Greetings, and welcome to the EDAP TMS First Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host, Mr. Jeremy Feffer, Investor Relations. Please go ahead, Mr. Feffer.

Thank you, Jerry. Good morning, and thank you for joining us for the EDAP TMS First Quarter 2020 Financial and Operating Results Conference Call. On today's call, we will hear from Marc Oczachowski, Chief Executive Officer and Chairman of the Board; and François Dietsch, Chief Financial Officer. Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements, which include statements regarding the company's growth and expansion plans. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. I would now like to turn the call over to EDAP's Chairman and Chief Executive Officer, Marc Oczachowski. Marc?

Thank you, Jeremy, and good morning, everyone. As we continue to grapple with the global COVID-19 pandemic, we hope all of our listeners are safe and healthy. We appreciate you taking the time to join us this morning. I will start with a brief operational update and then turn the call over to François Dietsch, our CFO, to review our financial performance. Despite the impact of the pandemic on our operations, we made solid progress advancing strategic projects for the company. First, as announced this week, we finalized a worldwide exclusive distribution agreement with Exact Imaging for the company's micro-ultrasound technology. This is a significant addition to EDAP's product portfolio and adds significant growth potential to our distribution business. It also fits perfectly with our Focal One HIFU device and will definitely help further its expansion and adoption in targeted prostate tissue ablation. Let me quickly introduce this unique technology and its great potential. The ExactVu device is an ultrasound-based imaging system that can operate and be used the same way as a standard ultrasound, but it also has the unique capability of operating at a very high frequency of 29 megahertz. By comparison, standard systems used in urology usually operate at frequencies between 7 and 9 megahertz. This micro-ultrasound resolution is comparable or better than MRI and represents 300% improvement over conventional ultrasound. Similar to MRI, it allows urologists to visualize and look at suspicious regions within the prostate and target biopsies in real time. Using this technology, urologists can see details that evade other imaging modalities. In an 866-subject study at 9 clinical sites, ExactVu demonstrated sensitivity of 95% for clinically significant prostate cancer as compared to 89% for multiparametric MRI. Exact Imaging's technology also includes a solution called FusionVu. Where an MRI is required, FusionVu allows for…

Thank you, François. Again, we are very proud of our team for maintaining their drive and dedication during the worst of the pandemic, and we remain very optimistic about the opportunity to drive significant commercial adoption of the Focal One HIFU. The processes that we quickly put in place when COVID-19 emerged are serving us well as we are continuing to provide uninterrupted support to current customers while at the same time, engaging in whatever outreach is possible to continue to build the pipeline. We wish for everyone's health and safety during this very challenging time, and we'll continue to focus on supporting our employees and customers. We look forward to providing you with our next quarterly update in August. We will now open the call to your questions. Operator?

[Operator Instructions]. The first question is from Andrew D'Silva, B. Riley & Company.

Yes. I'm glad to hear everyone sounds well. Just to start ex U.S. in areas that have started to reopen, has there been a change in the cadence for your ability to obtain sales traction relative to while the lockdown was maybe fully implemented in those countries? And have you been able to sell any HIFU systems year-to-date even outside the first quarter or is that just unrealistic to assume with the current COVID-19 environment?

Andy, good to hear you're good, too. Actually, we can see some beginning of activity in some countries in Europe, but that's very recent. And that has been translated by people starting back to use the technology to treat patients and to, like I said, start back doing some elective procedures. So we see our mobile business in Europe, like in France and Germany, getting back into operations with some session reservation and treatments as well as we can see also some of our customers getting back into operation, but that's very slow and progressive. In terms of the sales process, it is still very difficult for the sales team and the sales force to move around as the restrictions are still pretty tight in terms of traveling and also in terms of meeting people from the administration or purchasing departments in most of the hospitals in most of the countries. So we can feel the activity starting back because people are starting to use their equipment and do something else than only focusing on COVID-19 in the hospitals. But in terms of selling devices, closing deals, it's still a little bit early to have access to the full stakeholders in the sales process.

Okay. No, that's completely understandable. And then can you just give an update, if any, as it relates to CMS? Have you heard anything on timing? I'm just curious you're still expected to have draft guidance in early summer. I know they've had to pivot and work on things like telehealth a lot more than initially expected, but wasn't sure if that changed. Any timing assumptions on what they're working on for HIFU?

Well, so far, we've got no news. I mean, we know that there is no change in the usual agenda of releasing proposed rules. So we're still expecting to get some proposed rules in July, which is the normal slot for the OPPS proposed rules. And we know that they are starting to release some other information in other divisions. So it looks like they're online and on time. They have not delayed any sort of release.

Okay. Great. And just as it relates to the R&D pivot in the UDS segment, how important has innovation been historically, given how mature the market is and that a lot of it is related to replacement cycle that you have going on right now? Does new technology platforms or integrated systems or anything like that really matter because I was initially thinking of ENDO-UP in kind of that fashion? But I'm curious, just historically, if there's been an uptick whenever new platforms or additional innovation has taken place?

I'm not sure I get your question exactly, but what's important here, and as you know and as we've announced, I mean, we have a lot - I mean there are a lot of great and highly potential projects with HIFU, including platforms as well. I mean, the concept of the EDAP [indiscernible] we are speaking about for a number of times and months. And we really want - the idea here is really to focus on all those new market, new application - new potential application that we could develop on HIFU and really put all of our resources on that, so that we can move that forward as quickly as possible.

Basically, all I was asking as it relates to ESWL innovation as you create new platforms, historically, has that been able to drive revenue in your opinion? Or is it dominated really by the replacement market at this point and new technology [indiscernible].

Yes.

Okay. Perfect. Perfect. That makes sense. And then just my final question. In the United States, right now, we have the CARES Act and along with that, came the Paycheck Protection Program. Are there any similar sources of funding you're able to access right now as well in France? Or are you able to utilize anything like that in the U.S. since you do have operations here?

Yes, absolutely. We've requested to get some benefit from the PPP program. And actually, we've been approved. So now we're waiting for the process - the administrative process of that. And they are similar, subsidized and helps that we can get in France, and we are in line as well. We're on that program as well as in Germany. In most of the places where we have operations, our financial and administrative teams are making sure that we can get all the protection and the subsidies that are given.

We have a question from Sean Lee, H.C. Wainwright.

So my first question is on the agreement with the Exact. So my understanding was that they previously had an internal direct sales team handling the sales, at least in the U.S. So would all that be discontinued or is that some sort of a transition period where two of you will co-promote the products? How is that handled?

So actually - and I don't want to speak on the name, but what we concluded is an exclusive worldwide distribution agreement. So basically, the EDAP's sales force agent or distributors and marketing team will distribute and market their products everywhere in the world. And we'll try to give them the most benefit of our strong and again, global network of sales. We will also provide service and application for them. So that's the agreement we have.

I see. And in the call, you mentioned that there are 74 installed devices already globally and - with 24 in the U.S. I was wondering how much overlap are there between their devices and HIFU?

There's no overlap at all between that technology and the HIFU. That means - if not, they would be competing. But they are extremely complementing, as I explained. I mean, the imaging - the Exact Imaging part is really the diagnostic part and HIFU is the training part. And that - putting those 2 technologies together, again, brings a global and complete offering and end-to-end solution from diagnostic to treatment in prostate cancer, and most importantly, in focal approach of managing prostate cancer. So that's a perfect complement, as I would say. And in the [indiscernible] installation that they currently have developed around the world, mainly in Europe and in the U.S., some of them are already using Focal One and some of those are not. So that's why it's also a very quick sort of opportunity to get to those accounts that are not yet using our technology or vice versa. Like I said, I mean, all the centers where we have Focal HIFU, it's also sort of an easy reach for us to offer them that new and very promising technology for diagnostics.

I'm sorry, I wasn't being very clear initially. By overlap, I meant the - in the installed base, but you did answer that question. So thanks for the additional color. And my final question is on the sales side for the HIFU in the COVID pandemic. With the hospital budgets likely to be under stress for much of the year, is the company considering alternative strategies like additional financing options or such things to help alleviate the impact?

Well, we have already in place a number of different options and business models, as you know, from the capital sale to leasing, going through mobile use, paper use and these kind of things. So we'll indeed continue to offer all those models. And we'll also work very closely with the hospitals, but it's too early to say if - what decision has been made at hospital level in terms of budget utilization and needs, but we'll follow that very closely.

There are no further questions at this time. I'd like to turn the call back over to Mr. Marc Oczachowski for closing remarks. Please go ahead, sir.

Thank you, Operator. And again, thank you, everyone, for attending the call today. Stay safe, take good care. And we'll definitely keep you posted on the developments. Thank you. Bye-bye.

This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.