afternoon. Thank you so much for this opportunity to speak on this amazing technology and to discuss this further.
I think it's important right now to answer and understand exactly what a re-excision is. A lumpectomy, which is also called a partial mastectomy, is breast conservation therapy. That essentially means as surgeons, our goal is to remove the cancer with healthy tissue, or what we call a rim of tissue around it on all sides.
Whenever you think of this, think about a box. It's a 3D object. There are six sides, or what we call margins. What happens is that a pathologist will evaluate that tissue and then assure us that there is no further cancer left in that specimen we submit and remove from that patient.
That's done in the postoperative setting after we've already completed the surgery. Pathology commonly can take up to 10 to 14 days to receive the final results. If there is cancer at the margin, then we have to talk to a patient potentially, and the standard of care is to go back to the OR to remove that to have healthy margins.
Whenever we look at how a positive margin or re-excision impacts patients, essentially there's four ways that it impacts the patient.
It's emotional trauma for the patient. It can be physical trauma for that patient. It can be financial trauma for the patient in the hospital, but it can ultimately, all of those things can also lead to delay in other adjuncts that are important for the overall prognosis and care of the patient.
I briefly want to go over those because it really is important to understand each element of this. It's all multifactorial, but it all comes together for best patient care. And in oncology, it always matters.
Whenever we look at a patient, the worst thing is to tell a patient you have breast cancer, but it's equally awful to tell a patient you have to go back to the OR for a second time. What that can do is result in emotional trauma for the patient.
It can be undue stress. And up to 36% of those patients actually they decide to go back to the OR, but they convert their operation not from a re-excision, but to a mastectomy, which is complete removal of the breast because they're not confident that we can get the tissue we need with the re-excision. All of those things combined lead to emotional trauma that we want to avoid as surgeons.
Whenever I say physical trauma, if we go oncologically at a patient to do breast conservation therapy, well, our primary goal is to remove the cancer. But we're also, as surgeons, trying to leave limited evidence that we were ever there and to preserve not only the functionality of the breast but the cosmesis of the breast. So, whenever we have to return to take more tissue, oftentimes there's postoperative inflammation that can also result in taking excessive tissue that otherwise we wouldn't necessarily have to take in the first operation, had we known.
That can result in disfiguring operations, and it can result in dissatisfaction of the cosmesis of the patient. And ultimately, that can also add to that emotional trauma.
The financial trauma is significant. It can not only affect the patient, but the hospital. We know from our studies that every re-excision can ultimately result in about $16,000 for cost. So that's an important consideration.
But all of these things, whenever we have a re-excision, can also lead to delaying further adjuncts. Primary treatment for breast cancer is surgery, but we work as a team to effectively reduce the risk of recurrence for it coming back. And so we have to implement our adjuncts, which could include radiation, it could include chemotherapy, and it could include anti-estrogen or hormonal therapy. And these have to be disseminated on a certain timeline.
If we're delayed because we're allowing healing and the second surgeries up to 50% of those patients in the global setting, which is 90 days after the surgery, they can have further complications such as wound infections or dehiscence. This can all lead to delay of the adjuncts. All of that can affect prognosis.
We as surgeons have tried multiple ways, multiple strategies to eliminate all of that. We're trying to do our best for our patients. Some of that has been, well, a lot of surgeons routinely take what are called shave margins. That's where we routinely take six additional edges or sides that can result in cosmetic dissatisfaction and also removing healthy tissue that we otherwise would not need to.
Some surgeons utilize other technologies such as ultrasound intraoperatively to get a better view. They also use additional technology that can use electromagnetic ways to decide if there's potentially further cancer in the specimen or not. Those are not always reliable, they're not always effective.
There's also ways that we can utilize our pathology colleagues. We can do what's called a frozen examination or touch prep. Unfortunately, that actually can compromise our specimen. And what Perimeter OCT does is it doesn't compromise the specimen. It's non-destructive to anything that we remove. We also sometimes utilize our radiology colleagues. We do localizations with wireless or wire or needle localizations. That's effectively placing something preoperatively that requires another procedure that is invasive to help us find exactly where the tumor is. Some of the technology can even give us information about the depth. Well, all of those things can result in, essentially delay in OR. It can also result in additional trauma or emotional impacts to the patient.
Whenever we look at all the strategies, unfortunately, we just haven't found one that works. But this, using OCT intraoperatively, it gives you information and empowers a surgeon intraoperatively to make real-time decisions. It's non-destructive to the tissue, and it ultimately can work and help reduce re-excisions, which if we can in any way reduce the fact that we have to tell a patient you have to go back to the OR a second time, then it's amazing technology that surgeons can potentially utilize and help with their outcomes and their best patient care.
PropThink
Dr. Tower, you touched on some other imaging technologies that were currently being used. What are some of the gaps in these other imaging technologies that are used in the OR right now?
Dr. Amelia Tower, KOL
That's a great question. So, there's a lot of new technology that's coming into the operative suite. As far as looking at how reliable this technology is, how effective it is, how accurate it is, and also how cost-effective it is. All of that is still not established.
One of the things that also is a differing agent with this technology is there's nothing comparable that provides the visionary structures of the tissue and the microstructures that this technology gives you. The only thing that's comparable is essentially having a pathology colleague in the operating room with you. That's where this technology differs from other technology that's currently available and looking at trying to figure out how we can reduce our positive margins.
PropThink
Adrian, you mentioned OCT technology and that's been around for over 30 years and used in other spaces like ophthalmology, cardiology, as well as other indications. Perimeter’s technology is the first OCT imaging tool on the market for oncology surgeries. Can you talk about the differentiating factors of OCT, its benefits and why it took this long to be introduced into the operating room?
Adrian Mendes, Perimeter Medical CEO
As I mentioned earlier, there's two main technology tracks that our company is really investing heavily in, in terms of research and development. The first is OCT, the second is AI.
We'll get to AI later, but on the OCT side, it's called Optical Coherence Tomography. So let me just give a little bit of a background on it. I'm an engineer, so I apologize if this gets too deep, but I'll try to keep it high level. OCT was developed in 1991 out of MIT. Doctors Fujimoto and Dr. Swanson were the inventor's of it. Coincidentally, just last month, October, they both won an award. They were at the White House. They won a national award for Innovation and Technology.
As Dr. Tower mentioned, it is used in ophthalmology about 30 million times a year currently. The way to think about this is it's similar to an ultrasound. It emits sound waves, collects them after they bounce back against whatever is in the environment. And then from that, you can construct a picture. What we use with OCT is infrared light waves. What that gives is a couple of things.
It gives a resolution that's much higher than ultrasound or x-ray, which then allows someone observing the images to see at a much more detailed level what is happening inside of the tissue, to Dr. Tower's point. You get that level of structure that you need when looking at an image.
It penetrates two millimeters to three millimeters into the tissue type, versus an ultrasound, which goes much deeper obviously. However, that's the perfect application for margin assessment, right? So, you get the resolution you need, and you get into that several millimeter range into the tissue.
Then there's the engineering piece of it. How do you take that technology and apply it into this space? There were many engineering challenges. The company was founded in 2013, so we're 10 years in right now. Many of the early years were developed, not so much on the science, but more on the engineering piece of it. Applying it to this application. One of the bigger challenges is that OCT generally has a field of view of about one centimeter by one centimeter, which is too small for this application. You need to be about a hundred times bigger to have a product that's actually going to be useful here. There was a significant amount of work figuring out how do you get the size of image that you need to be useful in this application.
Another challenge because a resolution is so high, having stability in the image, like you don't want a blurry picture, right? You have to have a lot of stability. A significant amount of engineering work goes into that. The flatness, you're looking at two millimeters, you need a very flat surface to take the picture on. Those are just three examples of the engineer work. There's many, many other examples I could go on about. A lot of work being developed has been done and continues to be done on the OCT technology from an engineering perspective.
We got FDA clearance in 2021, so we've been in markets since that point in time, been a couple of years now. You've heard from Dr. Tower some of the feedback from those customers about the technology.
PropThink
That's good. I thought you were going to go into much more detail, putting us to sleep on the engineering side of it, but I think you kept it high level.
Dr. Tower, you were a strong advocate, being the first surgeon to use the S series OCT commercially in the US. What led you to your decision and was there a so-called “a-ha” moment?
Dr. Amelia Tower, KOL
There were several factors in me utilizing this technology as a fellowship-trained surgeon. Also, I am a program director of a general surgery residency, so I'm helping to train the next generation of surgeons. I am a progressive surgeon. I look for innovative surgical equipment and techniques to not only help and train new surgeons that are coming in to take care of future generations, but also to give my patients the best possible care I can. As breast surgeons, we're typically in the surgical arena. We are early adopters of a lot of technology that are adjuncts and help us achieve our amazing logic outcomes that we do whenever we surgically manage our patients and provide interventions.
Whenever I was given the opportunity to be educated on this, I was first enticed chiefly by the fact that it is something that I strongly feel and know there's nothing else comparable to it currently. And it is meeting a significant deficiency that is in the OR whenever we undergo and we take on the challenge of breast conservation therapy for our patients. It is essentially providing us information that we otherwise have to wait for.
There's nothing else that you can take a specimen and remove it from a patient and look at it in real-time and see the microstructures underneath. By having that information that can either give you assurance or can give you invaluable results that can change or impact the patient from perhaps having a second surgery to me is, is priceless. As a surgical oncologist it is something that I'm going to utilize if I have the opportunity.
But before I implemented it into my practice, I did have to have a lot of considerations because when taking any technology on board, as a surgeon, you have to essentially weigh the risk and benefits. You have to essentially figure out how it's going to be integrated into your workflow of the OR. You have to figure out if it's going to be time-effective, and if it's going to be accurate and work for you. By doing my own research, I essentially was looking at the studies and the case reports of how OCT had been utilized in other surgical specialties.
That was not only reassuring to me that there were some benefits in the breast cancer arena, but also confirmed that I definitely wanted to participate and try this on my patients. Whenever I did make the decision to move forward with this technology, the “a-ha” moment, you know, there is an old adage seeing is believing, really did happen. It essentially happened on the second case that I utilized this equipment.
I was able to see something that was suspicious. I was able to intraoperatively make the decision to return back to the operating table. The machine is in the OR with me. Within minutes, take additional tissue, re-scan that tissue, be confirmed that I was happy with the result, close my patient. The follow-up pathology correlated with, had I not done that step, had I not utilized the technology, had I not turned around and taken an additional superior margin on that specific patient, then I would've been having that conversation that I spoke of earlier.
That moment to me, I guess is my “a-ha” moment. It really was seeing as believing because as surgeons, we are somewhat skeptical species sometimes. Whenever we can see something that works for us, with us and not against us, especially in the challenges of being in the operating arena and managing complex cancer patients, then it's something that we'll definitely spend the time to utilize. So, I guess that's what led me to it, and that's what made me a believer and that's what has sustained me in utilizing OCT for my patients.
PropThink
It really does sound like a breakthrough technology, especially for patients. I don't know if you've had any patient feedback because I guess during the surgery, they're not in there talking to you [laughing].
Dr. Amelia Tower, KOL
As surgeons, we don't like to talk to our patients while we operate on them [laughing]. Anytime we're utilizing technology and processes, that is included in our surgical preoperative discussion.
I did inform my patients I was utilizing a new FDA approved technology. I did not give the engineer version that Adrian did, but I did give the surgical version of how this has been utilized for ophthalmology, for cardiology. So, hey, this is safe.
One of the big things that's important with patients is letting them know this technology is not utilized inside their body. It's actually utilized on the specimen that is removed from the body. That's a big and a very important thing to disclose. Also that it is not destructive to the tissue. By informing the patients, that I utilize it on, they have essentially that's included in their informed consent. I think that it's very important to be transparent and let them know what we are utilizing in their operation because it's a, collaborative effort to go to the OR. It was very impactful and, having that conversation with that patient and, and showing the result of the pathology.
Had we not used this machine, had we not taken that extra tissue, well, we would be talking about right now, unfortunately, you have to go back to the OR. Not because I failed, not because we failed at the operation, but because cancer never behaves by the rules. Cancer is microscopic in a lot of cases. This is something that there's no other technology that intraoperatively you can utilize to see these ductal and microscopic tissue structures, that otherwise you would have to wait days that is essentially processed and placed on a slide for a pathologist to review.
PropThink
Adrian, we got the surgeon's point of view. We even have some feedback from patients. How are hospitals looking at this technology from a ROI perspective?
Adrian Mendes, Perimeter Medical CEO
The slide you put up is a wonderful one. On the left side of the slide here is the current standard of care. What we're illustrating here is we just took lumpectomies as the example, and in the United States there's about 230,000 lumpectomies a year, with about a 23% on average re-excision rate that ends up being about 53,000 procedures that what I call our waste, right? Again, not because a surgeon did the wrong job, but because cancer is bad. It's evil.
That waste, when you dollarize it, times the $16,000 that Dr. Tower mentioned earlier, it's a lot of money. It's $850 million that we're wasting from a payer standpoint. Now, imagine if you could bring that down into the single digits. For illustrated purposes only, imagine getting down to 3%, instead of 23%. That's a lot of money that's potentially available to us.
So, taking my engineer hat off, put my business hat on - significant opportunity here. Even if we don't consider any of the traumatic, the emotional in-patient effects that Dr. Towers very eloquently talked about. There's significant savings to the healthcare system that we can provide. These dollars are just for the US only and also just for lumpectomies.
There's great expansion beyond that. When you look at that from the hospital side. If I was the payer, this is what I'd be looking at, these are the savings I can have. There are some hospitals that pay, but as you know, in the US usually the payer is separate from the hospital.
There's a couple of things that hospitals get out of this. One is they get improved patient care, right? As we start to move to a value-based care system, the ability to reduce re-excisions, improve outcomes, improve quality ratings, patient satisfaction scores, that's a very, very big deal to hospitals. So that's one element of it.
Now that we've had this product in the market for a couple of years, we're starting to get some good data from the surgeons that are using it. Some of those hospitals are starting to now think creatively about how do we market this, market our surgeons as being able to provide care to patients, to potentially increase our top-line revenues. This is the view that hospitals are looking at this in terms of an ROI standpoint.
On the I side of the ROI, the most common business model that we have is where we place the hardware device at no cost into the hospital. Then we have a consumable element of the product. We use one per patient, one per procedure, and we charge for that. It ends up being a relatively low barrier of entry for a hospital to get the technology in. As the surgeon uses the product, then they pay on a per-use basis, which then allows a surgeon to get a feel for it, to start to see some of the results. It's not like they need to make a huge upfront financial commitment ahead of seeing some of those results.
PropThink
That makes a lot of sense, especially on the numbers side. I think the way that you compared both the 23% re-excision rate and then the 3%, there could be a lot of savings, not only for hospitals, but just the healthcare system in general.
Dr. Tower, this question is for you. From these comments and testimonials, obviously you and your colleagues have seen a clear benefit here. Can you talk about how when there's new technology introduced, there is an investment of time to learn how to use the device and then also make the adjustments into your workflow. Can you share your experience in implementing this technology into your operating room and workflow?
Dr. Amelia Tower, KOL
Anytime that you take on new technology in your operating room, it's very important to have an idea of an effective way to implement it. But every surgeon has their own way to do everything in preparation. There is somewhat of a learning curve with reading the OCT images. That being said, it is pretty quick.
As breast surgeons, we do focus a lot of our surgical preparation and, have been trained to read a lot of these images anyway. The learning curve is typically about after five or 10 cases that the Perimeter staff comes in and helps read and helps work the machine till people feel comfortable doing it independently. Everybody's experience with that is different.
That being said, there's also some teaching module preparation beforehand and then, just an atlas of images that you can review. Those are all advantageous to kind of prepare where you can quickly review the images. To integrate this technology into the workflow in the OR was actually very easy. So, it made sense to incorporate it.
The typical process of a breast conservation therapy surgery is we essentially perform the partial mastectomy or the lumpectomy. We remove that tissue, we orient it. Orientation is done with sutures, it's done with clips, it can be with radiographic clips as well, but in some way we denote the sides, which would be the margins for the pathologist to review.
Then we do an intraoperative specimen radiograph, which is essentially performed to document and for us to be assured that we remove the previous biopsy clip that is placed to diagnose the breast cancer and to also ensure that we retrieved in entirety, any potential localizing apparatus, if that was placed preoperatively.
At that point, that's where it can be scanned. And again, it's non-destructive to the specimen. So you can scan one focus margin, or you can scan all six. I typically think if I'm going to use it, I'm going to use it! I use all six margins, why not? Each scan is about one to two minutes. Essentially you're looking at 12 to 15-minute process.
You can speed up by doing some other things intraoperatively as part of your procedure. You do not have to break what we call scrub, you can stay sterile. It is a process that while scanning, I prefer to do myself. You can also train the operative staff to do it, which is an opportunity to have other people assist you. Also in reading the images, it becomes very quick and almost second nature.
The whole process is about 15, 20 minutes in its entirety. It can be changed or modified to whatever surgeon's workflow or patterns they have in the OR. For somebody like me, I utilize and train medical students and residents so they can always participate in it. But it's an opportunity to integrate a technology that does not cause a lot of undue training for staff. It doesn't destroy or, or destruct any kind of the tissue that you remove or compromise anything. It doesn't add excessive time onto that operating clock that you have ticking. And it really just is a seamless process to consider and integrate and, and it gives a surgeon the opportunity to modify it and individualize it into their workflow as they want to, and then make adjustments.
PropThink
Sounds quite easy, I guess [laughing]. Adrian, Perimeter is developing this next generation called the B series OCT system which uses AI. There's an ongoing pivotal clinical trial right now, which is comparing the B series against the current standard of care to assess the impact on re-excision rates. Can you share some of the details of this trial and what is the next milestone there?
Adrian Mendes, Perimeter Medical CEO
Yeah, absolutely. So let me back out a minute and just talk about the AI for a moment. I talked about there being two major technology tracks within the company. OCT is one of them, we talked about that already. AI is the other one. We've got an AI team, they're world class. We've got some world class experts on our board of directors who are deep AI engineers and scientists and business people. So we've got a lot of depth of experience in our company.
The nice thing about that is that a lot of people when they think about AI in medical imaging, they think about the image recognition piece of it, the piece of AI that for non-AI people, that kind of draws the boxes around your friend's faces on Facebook and things like that.
That is the base technology that is inside our B series, which is going through the clinical trial right now. I just wanted to say we've got approximately four, maybe five other AI projects ongoing in the company that are outside of that image recognition piece. These are deeper inside the machine that help the machine creates high resolution images, helping the machine speed up the scanning, helping the machine take noise out of the images, helping our training development. We've got AI built throughout the company within everything that we deliver, which is super important to what we're trying to do.
What the B Series adds in on top of the S Series, which is the product that's in market right now, is an AI layer on top of it. What this does is it will help the surgeon sort through all the images that are created and it'll highlight areas of interest. It doesn't make decisions, it's not a diagnostic tool. What it does do is it helps the surgeon look at the areas that have the highest probability of being suspicious and helps them zoom in quicker.
There'll be two impacts of that. One is it should help just time in the operating room. The second benefit of that is it does help expand our user base because it reduces the barrier. The learning barrier to adopt the technology. This will help from a sales standpoint, scale the technology even more and more surgeons and to get it into a more and more patient's hands.
The trial is ongoing right now. At the current rate, we're projecting to finish enrolling patients in the trial towards the end of 2024. We have an opportunity to do what they call an interim analysis on the trial. In the second quarter, we'll be able to look at the data and then make a decision whether we want to continue the trial to gather more data, or if we want to stop the trial at that point and submit to FDA.
We'll have better view of that in the second quarter. We've got 10 sites that are participating in the trial all across the US. The Mayo Clinic, MD Anderson, Baylor, so some very prestigious sites out there. As we get more information from this, we'll continue to update people.
PropThink
The B Series is using AI predictive algorithms to assist surgeons in making real-time decisions. Where are you getting all this data from?
Adrian Mendes, Perimeter Medical CEO
If we focus just on the B-Series, the image recognition portion, we've got a database that Dr. Tower refers to as Atlas. We've got this AI atlas database, that’s what we call it, which has got over 2 million images in it, which we used to train and to validate and verify the models. It’s growing all the time.
We've collected that from actual samples. We've got hundreds of samples from patients over time that we've collected. We’ve imaged them on the machine. We’ve used those to create sort of a set of data. And then there are techniques you can use in AI to create even more data sets from that data augmentation method. We're at about 2 million right now, and that continues to increase. We add to that all the time. Those are just on the breast side. Then we've got more in other places, so we collect this data in real time, we label it.
We've got another area where we've got some AI activity going on is in using AI to help the labeling, which is obviously a very labor-intensive exercise. We've got techniques that are using AI to help with some of the pre-labeling.
If I back out for a moment and just think about the company from a corporate valuation standpoint. AI is a hot topic right now, maybe a little bit overblown in some manner, but there's fundamental value in it. The market will figure out where that settles in over time. But you really do need it to move your business forward.
There's three different areas where you generate value with AI. One is the sophistication for your algorithms, which we've got incredible algorithms. Two is your data sets. This is a huge value for us. We’re the only company that can create OCT images, which means we're the only company that has the ability to create this dataset and has the ability to continue to grow the dataset. We're the only company that can label this data. There's a huge amount of value in that.
There’s a lot of different applications for that right now. We're talking about how we can use that data intraoperatively, and there's opportunities to move that AI into use at the biopsy level, possibly down at the pathology level. A great expansion, once you have the data, your mind starts to get very creative in how you can use this to help people do their jobs.
PropThink
Dr. Tower, from your perspective, how would AI help you in your analysis and decision making in the OR?
Dr. Amelia Tower, KOL
I think that AI and utilizing all those specimens that Adrian just spoke of, these algorithms are essentially creating a big database of the common patterns and anomalies that you would see with breast cancer. It can be easily identifiable with AI, which essentially, right now I just described the workflow. You take the specimen, you scan the sides, and you're interpreting the images. With the S series that's now in commercial use, the physician scrolls through the images. The B series will provide those suspicious images that the surgeon can readily look at and focus on.
Not only am I interested to see and really just excited to learn more about the precision it's going to add to surgery, but I think that the speed that it assists with already, I think that that's going to really be exciting on our surgical forefront for breast cancer surgery, whenever we're doing breast conservation therapy. Whenever we have those images right there for us to review very quickly and in such an effective and expeditious manner, I think that that's going to help more people be amenable to adopt the technology and implement it and use it.
This is all saving us from, it's not taking the place of or eliminating the pathology. That's the gold standard of processing our specimen. But what it's doing is it's giving us that critical and invaluable information that we can go and either be assured that we have a successful operation right then and there, or that we may need to take additional tissue to ensure that we get a negative margin. That real-time information with that AI, I think obviously will make it quicker and it’s pretty exciting. We're just looking forward to the future
PropThink
It does seem like a very helpful add-on tool. I think a lot of people when they think about AI, they think it's going to replace surgeons or humans.
Dr. Amelia Tower, KOL
I hope not because I need a job! [laughing]
PropThink
[laughing] I think the patients think the same way as you do, Dr. Tower. I don't think anyone's comfortable having an AI running surgery on them.
Adrian, let's talk about the potential and the pathway for Perimeter’s technology to be used in other specialty areas. We'll focus on cancer. You have lung, head and neck, prostate, colorectal, and others. What is the total addressable market in these other indications, and what is needed to expand into them?
Adrian Mendes, Perimeter Medical CEO
If you think back to the previous slide that I had with the two pie graphs on it, right there was 230,000 lumpectomies actually and the remainder are mastectomies. But that only represents about 15% of the total cancer procedures in the US alone, which is almost 2 million diagnoses are happening every year. The US only represents about 10% of global cancer cases. So, it's a massive market. The question is from a business standpoint is how do you march through that market and bring this technology to those other places?
We know that margin analysis and getting the margins right isn't just applicable to breast cancer. It's really applicable to any type of cancer that you're going to excise from the body. We do have work, initial really early investigation work going on in multiple other areas. We're seeing some promising results as we continue to develop those. We're starting to get, like I mentioned before, I think we're starting to gather data images from these other tissue types.
Expanding into other tissue types is a definite. The question is which ones do we expand into? As you can see, from this pie graph, there are three very big other areas. Colorectal, lung, prostate. Head and neck, very significant as well. What will guide that decision is where we see some of the easiest areas to identify where we've got an advocate surgeon in one of those specialists that is willing to work closely with us to help develop further in those areas.
The good news is that our S-Series in the market right now has a general tissue indication. It can be used for any tissue type. That's wonderful because we can be out in the market starting to explore areas.
In terms of the AI piece of it, which will eventually come, we will, like I mentioned for breast, we've got 2 million plus images on the breast tissue type. We'll have to grow our database in other tissue types to then be able to apply that to, as we expand out these pie charts efforts.
PropThink
Clearly there are many applications that OCT technology can go into, and Perimeter has already existing commercial efforts that also need to be funded. As of September, of this year, the company had $18 million. You can be winning additional grants from this Biden Cancer Moonshot initiative.
Can you talk about how this initiative impacts Perimeter and what will you be focusing on primarily within your budget?
Adrian Mendes, Perimeter Medical CEO
When this initiative was announced in September, we were amazed. We're like, wow this is a problem we've been working on for 10 years. We've seen the impact that this has. We have surgeons, we've seen patients, we all have someone in our lives that's had to go back for a second surgery. So, in one hand it was like really nice to see the recognition that you get at the White House level, that this is a problem that needs solving, number one.
Number two, it's a problem that the government is willing to put money behind to help solve, because there really aren't a lot of - it's greenfield, right? We heard that from Dr. Tower now. There really aren't a lot of great solutions out there. From a government perspective, they're working really hard to try to help solve this problem. That was the motivation behind funding ARPA-H and then funding the Precision Surgical Intervention (PSI) fund specifically on the ARPA-H.
That fund's got about $300 million assigned to it. With the sole purpose of reducing second surgeries. We submitted an abstract in September that got approved. We were invited to submit a full proposal. We did that a few weeks ago. Now that's going through their selection process.
I think there was 130-ish initial abstracts that got filtered down to 20 full proposals that were submitted. In Q1, I think February sometime, we'll get a decision. Our proposal is somewhere in the 15 to $20 million range. That'll be coming over three years that will help with the $18 million we have on the balance sheet right now.
That money is really targeted. It's non-dilutive funding for one thing and focused on research and development. We talked previously about our two technology tracks. We've got lots of ideas on how to improve those technology tracks. The wonderful thing about this is it doesn't force us at all to move off of our strategic plans. The only thing it does is it allows us to accelerate those existing plans by bringing more money in, allows us to staff up quicker, allows us to accelerate.
Next tissue types, we'll be able to gather more samples quicker. We'll be able to develop the AI, algorithms quicker. We'll be able to develop some more of the AI throughout the machine to increase resolution to increase speed. A lot of those things we'll be able to bring to market much faster.
There's some fundamental physics that we can work on in terms of the infrared sensors and light emitters that we will work on with the money as well. It really helps in our R&D efforts. It allows us to focus, assuming that we get this, we'll be able to speed up R&D efforts and allows us to free up some money that we would otherwise be spending on R&D and focus more towards the commercialization side of the business.
PropThink
Dr. Tower coming back to you. It always just comes back to improving patient care, right? To tie everything together, how could this technology, especially with the AI add-on, impact the standard of care in assessing margins during surgery?
Dr. Amelia Tower, KOL
As a breast surgical oncologist, I can tell you that it's a privilege and a pleasure to be able to take a patient who has a life-threatening disease and to surgically eradicate it. Our goal is to always have the most successful outcome. With technology like this, it not only enhances our precision with surgery, but it can reduce those free excisions and reduce all of those negative impacts that we talked about earlier.
Overall, I think that it is going to help with the patient outcomes. With that incorporated and utilized as a standard of care in the breast cancer arena, what that offers is a higher quality of care that surgeons can provide all patients. It also accentuates value-based care with our ever-changing landscape of healthcare we're definitely going toward.
With the technology like Perimeter OCT, I think that it's one that there's nothing comparable to. I've seen the positive effects it has, it works. It can easily be utilized. I think that we are going to have a lot more information in the future. With the AI component, I think that this is a way that is going to continue to reduce re-excisions and continue to positively affect multiple facets of breast conservation therapy and the challenges that we've been trying for decades in the surgical world. So, I'm excited for the future.
PropThink
Thanks for that Dr. Tower. We'll now start the Q&A portion of the event. You may submit a question using the text box at the bottom right corner of your screen. Let's just wait a few seconds. I already have a few that have been submitted.
The first question here is for Dr. Tower. How many surgeries have you done with OCT and approximate what has been the re-excision rate using OCT versus the standard of care?
Dr. Amelia Tower, KOL
Re-excision rates are different for every surgeon as far as how they're looked at and calculated in a healthcare system. I started adopting and utilizing the technology whenever I was coming to a new healthcare system, which was an amazing advantage for me to be able to utilize it because otherwise, you're integrating your new surgical equipment and technology and essentially working with new pathologists and radiologists. It was a really good opportunity to see how this could effectively go across the board.
Whenever I started, I was approaching around a 20% re-excision rate. Utilizing OCT, it immediately dropped to 0%. In fact, whenever I quit utilizing OCT routinely for all my surgeries, just for a brief episode or time, I immediately had one re-excision. It was confirming how valuable this was.
Re-excisions are always different for every surgeon. Some surgeons won't admit them, but it is one of those things that also depends on how cases are submitted. Rremember I talked about earlier, whenever you talk to a patient and you counsel and you say, we got a positive margin, obviously we have to surgically manage this, some of these re-excisions essentially return to the OR not as a re-excision, which is a different CPT code. But they essentially convert to that total mastectomy. So that's where sometimes it depends on the healthcare system. But it definitely changed my re-excision rate.
PropThink
Is this technology being used in Canada?
Adrian Mendes, Perimeter Medical CEO
The answer is no. We have FDA clearance. We're focusing on the US market at this point. We've got FDA clearance. We haven't gone through the regulatory hurdles in Canada yet. It's on our list of things to do.
Of course, our company was founded in Toronto. I was born and raised in Toronto. I am Canadian and would love to bring this technology there for all my friends and family that happen to be in Canada as well. We'll get there, we're just not there yet.
PropThink
What is the current standard of care being used in the trial? Is the benchmark the 23% rate that was referenced earlier?
Adrian Mendes, Perimeter Medical CEO
The way the trial works is the surgeon does their standard of care. Then just before they're going to close, they open an envelope. Inside the envelope, it'll say either device or control. If it's a control arm, then the surgeon closes and that's the end of the procedure. If the device arm, the surgeon takes the sample, the tissue and uses the OCT machine to scan it and then acts upon whatever they find.
That’s ongoing right now. It's a blinded trial. We don't have data of how things are happening in the trial. The 23% is the national average based off of studies that have been done in the US. We're expecting that's what we will see. Once we get the data from the trial later next year, we'll know.
PropThink
How are hospitals and physicians reimbursed for the use of the technology in the US? Do the hospitals incur the cost of the re-excision, or do they get additional payment for the second surgery by the insurance company? How does coverage work?
Dr. Amelia Tower, KOL
That also can vary with systems and also with insurance. One of the things to know about this particular technology is whenever you're utilizing new surgical technology, CPT codes, which is what we use to bill our procedures, they're essentially called temporary codes. Oftentimes they don't have any reimbursement, but already I was able to get reimbursed for the hospital, for the surgical aspect of actually performing and utilizing the technology and doing the interpretation.
There are currently codes, it's 0351T and 0352T. Essentially adding a modifier 26, which shows that intraoperatively, I interpreted those images and I acted with a surgical intervention based on that interpretation. I included in the operative note and it's submitted and it has been reimbursed in some cases.
PropThink
When you say you use 6 scans during a surgery, does that mean you use 6 times the dispensable tools Perimeter supplies? Or only 1 use?
Dr. Amelia Tower, KOL
Every time you utilize it, there's one disposable that is used essentially $900. That's just that one disposable. What happens is it's a vacuum. And so you push a button and the vacuum sucks it down so you can get a really good read and then release it. The six scans is whenever you essentially are scanning each side, but you're utilizing the same disposable, which is really great because you're not having to use a bunch of equipment and that doesn't increase the cost. So it's a one use of this disposable with the machine.
Not all surgeons, and not all cases necessarily necessitate the six scans. The 3D specimen is, think about a box, there's top, bottom, front, back sides. That's a lumpectomy. I'm not really a betting person, so if I have it, I'm going to use it. I just do the six scans.
Whenever I say scan, the scans take one to two minutes per side, and then the images pop up and you can actually be reading or interpreting the images of your superior margin while your inferior margin, you, release that vacuum, you place it in, you hook it, you hit the button, the vacuum hits again and sucks down, and then it's scanning that inferior. So, you can do a lot of it at the same time.
PropThink
The next question is also for you Dr. Tower. What decision or decisions do you need to make or how do you think about what you need to do if you see an OCT image showing you a suspicious area?
Dr. Amelia Tower, KOL
This is a biopsy proven cancer, right? The purpose is I'm utilizing the technology to intraoperatively get a real-time margin assessment. If I see something that I deem suspicious, which I've done the training, I've read the images in the atlas, I've done my cases and gotten over that learning curve. If I see something, say for example, a dilated duct approaching the surface of the tissue, which is two-millimeter slices. If I see a dilated duct calcifications that again, I've practiced and read and feel comfortable calling, you can actually find exactly very precisely where that is on the tissue.
That's another advantage because the plate will project exactly where you find that area of suspicion. You can make a box on it, and right then and there you can turn around and have a very precise re- excise area of tissue. That can eliminate what we call a shave margin. A shave margin is essentially taking the entire aspect of that margin, and so it can lead to more focused and a more accurate area for re-excision. So that is another advantage that we hadn’t previously discussed.
That is the double check. The double check would be that you can have the option to utilize that vacuum again and you can re-scan if you, if you re-excise tissue.
I'm one of those people that if I see something suspicious on my specimen and I re-excise more tissue, I'm going to scan that tissue I re-excised until I'm confident that I got a negative margin and there's nothing else suspicious. These structures are highly identifiable. These suspicious areas are very identifiable, with training obviously, from the otherwise normal or healthy tissue that you're scanning within the specimen.
PropThink
The next question, Adrian, you might have answered already. It was the Biden PSI. The proposal was, $15 - 20 million that you submitted?
Adrian Mendes, Perimeter Medical CEO
That's correct. Yeah, yeah, that's correct.
PropThink
What are some of the challenges that the S-Series has faced in terms of scaling and capturing more of the market?
Adrian Mendes, Perimeter Medical CEO
It isn't so much on the demand side. There's pull, there's customers that want this. As we continue to get more and more embedded in certain markets, especially Dallas, where our US headquarters is, we start to now get surgeons talking to their peers and we're starting to get some great pull out of hospital groups and various surgeons. Now it's more of “how do we grow the organization in a way that we can support the demand?” We've got very deep sales pipeline, which is very encouraging. I think you're going to see over the next year and into the future, our sales really start to accelerate.
PropThink
The next question is for you, Dr. Tower. If the pathology is the gold standard, is there an ability to make pathology available in the OR, or is that simply just not doable?
Dr. Amelia Tower, KOL
It's the resources and the time. There's other cases going on, and a lot of healthcare systems don't have the resources or enough pathologists to commit to that. Another differentiating factor to consider is, intraoperatively, they can do things like frozen section or touch prep that are quick - about seven minutes. What that can do is destroy some of the tissue, so you're compromising some of the tissue, because the gold standard pathology review, they have to do stains, let it process. It still takes time and a certain process to do specimen, a true specimen analysis.
With Perimeter, it provides you that information and it does strongly correlate with your final pathology. You get it real time while you're in the OR.
PropThink
Will the trial results for the B-Series impact reimbursement coverage of the S-Series? Is there any read through between the two?
Adrian Mendes, Perimeter Medical CEO
No. They're two separate products from the way the reimbursement schemes look at things from the FDA standpoint. It will help, obviously, once we have S-Series coverage, it'll help on the B-Series side as well because they are so closely related. We'll be able to point to the results we're seeing in the S- Series to help the B-Series coverage. But they're treated as separate products from the FDA standpoint.
PropThink
Interim analysis will occur in Q2. How confident are you in the study being positive? If the study isn't stopped, when would final data be available?
Adrian Mendes, Perimeter Medical CEO
We're hopeful, but until we actually see the data, it's going to be very hard to make a projection on whether it will be successful at that point or not. Dr. Tower said she's not a betting woman. I am a betting man. I'm hopeful if we decide to continue past that interim analysis standpoint, it would be in the fourth quarter of next year that we finish enrolling all the patients. There are a few months of data gathering analysis that needs to be done, which would make the data available either towards the end of the year or early into 2025. Those are the two milestones that we're running the company towards.
PropThink
Those are all the questions that I see in the queue right now. Adrian, would you like to add any, any final remarks?
Adrian Mendes, Perimeter Medical CEO
I'm excited about what we're doing here. It's a very big market. We have got a technology that really seems to be making an impact. We've got customers that really like the technology. We're starting to get critical mass of our devices out there and information starting to flow back into us from use cases. I think that's exciting for the company.
I think the fact that this is a problem that's being recognized at a national level is very exciting as well. That will give us some more wind behind our sails. I'm hopeful that we will be successful in our RPH grant. I'm hopeful that our estimated amount of money that we'll get from that, which is really just an estimate until we get the answer back, will be close to what we are hoping for.
We've got a number of very significant catalysts coming up here from a business standpoint over the next few months. So I'm excited. I know the product works and I know it's having a great impact on our customers.
PropThink
Dr.Tower and Adrian thank you for your time. The event obviously proved to be very insightful. This concludes the presentation and the Q&A portion. This event was sponsored by Perimeter Medical Imaging and if you’re interested in getting in touch with the company you may do so via their website perimetermed.com. If you’re interested in learning more about PropThink, you can visit our website at propthink.com or follow us on Twitter with the handle @propthinker. Thank you for attending and I hope to see everyone again.
Disclaimer:
PropThink Digital Conferences are organized and marketed by PropThink LLC (“PropThink” or “we”) with the aim of connecting subject matter experts with investors. This Digital Conference was sponsored by Perimeter Medical Imaging AI, Inc. (the “Company”) who is expected to pay fifteen thousand dollars for PropThink to conceptualize, market and host a Digital Conference featuring the Company. PropThink is not a registered investment advisor in any jurisdiction. We do not publish investment advice and remind readers that investing involves considerable risk. PropThink urges all readers to carefully review the Company’s regulatory filings and consult with an investment professional before making any investment decisions. Please read our full disclaimer at https://propthink.com/disclaimer
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