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Edited Transcript of ELX.AX earnings conference call or presentation 28-Aug-19 11:00pm GMT

Full Year 2019 Ellex Medical Lasers Ltd Earnings Call

Sep 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Ellex Medical Lasers Ltd earnings conference call or presentation Wednesday, August 28, 2019 at 11:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Maria Maieli

Ellex Medical Lasers Limited - Interim CEO & CFO

* Thomas Duthy

Ellex Medical Lasers Limited - Head of IR and Corporate Development

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Conference Call Participants

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* Tanushree Jain

Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the Ellex Medical 2019 full year investor presentation.

(Operator Instructions) I would now like to turn the conference over to Ms. Maria Maieli, Interim CEO.

Please go ahead.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [2]

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Thank you, operator. And thank you, everyone, for taking the time to join us on today's investor call as we provide an overview of our financial results for the full year ended 30th of June 2019.

Joining me this morning is Dr. Tom Duthy from investor relations and corporate development.

I trust that you have a copy of Ellex' full year investor presentation or you are following our broadcast online where we will transition the slides directly to you. I'll draw your attention to Slide 2, our legal disclaimer of today's conference call and webcast which may contain forward-looking statements.

Our key financial information for the full year ended 30th of June is highlighted along with -- and certain market information pertaining to our securities on Slide 3. Our reported revenues for the year were $81.6 million, up 30 -- 3%, and Ellex recorded a net loss after tax of $5.8 million. Late in the first half of financial year 2019, Ellex commenced trading on the U.S. OTCQX Best Market with the ticker ELXMY and ELXMF. The directors and management of the company continue to hold a significant position of the outstanding shares on issue, namely 14%.

Turning now to Slide 4 for overview of our business.

Ellex is a world leader in the design, manufacture and sale of a comprehensive range of ophthalmic lasers, evolving consumable devices and diagnostics equipment. These products serve multimillion -- multibillion-dollar markets, namely glaucoma, diabetic eye disease, secondary cataracts, age-related macular degeneration or AMD and vitreous opacities. Our installed base of lasers and diagnostic equipment globally is in excess of 35,000 units. And to date, more than 108,000 Ellex iTrack consumable devices have been sold to treat glaucoma. Ellex has a direct sales force in our major markets, including the U.S.A., Japan, Germany, France and Australia; and a presence in over 100 countries across the globe.

We continue to target our 2 high-growth market segments of glaucoma and age-related macular degeneration, with our innovative range of products having made excellent progress throughout the year in achieving solid growth within these -- both these disease indications.

Turning to Slide 5, our highlights for the year.

Our group revenues grew 3% to $81.6 million, driven by a very strong iTrack contribution, with revenues up 29% to $14.3 million.

In September, we reported on the Ellex 292-patient LEAD clinical trial, which showed a fourfold reduction in the rate of progression to late-stage AMD in 76% of patients who received Ellex 2RT over the 36 months of the study. Very recently and just after the end of the financial year, we also reported on the 4th year or 48 months LEAD trial, which showed sustained positive results in those same RPD-negative patients who exhibited a strong benefit at 36 months or 3 years. We were delighted to announce the publication of the LiGHT clinical study, which showed significant superior benefits of SLT in the treatment of first-line glaucoma patients versus traditional eye drop-based interventions. Not only did patients who received the SLT exhibit better control of their disease at 3 years, none of the SLT patients' disease progressed to a stage that required surgical intervention. And overall, the procedure was most -- more cost effective than eye drops. Ellex is the world leader in SLT with its Tango and Tango Reflex SLT lasers. We anticipate the benefits from this data will flow to increase utilization of SLT in major markets, including the U.S. and U.K., over time.

Finally, we launched the next generation of our Ellex Eye Prime ultrasound platform at the American Society of Cataract and Refractive Surgery, also known as ASCRS, meeting.

Turning now to Slide 6, the group financial summary.

Today, Ellex reported global sales revenues of $81.6 million, up 3% on prior corresponding period and down 6% on constant currency basis. Our 4-year revenue compound annual growth rate or CAGR stands at 9%, which has outperformed overall industry growth rates over the same period.

Although the company experienced a reasonable currency tailwind over the period through the depreciation of the Australian dollar relative to the U.S. dollar and euro-dollar particularly, which benefited sales, operating expenditures grew to $52.4 million. However, in constant currency terms, our operating expenditures fell 4%. As mentioned already, we continue to invest into our high-growth glaucoma segment to drive future growth. The glaucoma segment does tend to have a high U.S.- and euro-denominated exposure.

Our gross margin, excluding production labor was up 410 basis point to 62.2% versus the prior corresponding period, which reflects currency benefits coupled with improved mix dynamics through a high proportion of high-margin products in glaucoma.

At the EBITDA level, the group recorded an underlying loss of $0.7 million, which excludes a -- $0.3 million in restructuring charges. Our reported EBITDA loss was $1 million, which improved slightly over the pcp, which was an improvement of 12% versus prior period. The company recorded negative operating cash flows of $4.2 million, reflecting increased working capital investment, particularly in inventory, to support expected sales growth. I will address this further in later slides.

Turning to Slide 7, which compares and contrasts our revenue by geographic region compared to prior period.

North America, the vast majority in the U.S., continues to be the strongest Ellex market by sales and revenue composition, with sales reaching 47% of our group sales in 2019. Our North American business has been driven by very strong growth in Ellex iTrack, along with SLT growth in our key glaucoma markets.

Europe, the Middle East and Africa or EMEA consists of direct markets, namely France and Germany, with the balance via distributors. Our revenues were relatively flat this year in that region, with gains from 2RT and SLT offset by iTrack and other lasers and ultrasound sales.

Our Japanese revenues increased 4% on prior year, largely currency driven, although we continued to focus our Japanese business on a selling bias towards higher-margin products such as SLT.

Asian sales including China but excluding Japan grew 14%, with good growth across the entire Ellex product range, albeit off a relatively modest base.

Finally, ANZ sales were up 7% versus prior period with continued momentum in SLT and initial sales of Ellex 2RT post LEAD.

Slide 8 shows our revenue split by the eye diseases we treat, including the diagnostic ultrasound.

As I have already pointed out, Ellex continues to see strong customer demand for its SLT laser to treat glaucoma, with a growth of 10% on prior period and iTrack revenue growth of 29%. This category has delivered an impressive 3-year compound annual growth rate at CAGR of 24%. With this solid growth, there has been a significant increase in our glaucoma product mix from 36% in FY '16 to 57% of group revenues in FY '19, justifying our investment and a focus into this high-growth underpenetrated market.

Our 2RT laser recorded a 260% increase in sales over prior period with strong initial sales following the late results of our LEAD trial in the first half. However, growth did moderate in the second half.

Several of our disease segments did not perform to our expectations during the year. Our cataracts and vitreous lasers declined 23% over prior period as competitive pricing pressures continued into the second half. Our retina disease lasers declined 2% over prior period, of continued pressure from pharmaceutical intervention to treat disease such as diabetic diseases and diabetic macular edema versus laser-based interventions. Finally, our diagnostic ultrasound revenue was down 37% on pcp to $4.3 million. We released our next-generation platform of Eye Prime in May, which we hope will stabilize and grow our ultrasound business over time.

Turning to Slide 9, on operating expenditures. Total operating expenditure was up 10.2% to $52.4 million, representing 64% of sales versus 60% in prior period.

Looking more carefully at our major line items. Our employee expenses were up 10%, principally due to the head count expansion across field sales and management capability, commissions paid on sales growth and FX effects. Our sales and marketing spend of $5.4 million, which was up 29% on prior period, was a result of increased efforts for Ellex iTrack in the key U.S. market, SLT and the marketing of 2RT post LEAD, along with currency impacts, highly U.S. denominated. Our sales and marketing which is predominately foreign exchange denominated was also impacted by FX.

Other expenses consisting of professional consultants, travel expenditure and other items grew 23% to $11.8 million or 15% of sales, principally driven by increased activity around plans for 2RT dialogue with the U.S. Food and Drug Administration.

I would now like to focus on our consumable device business, iTrack in glaucoma, which we see as foundational for our long-term growth at Ellex. Turning to Slide 11, we see that iTrack unit volumes increased 17% on prior period, and revenues were up 29% to $14.3 million.

During the fourth quarter of the financial year, Ellex implemented a low double-digit price rise for iTrack in the U.S. market, noting this was the first price increase in a number of years and reimbursement continues to remain very strong in that market. Although there were some benefits that occurred during the quarter at the new price, clearly the full effects of the increase will be in 2020 financial year and beyond. The higher-than-average AUD price for iTrack was mostly attributable due to FX benefits and mix effects from a high U.S. volume component.

Segment gross margin ex labor was 79%, down from 84% in pcp, reflecting some manufacturing rework during the period at our facility in Fremont, California.

Our iTrack business highlighted strong cost base leverage during the second half, which recorded $1.1 million EBITDA loss versus a $4 million loss in the first half, to give a full year EBITDA loss of $5.1 million. We anticipate the iTrack business will generate positive EBITDA for the business in the second half of the financial year 2020.

Turning to Slide 12, which looks at our regional contribution to unit sales, we note the U.S. unit sales were up 30% versus prior period and revenues up 45% to $10 million. In constant currency terms, revenues grew 33%. This strong growth for the full year by iTrack reflects the continued expansion of accounts, users and deeper penetration within the accounts.

iTrack outside-U. S. unit sales excluding China were down 9%, with revenues up 2% to $3.3 million. We noted some improvement in German sales via Hoya Corporation, which acquired our previous distributor in the first half. Chinese unit sales were up 42% versus prior period, with revenues growing 7% to $1.1 million. Unfortunately, the impact of tariffs impacted net pricing despite these strong volumes. Ellex iTrack continues to be the only MIGS device approved in the Chinese market.

Slide 13 presents a detailed synopsis of a key U.S. market opportunity. During the period, new account setups were very strong, growing 49% over the prior period to 396 accounts. Importantly, from the perspective of a more effective and efficient sales force, our field sales personnel have grown 17% over the period. In other words, we are significantly expanding our footprint without a material expansion in head count. As we indicated at the first half, we anticipate the strength in new account setup during the period will be a driver of order growth for iTrack in coming periods. We saw an increase in FY '19 reorders of 46% versus prior period, while new order or reorder mix of 91%, 9% reflected a focus on higher-volume customers. Orders from new accounts, which represents only the initial order from a new account during the period, were down 18% to 0.6 million a full year basis.

We remain excited by the opportunities for iTrack in the U.S. When we overlay the accounts by ophthalmology specialty and by ambulatory surgical center, or ASC, we note our user penetration is approximately 6% of the available specialists who could use iTrack in their practices, while at the ASC level, which are the majority of our accounts, it's approximately 17% penetrated. Our current lead capacity is in the excess of 50,000 units per annum, which implies less than 30% utilization at our FY '19 production volume.

Moving to our next business segment, Laser and Ultrasound, I wanted to provide our investors with a snapshot of its performance during the half.

Moving to the Slide 15, investors will note that despite negative revenue growth of 3% to $65.5 million, our lasers and ultrasound gross margin expanded by the 500 basis points to 59% and segment EBITDA increased 6% to $9.5 million. While the second half performance lagged that of the first half in terms of top line growth, it was pleasing to see the growth in EBITDA from its segment overall. As with previous financial years, our laser and ultrasound EBITDA is invested into growth opportunities for iTrack and 2RT. Hence, the group EBITDA loss remains modest once more for FY '19.

Our final business segment I wanted to provide our investors with an update relates to 2RT for the treatment of intermediate age-related macular degeneration or iAMD.

As Slide 17 highlights, we saw solid growth in sales of our 2RT laser, up 260% to $1.8 million. Investors will recall the 532% growth in the first half to $1.2 million following the LEAD results, indicating that sales volumes and revenues moderated in the second half. Gross margins improved 15% to 57% versus the prior period, as unit sales mix were initially skewed to distributor markets in Europe. Segment EBITDA loss lowered to a loss of $0.6 million, an improvement from the $1 million loss in the prior period.

We recorded several unit sales into the United States, where 2RT is FDA cleared for clinically significant macular edema or CSME. Purchase prices and per-procedure fees were stable, and fees collected were $0.2 million for the year.

I now just want to -- wanted to provide an update on our corporate activities as they relate to 2RT, particularly the FDA process which is ongoing. As a quick recap, investors will note we have been focused on the education and marketing of the LEAD clinical trial results, which showed a clinically meaningful 77% reduction in the rate of progression to late AMD in 76% of patients enrolled in the study of 3 years. LEAD was the first-ever study to show a significant efficiency effect in an iAMD population. We are strong believers in the meaningfulness of these clinical results despite the study not meeting the primary end point across the entire study population.

Ellex remains on track to establish U.S. regulatory pathway for 2RT in AMD with the FDA during calendar year '19, with submission to the FDA of regulatory documents anticipated in current quarter. The company expects to meet with the FDA and report on these outcomes in the fourth quarter of this calendar year.

Finally, to our outlook on Slide 19.

We expect our group EBITDA for the 2020 financial year to improve on FY '19, subject to global economic conditions and foreign exchange rates. We expect iTrack revenue growth to continue and that business to turn EBITDA positive in second half FY '20. We will focus on OpEx control as investing phase moves to sales execution and focus on reduction in working capital requirements, particularly in inventory.

Ellex will promote the LiGHT study findings to continue market leadership position in SLT for glaucoma. And finally, we will leverage specialist glaucoma sales force capability to promote both iTrack and SLT to increase our global footprint in 2020 and beyond.

That now concludes the formal presentation of our FY '19 investor presentation. I would now like to turn the call over to the operator to commence the question-and-answer session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question today comes from Tanushree Jain with Bell Potter Securities.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [2]

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Congrats on your first call as CEO.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [3]

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Thank you.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [4]

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And just a couple of questions from me. Just on Slide 3, can you let me know why the Latin America market was significantly down over pcp?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [5]

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That was predominantly from the change of our manufacturing addresses from Gilbert Street to Mawson Lakes. And we actually had to get some updates in our regulatory documentation, so there was a bit of a slowdown in the Lat Am market.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [6]

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All right. Okay. And then just, I guess, on the SLT. The growth has slowed down versus what we've been seeing over the last couple of years, even though it grew 10% on pcp. And I think the second half really showed the growth coming down. Have you been able to identify what the cause was for that and how should -- you're looking at growth rates moving forward?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [7]

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The -- with the LiGHT study, we actually predict that, that will actually go back up. I think most of the market was just waiting for the outcome from the LiGHT studies, and now that we do have that, we do believe it will go back up.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [8]

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All right. So there wasn't any one particular region that you could point out as driving the slowdown.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [9]

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None.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [10]

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Okay. And then just on the iTrack, you did mention that the margins were down over pcp due to some manufacturing rework. Can you just clarify that?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [11]

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So basically, we did actually expand our site in Fremont. So we were actually having 2 sites, so our overhead absorption rates were a bit higher so hence why the margins have decreased.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [12]

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All right. Okay. And you did mention that the new account -- the new orders have come down over pcp. Was -- and that's despite having a strong growth in new account numbers. And what's driving that?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [13]

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Tanu, it's Tom here. I'll take that one. So if you look at the new orders, they have declined a little bit, but the base is very small. So the definition as Ellex puts forward on new orders and reorders, if a new order is essentially the size of the first order at a new account but set up within that period, it's not the -- is -- it doesn't encapsulate all orders from that new account over the 6- or 12-month period that we've reported. So what you would expect is that, that new order, right, wouldn't shift materially period to period if we're setting up new accounts because their first orders are typically small orders, as you can appreciate. As their clinical experience grows, you expect accounts to order more iTrack over time. So really the number is the reorder rate, which encapsulates the second order from those new accounts and beyond. And that grew, I think, 46% during the period.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [14]

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Yes. So that's the [impact], but I guess I'm just trying to understand that just, if I'm looking at pcp, obviously we've had a strong growth in new account numbers. So I'm assuming we had more new orders, so should I just take it that, compared to pcp, the size of that fourth order from that new account has decreased?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [15]

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It infers -- that's right. So the new account setups between the first half and the second half was not too different. And the new orders were a little bit different, but again I'd refer you to the base being low. So what it does suggest is that, the new account, their initial orders on a dollar basis are slightly lower than what has been seen historically. You have to sort of bear in mind without calling out the differences between the ASCs and the hospitals, it really does depend on what that new account is. If it's a larger hospital, it's probably likely to order a higher number initially versus a smaller ASC, for example.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [16]

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And particularly in terms of your reorder, obviously you've seen a big growth. Do you have a sense of, in a 6-month period or in a year period, how many reorders you get from an account on average?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [17]

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We don't provide that level of granularity necessarily on iTrack at the account level. However, consistent with what we've presented historically or told the market historically, typically for new accounts, they take at least 2 quarters, 6 months, to commence what we would say to be more consistent and higher levels of order rate. And that's principally the effect of the clinicians' learned experience in iTrack. As they become more proficient and more expert, they do tend to treat a higher proportion of patients. It also is subject to, of course, whether or not they are seeing patients who would be a good fit for iTrack within that period as well. So that's sort of the dynamics that we do see. And we will give some consideration to what other information we may be able to provide in the future as we get more consistency, I guess, across the accounts through time and we can come back to you on that.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [18]

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No worries. And I guess, just one last one for me. On the outlook statement, Maria, you mentioned that you are looking at leveraging your specialist glaucoma sales force to promote both iTrack and SLT. Should I take that as implying that you're no longer going to have, I guess, additions in the 21 sales force that you've got for iTrack but kind of use the sales force that you've got existing for the laser business to basically be promoting iTrack as well?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [19]

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Correct. So we're using our current sales force to actually get that message across because we believe that [they will] go and see the same physicians, which is the glaucoma specialists, to be able to promote the iTrack as well. So we believe that, that will give us a greater footprint in the U.S. and the EMEA markets.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [20]

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All right. So you're not expecting, I guess, the 21 number for iTrack now to grow from here, at least in the next couple of years?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [21]

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The sales force numbers, is that what you're saying?

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [22]

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Yes. Yes. Yes.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [23]

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Yes, that is correct. So that sort of feeds back into trying to keep our OpEx low as well. And that is that we don't increase head count and then utilize our current resources to [be able to grow] the business.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [24]

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All right. Okay. I've just got a last one, and I'll finish off. Just on the inventory, what kind of reduction can we expect from the current level?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [25]

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Well, we don't actually give exact numbers around that, but we do expect to see a good amount of reduction. And that is at least 10% to 20% over this next year.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [26]

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And that's primarily coming from the laser business or the iTrack business.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [27]

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A bit of both but predominantly from the laser business. As you can imagine, the capital equipment is a lot more expensive.

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Operator [28]

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(Operator Instructions) The next question comes from [Hamish Jameson], a private shareholder.

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Unidentified Participant, [29]

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First of all, I'd like to thank Maria and Tom for making this available, for another investor conference call. It does make it easier for -- to communicate with shareholders.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [30]

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Thank you, [Hamish].

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Unidentified Participant, [31]

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Just to follow up on the last person who asked questions. [I count] SLT sales dropped from H1 to H2 from $16.8 million to $15.6 million. And I know you said people were waiting for the LiGHT trial to come in, but that was released over 2 months ago. And I do worry that this is a start of a trend. And what strategies have you got in place to try to reduce that loss?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [32]

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Yes. So part of combining the -- consolidating the 2 sales force would actually promote that SLT LiGHT study and promote the iTrack and SLT utilizing our current sales force. So that is one of the key strategies. So you're not going to be an iTrack representative or a laser representative. You're going to be a glaucoma representative for Ellex. And that, we believe, will drive those SLT sales.

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Unidentified Participant, [33]

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Is it perhaps competitors or something else selling SLT? Because you were expecting with the LiGHT trial being released, to have a sudden big burst with sales?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [34]

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Yes. So [Hamish], it's Tom here. So typically in clinical medicine, irrespective of a very high-quality scientific publication that LiGHT represented in the second leading medical journal, being The Lancet, the pull-through is never crystallized quickly. For education and awareness purposes with the clinical community, it does require a concerted marketing effort to make he or she aware of those results, as good as they were. So as with any entrenched standard of care, which eye drops typically are, they are a first-line recommended agent in newly diagnosed primary open-angle glaucoma. That progressive shift will take some time. However, if you look at the 2 glaucoma markets where eye drops are used far more frequently as a first-line regimen, they -- those markets are including the United States; and the United Kingdom, the U.K. So clearly those 2 markets -- as opposed to Australia where SLT is a very entrenched first-line standard of care. Those are the 2 markets where some education and awareness is required to push through the LiGHT study to see that change in medical practice. What I might add as well is the U.K. is very dependent on changes to a group called NICE. So NICE currently recommend to the National Health Service, the NHS, that eye drops are a first-line treatment choice in the U.K. That needs to change to SLT or have SLT included as an alternative option to just garner utilization in the U.K. And that just highlights, I guess, the time-based approach when you have new information like this.

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Unidentified Participant, [35]

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Okay. My next question is around ultrasound sales. Looking back at your sales, 3 or 4 years ago, it was $10 million a year. This year, it was $4.3 million. And I know you released the ultrasound Prime in May, but do you think this is going to increase -- could potentially increase sales to $10 million a year now that the product has come out? Or are ultrasounds being used -- or new ultrasounds being used less by ophthalmologists?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [36]

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Well, the Eye Prime is precisely that. It sort of gives the ophthalmologist new technology. It has -- it does have an image quality that is above the ultrasound, so hence the market has been waiting for that release. So we do anticipate that sales will actually accelerate in FY '20 now that, that has actually been released.

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Unidentified Participant, [37]

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It's quite a big acceleration. As I say, it's dropped down to $4.3 million, whereas 4 years ago it was $10 million. So do you think it could increase back as -- the market could get up towards the $10 million again?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [38]

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I think we're certainly expecting growth, [Hamish], off that new release. So Maria is quite right. There was a deferral in purchasing decision because the previous generation lacked some of the feature quality that some competitors had introduced over that period. So when you lose market share through -- I -- shall we say, a redundant offering which you've now created a second generation from, the crystallization back to that $10 million will not occur quickly, but we are -- as Maria said, we are expecting growth of that platform with the new release, which has advantages now over those competitors, whereas previously it was -- it did lack some of those features that Maria mentioned.

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Unidentified Participant, [39]

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And my next question relates to 2RT. And I know you're awaiting decisions on the FDA, but it seems to me it's likely that they will request another randomized clinical trial, although we don't know. Do you -- so you expect some feedback from that later in the year, do you, from the FDA?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [40]

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That's correct, [Hamish]. It's Tom. I'll take that one, if that's okay. The process with the FDA is ongoing. As we guided today, we are expecting to make those regulatory submissions and have a meeting with the FDA and have an outcome from the FDA prior to the end of calendar year 2019. Your point about the requirement of another study, that is the most likely outcome from those discussions with the FDA. However, until such time as the FDA has concluded that a study is required, we simply can't be drawn on being 100% certain that, that will be the case. So we have engaged regulatory consultants to assist us with exactly the positioning we should take with the FDA, noting that the LEAD study had elements to it, most particularly the primary end point and how it was measured through multimodal imaging. That's quite new for the FDA, who when they think about age-related macular degeneration, they are focused. And they guide companies to an end point called visual acuity, how many lines or letters on the chart you can read, whereas for intermediate AMD patients do have -- or they have maintained visual acuity, but they have the early stages of retinal damage. So we also need, of course, to change the thinking a little bit from visual acuity to monitoring progression through surrogate measures like imaging where we can see in fine detail progressive damage to the retinal pigment epithelium or RPE.

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Unidentified Participant, [41]

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I mean, I believe that 2RT could be a blockbuster. And certainly all the trials are pointing in that direction. Another RCT is going to require probably another capital raising and realistically takes 5 or 6 years till we get the result. I believe personally that the way for Ellex to go forward is to partner with a big multinational who will be interested in the investment. And that might provide some significant value to Ellex in the medium term as they realize the potential of what this could do. Are you considering [following] a partnership with a bigger international company to continue to develop 2RT?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [42]

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I think that's very much -- it's a good question, and the answer to that question is all options are on the table. However, again, to progress one particular option would be premature at this junction until such time as we have feedback from the FDA. And if that feedback is that if Ellex requires a pivotal study in the United States for registration purposes, exactly what the cost, size and time of that study will look like -- but suffice to say the company will run parallel programs to examine exactly what is the most accretive value proposition for shareholders. So rightly, you say we could partner it. We could spin it out. We could self-fund it. And if that requires a capital raise, again, we would make sure that shareholders were fully informed of exactly which process we intend to go down, but as I say, it's very premature to push in one particular direction at this juncture.

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Unidentified Participant, [43]

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Would there be another conference call opportunity for shareholders to discuss the options? Because Ellex has done 2 or 3 capital raisings over the last 5 years. And I just feel these processes are -- delivering these new technologies to markets take a long time. And you need a strong company to push it, really. Otherwise, they'll just generally ignore some of these new technologies. And I guess, would there be another opportunity to discuss the fundings -- or the options with shareholders?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [44]

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That's a good point. So if -- we will consider definitely a call, a conference call, with investors once we have that feedback. So we will announce clearly what the FDA has guided Ellex to do with 2RT. And we'll be very transparent with that, transparent as we can be, naturally, given the dialogue with the FDA. There may be some elements we can't talk to. However, we will happily and confidently put forward what the FDA has told us and share that with you. And we can debate that, if you'd like, on a call.

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Operator [45]

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Next question is a follow-up from Tanushree Jain with Bell Potter Securities.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [46]

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Just 2 quick ones for me. And given we're 2 months in the -- in FY '20, I guess, a couple of things. I guess I would like to ask if, a -- you mentioned that LiGHT trial had kind of deferred people purchasing these units, and also the launch of the Eye Prime. Have we then seen any uptick since the end of June, over these previous last 2 months?

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [47]

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There's no comment on that. We can't actually give that information to you, Tanu.

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [48]

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All right. Okay. And then, I guess, Tom, just on your comment. You did mention that the [dividends of] the LiGHT, it takes time for pull-through to come. And we'll need, I guess, protocols [to using] stuff, which I understand. But I guess, if there's more people deferring the purchasing decisions till these results were out, if I'm comparing it with what happened with 2RT and the LEAD trial where, I guess, post the trial results, I think, within 2 months, we saw a significant increase in orders, what do you think is really the difference driving the behavior with both of these...

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [49]

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Yes, it's a good question. So obviously the base for 2RT was negligible in the pcp. And therefore, the growth in percentage sense was high, albeit the revenues were unremarkable and, I think, $1.8 million. SLT is a well-established global intervention for early glaucoma, the difference being is that historically no one has ever run a large randomized controlled clinical study that has directly compared and contrasted eye drops with SLT but looking at both functional outcomes but also the cost effectiveness of each intervention. And so if we look at -- as I mentioned, if we look at the U.S. market, which is a private payer and a public player being Medicare, that is a little bit different than U.K. which is a single -- effectively a single-payer market with the NHS. That will take time through that NICE process, but in the United States SLT has been around for over 10 years, I think, from memory. Therefore, there's a lot of information around SLT, clearly, as both Ellex and others have promoted SLT for glaucoma over the years. And so to have that new clinical information, yes, it's -- as exciting and as interesting as it is in the U.S. market where they are familiar with SLT already, it's not going to have that same pivot initially as maybe what 2RT did where we saw the pull-through of those results principally because there is no treatment for iAMD anywhere in the world. And so when European clinicians particularly saw the 2RT results from LEAD, they purchased a number of units and we saw that growth. I hope that answers your question...

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Tanushree Jain, Bell Potter Securities Limited, Research Division - Healthcare and Biotech Analyst [50]

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Yes. Yes, it does.

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Operator [51]

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The next question is also a follow-up from [Hamish Jamison], a private shareholder.

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Unidentified Participant, [52]

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Tom, just following up my question on 2RT. Obviously, there was a lot of noise in the -- after it was released last October. Realizing the value of it through other bigger companies is a process that takes time. Is Ellex actively involved with other companies or other discussions? Or are they just waiting for the FDA? I mean, I guess we think we know what the FDA answer is, but I guess, one, given as -- is this a case for actively involving with other companies now even before the FDA or waiting for the FDA's outcome [and just] going to discuss it with them?

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [53]

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No, I think it's -- so the -- from the perspective of the LEAD clinical results, just to go back one step. And as Maria mentioned, the primary end point of the study across the entire patient population was not met. There was a spectacular response from a very well-defined subgroup, the so-called RPD minus subgroup, as you recall. I guess, in retrospect, had the primary end point been met, we'd be having a very different conversation with you today. However, it was not met. And accordingly, we are -- from a European marketing perspective, it's all about RPD minus. We are not permitted to market and sell 2RT for iAMD in the United States, and that's exactly why we're having those FDA discussions. So part of the rationale for not necessarily having deep and meaningful conversations with prospective partners at this stage is that the -- we -- they simply would not engage on the basis of an uncertain registration pathway in the United States. And currently it is uncertain until such time as we have that feedback from the FDA, and a clinical plan -- if required, a clinical plan, mapped precisely. And then one can determine the likelihood of success of that clinical plan and design, in which case it makes those -- as you say, those partnering discussions for funding, if required, for that pivotal study far more -- far simpler and far more encouraging because we have the -- notionally the [bio] from the FDA of that study.

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Unidentified Participant, [54]

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Yes. No, it's just interesting. I personally think this is -- that this is one of the strongest elements of Ellex. And it could be valued more than the whole capitalization of Ellex at the moment, I mean, if it was held by a prominent U.S.-listed company. It's certainly been very promising in what it's shown and very frustrating how they chose the primary and secondary end points in the study, in retrospect, but...

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [55]

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That's clinical trials, unfortunately. They'll show up -- they do throw up surprises that you not necessarily envisaged at the commencement of the study. And that group was not deemed a commencement to be potentially clinically important. In hindsight -- sorry, in retrospect, they clearly are an important subgroup and a defined subgroup of iAMD patients. So for us, I guess, with the 2RT and the LEAD results in hand, we have some very interesting data there that we can collectively exploit to the advantage of all Ellex shareholders and a way to exploit that -- those options that we've discussed. And as I say, we will present an option following the dialogue with the FDA. We are -- as I said, (inaudible).

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Unidentified Participant, [56]

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Yes. It's just frustrating that both the clinical trial predetermined end points. And you're right. It's just (inaudible) long time, of course, to get it to -- get it -- potentially get it reexamined.

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Thomas Duthy, Ellex Medical Lasers Limited - Head of IR and Corporate Development [57]

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Yes. And look, there are some -- I mean the AMD market is -- the FDA, I guess their thinking has changed a little bit in more recent times. So there's a company called [Apelos] in the United States that has 2 Phase III clinical studies, where the FDA has changed its thinking a little bit from visual acuity to an imaging-based standpoint looking at changing baseline atrophy in those patients. So there is a dynamic occurring where visual acuity for early forms of AMD is not a practical end point purely because it can take many years for patient's vision to be impaired. So the thinking is changing, which is good for Ellex.

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Operator [58]

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There are no further questions at this time. I'll now hand the call back over to Ms. Maieli for only closing remarks.

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Maria Maieli, Ellex Medical Lasers Limited - Interim CEO & CFO [59]

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Thank you, operator.

I wish to thank everyone for joining the call today and for your questions. We look forward to updating the market with our progress during 2020 financial year. Until then, good morning and goodbye.

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Operator [60]

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This does conclude our conference for today. Thank you for participating. You may now disconnect.