Video Transcription
Bryan Lord 00:00
Scott, great. Good afternoon, everybody. It's really a pleasure to be with you. I've had the pleasure to present a couple of times here at LSI. It's great to be back and thank Scott and Henry for the invitation. So this is a US-oriented, US-based company in Boston, a little bit of a US-oriented presentation. A big part of the US health ecosystem is ambulatory surgery centers. There are over 11,000 of them spread throughout the United States. I like to call them the heroes of health care because they take an increasing amount of procedure volume in the United States while also decreasing the cost overall, one of the few contributions of these two metrics in the health care system writ large. There are many challenges associated with ASCs: physical space limitations, issues with hiring, issues with cash flow and access to capital, and issues with sterilization of equipment as well. The profile of these ambulatory surgery centers also contributes to these problems. 85% of ASCs have four or fewer operating rooms in them. They're really not large facilities; they're more Ma and Pa in nature, and half of them are multi-specialty. So they do a wide variety of different procedures, all contributing to those issues raised above. We're going to start our application in sports medicine. So 90% of sports medicine procedures are performed in ambulatory surgery centers. The systems today that are used to perform these minimally invasive surgeries are big, they're complex, and they're expensive. They cost over $100,000 to purchase, about $5,000 a month to service, and then about $125 to $130 per procedure for sterilization as well. The instructions for use on these devices contain 35 processing steps that simplify into this flow chart that shows all the processing steps that typically hard-to-find, hard-to-retain, and really relatively low-compensated workers have to perform. And even if they do all these steps properly, studies show that the devices are prone to contamination. In fact, 71% of endoscopes have biofilm on them after the proper processing has been conducted. And last, many of these systems are out of date. Believe it or not, at the bottom of the print of these towers in the operating room is a printer. It's not a dot matrix printer, but it's a laser printer that prints at the end of a procedure. The surgeon saves images; they print to $5 glossy sheets of paper. The surgeon takes a space-age device, otherwise known as a Bic pen, and literally writes with a ballpoint pen on it and says, "Here, this is what we did to you in the procedure." And then the other copy gets walked down the hall to the dog-eared medical records department. So our mission at Pristine Surgical is to simplify this regime, primarily for our ambulatory surgery center customers, and we do it with what we call next-generation single-use endoscopes. So I'll walk you through how the system works here. This is what we call Summit. It's the world's first 4K single-use arthroscope. What we do is we take the external camera, we take the external light source that was on that big tower that I talked about, and we replace it with components that come out of the global smartphone industry. And so we use chip-on-a-tip technology, a high-definition camera, and a high-brightness LED located miniature on the tip of the scope. This is designed for full-on surgical procedures. So if you have an ACL, a rotator cuff, or a meniscus tear, this is the device that would typically be used to perform that surgery. So surgeon-founded, surgeon-funded in the early days, and really a surgeon design-driven company. And so the ergonomics are, of course, designed to be dropped into the hand familiar to the surgeon. Importantly, these devices also have to integrate water delivery as well. The joints are insufflated with water. And so when you think about the complexity of the engineering, it includes not only the optics and the electronics but also the fluid dynamics, and both of those have to work together in order to perform effectively. And so just to be clear, this entire device is 100% single-use, sterile, direct from the factory, and this device also delivers a stellar 4K procedure as well. We've been getting rave reviews as we've been bringing this out to the market. Surgeons say, "Wow, I can't believe that you can get this kind of image to rival, if not exceed, what they currently see in their operating room." Adjectives like stellar, gorgeous, and better than my current scope. So just to go in a little bit deeper into how the system works, the scope that I introduced to you comes in a single-use kit, very much like any other surgical kit that you would see as well. So everything that you need to perform the procedure is contained in the single-use kit. It includes trocar tubing, water tubing, and the electronics as well, and this plugs into a box that we call our image processing unit. But you can really think about this as a cloud-connected hub, so it connects into the cloud from the box, and that connectivity does a number of things for us. One of the things it does is it enables what we call our scopes by subscription business model, so we use a QR code to manage the inventory, which automates the inventory management, automates the reordering, and really takes all of the guesswork out of the inventory management for our facilities. This connectivity also helps us reduce expenses. So no longer are you going to pay that CapEx; of course, you don't pay that reprocessing expense, and you don't pay for your service because this is all single-use. It also aligns expenses with utilization. So today, that CapEx purchase is a fixed cost, right? The service expense is a fixed monthly cost, and you've got to build capacity for the sterilization. All that gets amortized over the procedure volume that follows in the ASC. If you use a single-use device, your purchasing follows your utilization. It moves it to a variable cost that helps significantly to align cash flow. And we've done a comprehensive cost calculator, and we believe overall that we'll save our facilities, in addition to these other two attributes, between 5% to 40% depending upon how you slice and dice utilization rates, hard soft costs, and the like as well. And then finally, on the economic side of things, particularly for the high-volume surgery centers, we believe that we're actually going to increase efficiency by decreasing the turnaround time and condensing the schedule, and that will ultimately lead to profitability increases as well. So if you think about a typical schedule setup: procedure, cleanup, and then ultimately, sterilization. Maybe the facility gets five turns in that operating room. In a busy facility, we're going to shorten the front end, shorten the back end, condense that schedule, and what you'll see is either an addition of at least one, if not two procedures as well in the course of that particular day. And that's really game-changing, particularly for the high-volume facilities. So when you think about that schedule of all the things that I talked about before, we really address all of those issues. This was straight off the website from the Ambulatory Surgery Center Association, and we do it for the facilities that, frankly, need it the most, right? The underserved and some of the ones that are under the most pressure, and some of the smallest facilities as well. So I'm going to segue just to the other half of the story. Everybody recognizes this device. We all have it in our kitchens or living rooms. This is an Alexa device. If you think about what Alexa did, it took voice and actually allowed us a simpler interface to the internet. So you can ask it things like, "Alexa, what's the weather tomorrow? How many Super Bowls have the Patriots won?" Blah, blah. But what it really does is simplify our interaction with the internet, and we allow then a microphone to live in our house in exchange for that connectivity. You all have seen this ad before. This is a Radio Shack ad, or this meme before, that talks about all the components that used to be out there. I see some smiles from the older folks out here; sorry to point it out. It's all been replaced by an iPhone, right? So what that does is a simplification. It's a consolidation of hardware that also then facilitates connectivity as well. And so if you think about the same way that an Alexa enables the connected home, and in the same way that the iPhone really replaces a myriad of electronic equipment, that's the same thing we're going to do in the operating room and for our ambulatory surgery center customers. We simplify endoscopy writ large. So we do that by connecting the surgery center. We do that also by connecting the patient and the provider. So box to the cloud, cloud to the provider, provider to the patient, and ultimately then interactivity with the electronic medical records. And where we think the big idea and what the big opportunity is for Pristine is as we propagate these image processing units, these connected hubs throughout the country and eventually internationally as well, we're going to have a distributed network of connectivity connected to the cloud that probably becomes one of the most valuable attributes of the company overall—not only faster, better, cheaper devices, but now a connected footprint, where we have earned real estate in these operating rooms. So we can do cool things like image sharing and all these other neat attributes. But ultimately, we think this will be a key portal for AI propagation into the OR and data aggregation out through this distributed, connected network. And in fact, at the end of the day, we also just announced our rollout of voice connectivity as well, so the surgeons now can speak to our device and say, "Summit, take a picture. Summit, record an OP note" as well.
Bryan Lord 09:21
As a platform play. So as mentioned, we're starting in arthroscopy. We have a really cool follow-on product in laparoscopy as well. And eventually, we'll go into flexible endoscopy, 125 million procedures worldwide, so huge TAM. What we want to be is the consolidator writ large of single-use, minimally invasive visualization devices, and we're the only company in the world that has this platform today and in the future, across all indications for the primary indications shown here as well. So in sum and for Summit, simple and connected devices, we're going to bring that into surgery centers today. We just recently launched, and we're also on the march, as much of my other colleagues are, for our first institutional raise, and we're targeting about a $30 million raise to propagate this throughout the marketplace. So thanks for your time and your attention.
