Nano-X Imaging - Q2 2024

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Nanox second quarter twenty twenty-four earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mike Cavanaugh, Investor Relations. Please go ahead.

Mike Cavanaugh (Investor Relations contact)

Good morning, and thank you for joining us today. Earlier today, Nanox Imaging Ltd. released financial results for the quarter ended June thirty, twenty twenty-four. The release is currently available on the investors section of the company's website. With me today are Erez Meltzer, Chief Executive Officer and Acting Chairman, and Ran Daniel, Chief Financial Officer. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements regarding the company's financial results, research and development, manufacturing and commercialization activities, regulatory process operations, and other matters. These statements are subject to risks, uncertainties, and assumptions that are based on management's current expectations as of today and may not be updated in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date.

Factors that may cause such a difference include, but are not limited to, those described in the company's filings with the Securities and Exchange Commission. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of the non-GAAP to GAAP measures is provided with our press release, with the primary differences being non-GAAP net loss attributable to ordinary shares, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, non-GAAP other expenses or income, and non-GAAP gross loss per share. With that, I'd now like to turn the call over to Erez Meltzer.

Erez Meltzer (CEO)

Thank you for joining us, today, and as always, we appreciate your continued support of Nanox and our mission. Twenty twenty-four has been a period of strong commercial progress while also advancing the value of our products through our clinical efforts as we continue to expand our deployment in the U.S. and the rest of the world. We're not only accelerating deployment of the Nanox.ARC system, but also expanding the footprint of the other value-added elements of the full Nanox solution, including Nanox.AI. As mentioned in previous calls, I'm committed to providing further insights and detailed updates on our ongoing advancements in the coming periods. I will begin with a discussion of our recent achievements, which will cover regulatory updates, clinical advancements, commercial deployments, Nanox.AI updates, and an introduction to our new Nanox.ARC system, which we'll call Nanox.ARC X.

After my prepared comments, I'll turn the call over to our CFO, Ran, who will review our Q2 financial results. I will then share a few closing thoughts before turning the call over to the Q&A session. We have a lot to discuss, so let's get started. Before I provide an overview of our commercial progress, I will begin with some clinical and regulatory updates, which we believe will have a near-term positive impact on our commercial efforts. I'm happy to share that just last week, Nanox submitted a new 510(k) submission to the FDA, which is intended to expand the indications for our current Nanox.ARC system in general tomosynthesis imaging. Once cleared, the submission will significantly expand the system's indication for use from the current MSK for general use, including chest.

As you know, much of the clinical work we have been performing recently has centered around the suitability of the Nanox.ARC for chest indications and was intended to support this submission. The submission will include some software updates and is accompanied by new clinical data for various study anatomies, with and without pathologies. To be clear, it is worth noting that all current installed Nanox.ARC systems are hardware-ready and have the required capabilities to scan MSK, chest, and abdomen, subject to the FDA clearance and the requisite regulatory approvals. This means that post-FDA clearance, a simple software upgrade that can be done remotely is all that will be necessary to bring currently deployed Nanox.ARC units up to the new standards. Additionally, after completing the technical stages, including obtaining the ISO 13485 certifications from BSI and successfully passing the MDR audit-...

We are now in advanced stages with our notified body to secure the CE mark for the EU region. Rest assured, we will provide updates as soon as they are available. Turning now to our global deployment and commercial efforts, which continued in the second quarter. Our team is diligently working with imaging centers, physicians, and regulators to increase footprint of our Nanox.ARC technology. As of today's call, there are now dozens of units in various stages of shipment and deployment. The deployments in the U.S. are spread across seven states, the newest being Delaware and California, which are awaiting state approvals, and we expect to grow this number as our commercial team executes our deployment and growth plan.

To give more color on our U.S. deployment, I would like to add that during the second quarter, we have installed Nanox.ARC system in three prominent healthcare chains operating imaging facilities across the U.S., including one of the largest in the industry. Additionally, in the U.S., some of the deployed sites have received certification from the corresponding state's regulatory body and have begun to scan patients. Others are in the process of obtaining their approval. This commercial scanning activity is accelerating. For example, as of today, one of those sites have shown up to 14 scans per day. We recently received good indications for validation of the U.S. CPT and reimbursement process as we received managed care EOB.

Since March 2024, we have been ramping up in the U.S. with current targeted backlog of 50 favorable prospects and additional 44 leads in the pipeline, with the main segments being outpatient imaging centers, medical imaging chains, and orthopedic centers. We understand that not all of these 94 leads will convert, but I'm very pleased with our commercial team's progress in such a short period, and we are very confident that this will continue to grow over time. We're also awaiting the import license to deploy the first Nanox.ARC in Mexico, with the systems ready for shipment. Additionally, there are 2 units fully deployed in Israel, and another deployment is expected in the upcoming months for both clinical and commercial use. We're able to pursue this opportunity as we obtained AMAR approval several months ago.

Importantly, the number of daily scans is accelerating, and in last July, we experienced an average of 6.67 scans globally for all deployed Nanox.ARC systems, encompassing both clinical work and commercial patient scans. I think it is interesting to learn that the global commercial and clinical scans by body part are distributed as follows: 31% chest, 25% hand, 14% leg, and 14% spine. But of course, these indications may vary over time. For those of you that are interested, we also have some new clinical samples on our website, including chest pathology. To support our accelerating deployments effort, we continued to strengthen our team and infrastructure during the quarter, adding to our U.S. sales and technical teams. Looking ahead, Nanox is dedicated to accelerating the execution of our commercial infrastructure and future strategic collaboration in the country.

Our mission is to provide healthcare practices with a transformative imaging advantage with the Nanox.ARC, an accessible, cost-effective solution that not only provides advanced diagnostic imaging capabilities, but also elevates overall patient care. We are working to accelerate a steady flow of referrals from healthcare providers for Nanox.ARC digital tomography imaging as part of their diagnostic workflow. We also continue to advance our other clinical efforts in multiple countries and locations. Generating data, demonstrating the utility of the Nanox.ARC for a fuller, wider range of indications is a key initiative for Nanox. The reason is simple: if we can show large volumes of data demonstrating the evaluated utility of the Nanox.ARC, it will significantly boost our all-important commercial efforts. For example, the Beilinson Hospital in Israel has been scanning patients for exactly this reason, and this trial has begun to generate data.

There have been a few dozens of patients recruited at our clinical sites as part of this and the multi-site studies. The previously announced multi-site trial is now operational, and we are accelerating patient scanning activity. The UGMC is in the final preparation to join the multi-site trial as the second participating site, while already gaining clinical experience with the Nanox.ARC installed in scanning patients. The MSK trial held at Shamir Hospital has been completed, and a company-wide paper published recently. The study concluded that the Nanox.ARC was a value-added tool in the hospital's clinical workflow, enabling quicker diagnosis when used as a supplemental tool to the standard X-ray system, achieving faster diagnosis time as compared to the standard CT-based workflow. Furthermore, all Nanox.ARC images were determined to be of high diagnostic quality, enabling optimal depiction of findings.

Our technology can increase depiction of occult chest lesions, localize, characterize, and resolve questionable lesions, even without prior radiologist experience. Cold cathode DTS may have an improved diagnostic accuracy compared to CXR. Its capability to eliminate the need for CT at a fraction of the radiation dose, cost, and images per study, should be further investigated. For more information, see our white paper section on our website. Turning to our AI business. Just last month, we announced that our Nanox.AI cardiac solution, called HealthCCSng, was highlighted in multiple scientific presentations at the twenty twenty-four Society of Cardiovascular Computed Tomography, SCCT Annual Meeting. We are encouraged by the implementation of our AI cardiac solution at esteemed healthcare systems, along with a continued validation through real-world study of its potential to promote early detection and preventive care of cardiovascular diseases.

Corewell Health has previously reported that in the first full year of implemented HealthCCSng in its electronic medical record system, there was a thirteen-fold increase over the patients reported in the previous two years. At Beilinson Hospital in Israel, incidental coronary artery calcification on the CT scans of immune-mediated inflammatory disease patients, identify and quantify by our AI cardiac solution, was found in over 55% of scanned patients and associated with all-cause mortality and adverse cardiovascular outcome. Traditional cardiovascular risk scoring is difficult in these patients, and Nanox.AI can be a valuable new tool in quantifying these risks. After being installed and implemented, the Jefferson Einstein Hospital HealthCCSng helped identify 757 patients, aged 30 or above, with CAC levels higher than 100 Agatston units.

In a study conducted by Mass Gen Hospital and Brigham and Women's Hospital, HealthCCSng was used to analyze non-contrast chest CT scans of 260 patients who had measurements of lipoprotein(a) as part of a clinical care. A statistically significant correlation was found between level of CAC and this lipoprotein(a), a risk factor for coronary atherosclerosis, suggesting that this approach may be used to identify at-risk patients. As a side note, the lead author of this study, Brittany Weber, was declared as Young Investigator Award winner at the annual meeting as well. Nanox is proud to be associated with dynamic clinical talent that is doing valuable work to support the use of the Nanox.AI solutions to identify potential health risks earlier in the care continuum and helping to drive better overall patient outcomes.

Additionally, the previous agreements we signed for Nanox.AI with Covera Health and Dandelion Health are off to a great start, and the feedback has been very positive thus far. We are continually working to expand our AI footprint and make it accessible to a broader range of customers. Our ongoing innovation and development efforts are focused on enhancing our AI solutions and ensuring they reach and benefit a wider audience. I think I can speak of all of us at Nanox when I say there is a lot to be excited about. Looking ahead to the near future of Nanox, we're always looking to improve and meet market needs. In fact, every dynamic company that plans to expand rapidly over the long term with a new technology needs to constantly refine their offering based on customer feedback, changes in technology, and evolving use case.

Nanox is no different, and we are constantly working on product and technology future developments. I'm very pleased to share, for the first time, that we are developing another Nanox.ARC system called Nanox.ARC X, which we intend to submit, among others, for FDA clearance. Once cleared, it will be marketed along the current system, which will expand our current product offering. At a high level, the Nanox.ARC X is designed to meet market needs of our customers, including hospitals and imaging centers, as well as our clinical partners, who are using the Nanox.ARC to generate data for additional use cases. Listening to the clinical needs is an important step in the ongoing expansion of Nanox solution. Amongst the feature I'm able to share at this time, the Nanox.ARC X will have an even smaller footprint than existing Nanox.ARC systems, enhancing one of our key differentiators.

The new system will also be easy to deploy and use, with an anticipated one-day setup time and plug-and-play functionality. There will also be image enhancement options in the new units, which are currently not available on existing Nanox.ARC systems and future synthetic 2D. Please note that we are planning to share more detail about the future Nanox.ARC system publicly during our next event, which will also be made available via our website. Stay tuned for further details. To touch on our OEM efforts, I can report that we are well underway with the first phase of our development program with the U.S. Government entity, towards completion of a novel tube design, utilizing our emitter and focused on the entity space. We are optimistic we will move towards prototyping tubes the second half of this year.

Regarding our teleradiology services, we are leveraging our USARAD client base on a network of radiologists, as a significant part of our US deployment plan. On the mass production front, we have finalized the second phase of our development with CSEM, resulting in high-yield wafers with functional emitters. We are transitioning to production readiness and confident we have secured a second source of supply for our novel emitters. Varex has completed their initial tubes prototype, utilizing our emitter for testing to be integrated into our new Nanox.ARC. I've covered a lot of ground today, so with that, I'll hand the call over to Ran Daniel to review our financials. Ran?

Ran Daniel (CFO)

Thank you, Erez. We reported a GAAP net loss for the second quarter of 2024 of $13.6 million, which I will refer to as the reported period, compared with a net loss of $17.44 million in the second quarter of 2023, which I'll refer to as the comparable period. The decrease was largely due to a decrease of $2.1 million in the research and development expenses, and a decrease of $1.7 million in the general and administrative expenses, an increase of $0.5 million in the company's financial income, which was mitigated by an increase of $1.2 million in the company's gross loss.

Revenue for the reported period was $2.7 million, and gross loss was $2.9 million on a GAAP basis, compared to a revenue of $2.6 million and a gross loss of $1.7 million on a GAAP basis for the comparable period. Non-GAAP gross loss for the reported period was $0.9 million, as compared to a non-GAAP gross profit of $0.9 million in the comparable period, which represents a gross loss margin of approximately 9% on a non-GAAP basis for the reported period, as compared to a gross profit margin of 34% on a non-GAAP basis in the comparable period.

Revenue from the teleradiology services for both the reported period and comparable period was $2.5 million, with a gross profit of $0.4 million on a GAAP basis in the reported and comparable period, which represents a gross profit margin of approximately 15% on a GAAP basis for the reported and comparable periods. Non-GAAP gross profit of the company's teleradiology services for the reported and comparable periods was $0.9 million, which represents a gross profit margin of approximately 36% on a non-GAAP basis. During the reported period, the company generated revenues through the sales of its AI solutions in the amount of $113,000, as compared to revenue of $53,000 in the comparable period.

During the reported period, the company generated revenues through the sales and deployment of its imaging systems, which amounted to $68,000, with a gross loss of $1.3 million on a GAAP and non-GAAP basis. Those revenues stems from the sale and deployment of the Nanox.ARC systems in the U.S. and the sales of our 2D systems in Africa. Research and development expenses for the reported period were $4.8 million, as compared to $6.9 million in the comparable period. The decrease of $2.1 million was largely due to a decrease of $1.2 million in the salaries and wages, decrease of $0.2 million in share-based compensation...

And a decrease of $0.7 million in expenses that are related to our research and development and regulatory activities. Sales and marketing expenses for the reported and comparable periods were $0.8 million. General and administrative expenses for the reported period were $5.9 million, as compared to $7.6 million in the comparable period. The decrease of $1.7 million was mainly due to a decrease in our legal expenses in the amount of $1.6 million, largely as a result of the finalization of the SEC investigation and the settlement of the class action, and a decrease in the cost of directors' and officers' liability insurance premium in the amount of $0.4 million.

Our non-GAAP net loss attributable to ordinary shares for the reported period was $8.4 million, as compared to a non-GAAP net loss of $9.9 million in the comparable period. The decrease of $1.5 million was mainly due to a decrease in non-GAAP operating expenses of $2.2 million, and an increase of $0.5 million in our non-GAAP interest income, which was offset by a decrease of $1.1 million in our non-GAAP gross profit. Turning to our balance sheet. As of June 30, 2024, we had cash, cash equivalents, restricted deposits, and marketable securities of approximately $64.2 million, and we had a $3.2 million loan from a bank.

We ended the second quarter of 2024 with property and equipment, net, of $44.5 million. As of June 30, 2024, we had approximately 58.5 million shares outstanding. With that, I will hand the call back over to Erez.

Erez Meltzer (CEO)

Thank you, Ran. As we enter the second half of twenty twenty-four, our team remains focused on executing our growth strategy by continuing to commercialize the Nanox.ARC system, as well as integrating Nanox.AI solution into medical workflow. Our vision is to extend Nanox technology within and beyond hospitals, targeting underserved segments like urgent care units and orthopedic clinics. We deliver a seamless scan-to-diagnosis solution, leveraging AI for smarter, more efficient healthcare, with a focus on aligning innovation with clinical needs to enhance patient outcome globally. Nanox is dedicated to accelerating the execution of our commercial infrastructure and future strategic collaborations in the US. Our mission is to provide healthcare practices with a transformative imaging advantage with the Nanox.ARC, an accessible, cost-effective solution that not only provides advanced diagnostic imaging capabilities, but also elevates overall patient care.

Before we conclude our remarks today, I'd like to thank my fellow colleagues, customers, and shareholders for their support of Nanox and our mission. As always, I'm available to meet with you and look forward to sharing the insights of Nanox.ARC X in the upcoming events. With that, operator, let's now open the call for questions. Operator, can you pause for a second? I'd like to make one more comment. It's okay?

Operator (participant)

Yes, sir.

Erez Meltzer (CEO)

Okay. So in addition to everything we said, I'm happy to announce that as just today, we received another FDA clearance for the HealthCCSng version 2.0, which is an upgraded version of advanced AI cardiac solution, empowering physicians in assessment of coronary artery calcium. The HealthCCSng version 2.0, an upgraded version of the cardiac solution, introduces additional zero calcium categorization of coronary calcium, CAC, and generates an exact calcium score with corresponding CAC detection category in output. For us, it is very pleasing to receive further regulatory validation from the FDA for our AI cardiac solution. So, thank you, and with that, now we will open the call for questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Your line is now open.

Jeffrey S. Cohen (Managing Director and Director of Equity Research)

Good morning, Erez and Ran. How are you?

Erez Meltzer (CEO)

Good.

Ran Daniel (CFO)

Good morning.

Erez Meltzer (CEO)

Good morning.

Jeffrey S. Cohen (Managing Director and Director of Equity Research)

I wondered, firstly, could you expand upon a little bit regarding your backlog as far as imaging, when you spoke about 50 on sales and 34 on leads? Could you give us a sense of where these units are? I imagine they're mostly domestic U.S., and how that funnel looks for actually placements and training over the coming quarters.

Erez Meltzer (CEO)

Okay, so I think that we mentioned last time the number of twenty. Right now, the number is was growing to more than triple, as you can imagine, in various stages of deployment. We have a few dozens which are already deployed. A few that are waiting for approval, regulatory, the state approvals, because they are spread over seven states, and the last two states are waiting for approvals. And we believe that the indication that we gave, which fifty of them are probably favorable to be installed, and forty-four in the leads in the beginning of the process, we are getting to the target that we wanted to be by the end of the year, and that's where we are.

Jeffrey S. Cohen (Managing Director and Director of Equity Research)

Okay, got it. And then congratulations on the news today for a calcium score. Could you talk a little bit about these other 510(k) indications, and for general tomo as well, in addition to general chest? And could you talk about the codes associated with them as far as reimbursement at facilities?

Erez Meltzer (CEO)

Okay. Maybe I'll start with the end. With the reimbursement right now, what we speak about the reimbursement is based on the tomo CPT code, which is 76100. And this is the basis for the reimbursement of those that submitted their scans for the reimbursement. We have already received indications from more than two, I think, insurance insurers. And this continues to grow. The numbers that were received are in line with the model that we put together.

So basically right now, it seems that for the clinics that and the sites that the system is installed, the model is profitable. With respect to the 510(k), so in addition to the new one of the CCS or the calcium scoring that we received today, we have submitted the similar. It's in line of what we have indicated in the past, that we are going to submit this year, the additional clinical indications, especially the chest.

We decided that we're going to submit it for whole body, so including the chest, not only, but by the time that we get the this clearance, then even in the U.S., not only in the rest of the world, we are able to scan whole body and basically everything. Bear in mind that in the rest of the world, and especially part of the others, and including the submission to of the CE, we are using the fact that the hardware is hardware ready for whole body, and we are using it to to all all the clinical indications.

Based on this indication I gave in this call today, I gave indication of the spread between the various body anatomies or body parts that were received, and I gave the percentage that we have on the world, on a global basis, and you see, can you see the chest is a major part of them.

Jeffrey S. Cohen (Managing Director and Director of Equity Research)

Got it. And then, one more, if I may. Could you talk a little bit more about the Nanox.ARC X platform and, perhaps its form factor and differences versus the current platform and the intended commercial, presence that you anticipate as compared to the current platform?

Erez Meltzer (CEO)

First of all, we are going to give more details within the next, I would say, end of this quarter and beginning of the next quarter. We are, of course, going to submit it to the FDA. And after the FDA clearance, it will be marketed along the current system, which will expand our current product offering. And we mentioned a few times in the past that the ARC or the first version, 2.2, is not the first product, and definitely not the last. And we have in line a real product roadmap for the future.ARC X is one of them.

We will give more indications, but I think that the idea is to make the Nanox.ARC X available to more specific locations or sites that are more suitable for the spec of this system. We are talking about footprint. We're talking about, first of all, even for us, it's the cost of manufacturing, the return on investment, the features and the beauty of it, that whenever we are going to install it, we're going to enable the older features that are coming with the software and the features to be installed remotely. So we don't, we don't have to send technicians to do it.

It's downloads from the network.

Jeffrey S. Cohen (Managing Director and Director of Equity Research)

Got it. Okay, super. Erez, thanks for taking our questions.

Erez Meltzer (CEO)

Thank you, Jeff.

Operator (participant)

Thank you. Our next question comes from the line of Scott Henry with AGP. Your line is now open.

Scott Henry (Managing Director and Senior Research Analyst)

... Thank you, and good morning or afternoon, depending where you are. Just a couple questions. Congratulations on getting the 510(k) application in for the general use in chest indication. Could you give any thoughts on what you would expect the review timeline to be for that indication? What is it typically in this case, just to get a sense of when we may get final approval?

Erez Meltzer (CEO)

First of all, I hope that I understand the question, so I'll give the answer, and if not, you tell me. Bear in mind that up until now, all the revenues and the scans that were conducted in the U.S. and the few dozens of system which are installed are mainly MSK. MSK, spine, hand, leg, et cetera, and not chest. We all know that the chest is the most common use of X-ray, and especially when we talk about the tomosynthesis. So we expect that once we get the clearance, it will definitely increase the likelihood of sites and the customers to take the ARC.

More than that, in the sites that the system is going to be installed, it will increase the number of scans per day because it will be used for other indications, as stated. Is this what you ask or?

Scott Henry (Managing Director and Senior Research Analyst)

That's very helpful. Thank you. I guess the question I additionally was hoping to get some sense on is how long do you expect the review period to be for that 510(k)?

Erez Meltzer (CEO)

I wish I could tell you. I do hope that it will be faster than the previous processes that other companies, as well as us, experienced since COVID. But I think that the fact that the system itself is already cleared and it will enhance the process. But I cannot even guesstimate the time.

Scott Henry (Managing Director and Senior Research Analyst)

Okay. Well, that's helpful.

Erez Meltzer (CEO)

Or I would say.

Scott Henry (Managing Director and Senior Research Analyst)

I appreciate that.

Erez Meltzer (CEO)

I would say the following: I'm not happy to guesstimate because the last thing I want is that I will give an estimate, and then it will, for some reason, be longer. So, yep, I will be happy to announce that it's cleared once it's cleared, and everyone can imagine that the period that it will take.

Scott Henry (Managing Director and Senior Research Analyst)

Okay, I appreciate that feedback. Second question, you mentioned the installed Nanox.ARC systems in the three chain medical imaging service providers in the US. Have you gotten any feedback from those three chains and how that's working out, and perhaps, you know, what kind of expansion opportunities there would be? It may be too early, but I just wanted to get a sense of how that was going so far.

Erez Meltzer (CEO)

So especially for those of the people who are actually on the call that are here in the beginning, or I would say at the end of 2023 and the beginning when we started the test or the pilot or what we call the soft launch of the ARC in the U.S., we said that we're going in the first quarter or two. We are going to gain feedback from each one of the customers, not only from the chains, but we are getting a lot of feedback from the customers.

Feedback on a clinical basis on the maintenance on the usage on the pattern of the body parts and the anatomies that is being used, the clinical use. So far, this is something that encouraged us to accelerate the installation and the deployment. We received a very good feedback, and I think that what we see is a lot of examples of places that this system is replacing CT. Places where they didn't have in mind to install or to deploy a system, and they decided to do it. So overall, the feedback is very good.

I would say that probably in the next few months, we will get even better visibility on the usage, on the process, on the installation, on the regulatory processes. We will always, as indicated even in today's call, implement them and improve our service and our products accordingly.

Scott Henry (Managing Director and Senior Research Analyst)

Okay, great. Thank you for that feedback. Final question: when we're thinking about Q3 relative to Q2, should we expect... should we expect any seasonality in the U.S.? Is the summer months, do they tend to be a little slower, with a pickup in the fourth quarter? Just trying to get a sense of, what kind of cadence we should expect through the year.

Erez Meltzer (CEO)

Frankly speaking, right now, we don't expect any seasonality, especially due to the fact that we are ramping up our installed base, so we will probably see anyhow better results. But right now, right now, we are not planning or expecting to have any seasonality effect.

Scott Henry (Managing Director and Senior Research Analyst)

Okay, great. Thank you for taking the questions.

Erez Meltzer (CEO)

Thank you.

Operator (participant)

Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Ross Osborn with Cantor Fitzgerald. Your line is now open.

Ross Osborn (Managing Director and Senior Research Analyst)

Hey, guys. Thanks for taking our questions, so starting off, seems like you are at the point of inflection in terms of deployments. With that in mind, can you walk through your current manufacturing capabilities and where your various contract initiatives stand?

Erez Meltzer (CEO)

So, you're right about what you said. In terms of manufacturing, I would say the following: the two chips, we have no problem. We have available chips right now. We were able due to the results of the high-yield wafers that we get from CSEM. We have two suppliers, and I think that this is not an issue. In terms of the tubes, we have already the tubes that are coming from Korea. We have the tubes that are coming from the plant in Europe. And last but not least, Varex has completed their initial tube prototype utilizing our emitter, and this is for testing.

So I hope that it will be integrated into our new Nanox.ARC system shortly, and it will be part of the available production. In terms of the production of the assembly of the system, we have made the preparations in the site in Israel that we're moving forward, and we've increased the capacity of the manufacturing to enable what is needed in the next few quarters. And the low-cost manufacturing arrangement that we have will enable us to ramp up next year even higher than what we are currently doing. So right now, I would say that it seems to be in line of what is needed for the next few quarters.

Ross Osborn (Managing Director and Senior Research Analyst)

Thank you.

Erez Meltzer (CEO)

Are working on the next ramp up for twenty twenty-five, to be announced-

Ross Osborn (Managing Director and Senior Research Analyst)

Got it.

Erez Meltzer (CEO)

Later.

Ross Osborn (Managing Director and Senior Research Analyst)

Perfect. Thank you. And then following up on my previous question, would you remind us, how large your U.S. sales force is today, and then any plans for adding to the team?

Erez Meltzer (CEO)

So, right now we actually work with, I would say, it's about 10 people all together. And if I add the independent agents, then I think that we are right now at around 15. We are expecting to grow them to the number of 30 in the foreseeable future.

Ross Osborn (Managing Director and Senior Research Analyst)

Great. And then last one for us,

Erez Meltzer (CEO)

This is what I said is that that's what we anticipate for 2025, to be around 30 to 40.

Ross Osborn (Managing Director and Senior Research Analyst)

Got it. Got it. Thank you. And then lastly, just in anticipation of CE mark approval, would you walk us through your commercialization plan in Europe and other related geographies in terms of what type of medical centers you will be targeting, if you'll build out your own sales force or leverage a distributor there, and lastly, what the reimbursement environment looks like?

Erez Meltzer (CEO)

Okay. So, with respect to the rest of the world, first of all, there are a few countries that, if you remember, we have agreements that were signed in the past, and we are going to deploy them once the clearance in these countries are expected to be received. So, I mentioned today, one of them, Mexico, is really coming very shortly. I will be there next month to visit the places that they are planning to install the ARC. So this is one. We were talking about another one or two countries in Latin America. In terms of Europe, we are waiting for the CE approval, as indicated previously, and we are really in the final process of the CE approval.

Once we get the CE, so all the countries that were part of the agreements that we signed, like, like Australia, like New Zealand, like, Spain, we're going to use them. In each one of them, it's gonna be the distributors that are going to do the work. If you remember, I mentioned about a year ago that, right now, only in the U.S., Israel, and the U.K., we are planning to have our own people, and in the rest of the world, we are planning to have distributors. We are, right now already in the last quarter and this quarter, in touch with these distributors in order to ensure that we have a plan. Our people visited already a few locations in each one of...

Not in each, but in most of these countries. Right now we are talking in Europe and in Mexico, we are talking about medium to large medical centers.