VRAY (2019 - Q4)

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2019 ViewRay Inc. Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Michaella Gallina, Please go ahead. Michaell

Thank you, Sarah. Good afternoon, everyone and welcome to ViewRay’s fourth quarter 2019 financial results conference call. Joining me today is Scott Drake, our President and Chief Executive Officer. Earlier today, ViewRay issued a press release and presentation for today's call. The presentation can be viewed live on our webcast or downloaded from the Financial Events and Webinar portion of our Investor Relations site at www.investors.viewray.com. Today's call is being broadcast and webcast live and a replay will be available on our website for 14 days. Before we begin, I would like to caution listeners that comments made by management during this call may include forward-looking statements within the meaning of Federal Securities Laws. These statements involve material risks and uncertainties and actual results could differ from those projected in any forward-looking statements due to numerous factors. For a discussion of these risks and uncertainties, please see ViewRay’s current and future reports filed with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2019 as well as the company's other filings with the SEC. Furthermore, the content of this conference call contains time-sensitive information accurate only as of today March 12, 2020. ViewRay undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I will now turn the call over to Scott.

Thank you, Michaella. Good afternoon, everyone and thanks for joining our call. Today, we will provide our 2020 guidance and discuss the impact of coronavirus. We will review our company's mission and the progress we have made on this path. We will share roadmaps for our clinical, economic and strategic value propositions, review our financials and then we look forward to answering your questions. As Michaella shared, there is an investor presentation on our website that we will be referring to on this call. Please either go to our website to download or view the slides on our webcast. Let me start with a comment on coronavirus as it is top of mind for our team, customers and investors. We are actively monitoring and scenario planning. We intend to balance the need to drive our business forward while preserving capital in this time of uncertainty. We want to stress that even though we have a fortified balance sheet, we are highly mindful of the ongoing need to deploy resources thoughtfully should the situation prolong. Where we are today we do not intend to go to public markets in 2020 or 2021. Our aspirational goal is to be able to sustain for 2022. Our ability to achieve these goals will be dependent on how our business evolves. I'll provide more detail on guidance in just a moment. We are now in the second full year with the company and believe we have built a solid foundation. Our mission is clear, to treat and improve what others can't. Clinical interest in MRIdian is high and growing. The ability to track tumors in soft tissues in real time combined with the ability to safely deliver ablative doses in five or fewer fractions is unique valuable therapy that patients need and customers' desire. We have now demonstrated MRIdian's clinical use in 8000 patients and its merits have been documented in 100s of peer review journals and abstracts. We have demonstrated significant capability improvements across our operations and installations and now have 34 systems in the market. We have also exerted effort around training customers to quickly leverage the full capability set of MRIdian. A recent example is Munich treating several patients per day right out of the gate. In the first several weeks post commissioning, all but one patient was treated via high dose SBRT in five or fewer fractions. The site shared with us that the majority of these patients would not have been treated through a comparable system on another system. One patient's lung tumor was successfully treated despite having previously lost his contralateral lung. This type of high risk would not typically be treated by radiation as any damage to the lungs could cause significant complications. Clinically and operationally, we are making big strides and progress will continue. We have shared that our most important metric in the near-term is orders. This remains true, but we recognize this is a lagging indicator. On this call we will provide market vetted leading indicators that we believe will drive therapy adoption. We will breakdown this voice of market work into our clinical, strategic and economic value propositions. Let's first discuss 2020 guidance. As you'll recall, when we raised capital in December we shared that we did not expect our backlog to accelerate in the near-term. You can see on Slide 4 we expect 2020 revenue to be in the range of $58 million to $95 million and cash used to be in the range of $60 million to $80 million. Let me provide some context on this guidance. Most notably there is uncertainty around coronavirus in the near-term. Our commercial and operational activities are being impacted today and maybe further impacted depending how the situation unfolds. We have nine plant installations in 2020 in regions that have travel restrictions currently in place. We cannot predict when on hold projects will resume and when the other plant installations will commence. We are monitoring the situation very carefully and following CDC, State Department and other sources daily. Teammate safety is a top priority and the full impact of coronavirus on 2020 is simply unknown. As of today we have just over two weeks left in Q1. We recognized approximately $10 million in revenue. We have one additional system that is scheduled to ship this month to an affected area which could be delayed. We have received two MRIdian orders thus far in Q1. As previously shared, the situation is impacting our commercial activities. We have not had any order cancelations due to coronavirus, but the situation is inhibiting our ability to conduct business. For example, ASTRO and RSS [ph] just postponed their conferences and several key accounts are no longer allowing site visits and many hospitals are limiting access. As we look beyond the coronavirus uncertainty, we are confident in the capabilities we have built and believe we are well-positioned relative to industry trends. The current treatment paradigm lies primarily in the form of IMRT therapy. While many centers utilize SBRT in some form, they treat a relatively small percentage of patients in this way due to the limitations of conventional systems. Advanced MRIdian centers treat with high-dose SBRT approximately 75% to 100% of the time. Customer feedback, bundled payments, and clinical data are demonstrating the need for SBRT capable machines. Our customer interactions and market survey work indicate that customers desire to treat with high doses in fewer fractions. We are very well-positioned for these trends. The limitations of conventional technology are nontrivial. Evidence demonstrates that 75 to 100 grade biological effective dose or BED10 is an ablative dose that drives more favorable outcomes, yet coalitions balance the need for ablative doses and tumor coverage versus the risk of toxicity to organs and healthy tissues at risk. Conventional systems limit the ability to deliver ablative doses while protecting healthy tissue. These limitations stand in stark contrast to the capabilities of MRIdian which represents a no compromise solution. Real-time soft tissue imaging enables real-time adaptation which allows for tighter treatment markets. And real-time tracking enables our automatic beam gating. The aggregate effect of these features provides the confidence to deliver ablative doses and reduce treatment margins to avoid toxicity. Again, MRIdian offers a no compromise solution that is differentiated in the market. We intend to rise above the noise and misinformation in the industry by leading with clinical proof. We are working to prove that good enough is not good enough. In other large segments of the medtech landscape, definitive clinical data dictates therapy. Our goal is to move the radiation oncology space via prospective, randomized data that will separate MRIdian in the market. Key opinion leaders believe that delivering ablative doses while preserving healthy tissue is the future of this space. As such MRIdian is the future. Take for example tumor margins and treatment volumes. On the right is a market-leading CT LINAC treatment plan and on the left is MRIdian. Both plans are overlaid on an MRI image for comparison. On the right, you see conventional treatment margins of 15 to 30 mm while MRIdian has margins of 3 to 5 mm. In a reasonably sized tumor this would result in approximately 50% less treatment volume on MRIdian. In simple terms think of a tumor that is the size of a golf ball. If just 10 mm of margin is added to create a conventional treatment plan for motion that cannot be accounted for, the plan target volume increases to the size of a tennis ball. The larger the treatment volume, the larger the risk to healthy tissues. Conventional LINAC simply cannot account for the dynamic movement of the tumor and organs at risk and thus are frequently handcuffed to treating in low doses. MRIdian however, gives clinicians the confidence to escalate dose to the full tumor even in the presence of tumor and organ motion. I will now share context of the clinical work that has been done on MRIdian, the clinical data it has yielded, and how we intend to build a comprehensive compendium of compelling clinical proof. MRIdian's recorded data is a strong signal and has led our customers to do deeper work. Let me share a few notable samples from just this past month. Washington University had a paper accepted in the Red Journal reporting results of a prospective clinical trial on single-dose treatment for breast cancer after lumpectomy. The paper highlighted APBI treatment time reductions from 10 fractions down to a single treatment on MRIdian enabled because of tight treatment margins. As the authors state, MRIdian "provides a convenient, less toxic and more feasible option for breast cancer patients post surgery." Another qualification from the Lancet Oncology Journal identified MR guided therapy as a "practice changing technology that allows for precise delivery of high dose in liver and elsewhere." Lastly, AUMC's publication in the Red Journal demonstrated a large series of complex high risk lung cancer patients treated with high-dose SBRT on MRIdian with low resulting toxicity. The breadth and clarity of this clinical data has led to deeper work in understanding the importance of BED 10 or delivering ablative doses while maintaining local control, preserving healthy tissue, reducing toxicity, and improving quality of life. On Slide 9, you can see the demonstration of safe ablative doses on MRIdian with significantly lower toxicity than conventional technology. In pancreas, one of the most difficult cancers to treat, we report 0 grade 3 toxicity while conventional therapy reports over 12%. Similarly, in Oligomet we report 0 grade 3 toxicity while conventional therapy reports up to 29%. The data is demonstrated again in liver and again in central lung. A competitor often says that they can do 95% of what we can do, but evidence demonstrates a different story. Good enough is not good enough. Our clinicians value the combination of our features that enable safe ablative doses. Dr. Chuong recently shared quote "some may prescribe very high dose, but allows the target coverage to be potentially horribly low. This is how toxicity might be mitigated, but on the other hand they are not giving ablative doses to most or all of the tumor in some instances. I am able to treat with ablative doses to all or nearly all of the tumor with MRIdian and still cause almost no major toxicity." Dr. Chuong captures the essence of ViewRay. Turning to Slide 11 for our clinical roadmap. We have 26 clinical collaborators with more than 30 physician initiated projects in 2020 alone, all pointed at the power of our technology to reduce toxicity and improve outcomes. Building upon existing data and these projects, our goal is to open several multicenter prospective Phase 2 and Phase 3 trials that prove what others can't, safely delivering ablative doses while reducing toxicity in such areas as pancreas, central lung, prostate, Oligomets and liver. Included in this plan are head-to-head studies, quality-of-life measures, cost-effectiveness analyses, feasibility of new indications and more. We are in the process of working with a strategic partner to build out this roadmap for short-term evidence and longer-term follow-up intended to definitively position MRIdian as the treatment of choice. Our strategy incorporates ubiquitous cancers such as breast and prostate and also includes more difficult to treat cancers that I've highlighted. We believe our capabilities, combined with definitive clinical data, will enable us to change and improve the paradigm of care. As we pursue additional clinical evidence, we intend to augment proof of the strategic and economic value of MRIdian. As it stands today, MRIdian provides added economic and strategic benefits to cancer programs. Customers share that they are treating many patients that would be untreatable on other systems. Additionally, shorter courses of treatment and fewer side effects drive patients to travel for therapy. Between the strategic differentiation and operational efficiencies of our system customers share that their [ph] patients due to MRIdian. Based on customer feedback, we believe sites may add approximately 80 new patients to their program over the course of the year. This equates to real economic value to our customers and clinical value to their patients. In 2020 we intend to develop more definitive economic proof to share with our customers. Let's highlight an example of the efficiency and economic value of MRIdian. On Slide 13 you can see the throughput and economic benefits of being able to treat prostate with high-dose SBRT. Traditional IMRT treatments take between 28 and 44 fractions. If each fraction takes 15 minutes, the total time the patient is on the table is between 420 and 660 minutes. The majority of our customers treat in 5 fractions including two adaptive treatments that require the patient to be on the table only 180 minutes on average, a potential increase in patient throughput of 2.3 to 3.7 times that of a conventional system. This is to say nothing about how disruptive 40 versus 5 treatments are to the patient's life. Turning to Slide 14. Customer feedback is clear in terms of what will further improve our economic positioning to win in the marketplace. First, customers are asking us to simplify workflow and reduce treatment times. Our goal is to reach sub 30 minute fractions in breast and in prostate. This timeframe is at the low-end of how competitors deliver their less sophisticated version of SBRT. Second, we are working with Elekta on appropriate higher reimbursement for MR guided technology in the U.S., Japan and select European countries. Third, we are offering customers alternative methods of acquiring MRIdian. We will reduce our cost of goods by over $1 million dollars in the next three years to enhance our flexibility on this front. We believe the combination of these efforts will drive economic value for our customers. We are seeing positive early signs of moving in the market as our clinical, strategic and economic value propositions resonate with customers. In Florida, in the Northeast U.S. we have clusters of accounts due to competitive pressures that MRIdian programs have built. Since our commercial team was up and running in Q2 of last year, we've added several hundred new prospects to our pipeline. The sales cycle is likely in many of these accounts are in the early stages of our process. In summary, on Slide 15, we have vetted what it will take to move the market to MRIdian. We have clarity on our clinical, strategic and economic value propositions to drive therapy adoption. As highlighted, we will lead the way with clinical data as we work to improve the paradigm of care. At the same time we are actively monitoring scenario planning and working to mitigate the impact of coronavirus. We intend to balance the need to drive our business forward while preserving capital in this time of uncertainty. As I shared earlier, we do not intend to go to the public markets in 2020 or 2021. Our aspirational goal is to be able to say the same for 2022, but this will be dependent on how our business evolves. We are obviously in a highly dynamic situation and we are focused on executing with excellence on the things we control. 2020 performance is dependent upon our ability to travel and gain access to hospitals. Beyond this year we are focused on executing on the roadmaps we have highlighted designed to yield steady growth and value creation going forward. Our team is highly motivated to deliver on behalf of patients and shareholders. With that, I'll turn it over to Michaella.

Thank you, Scott. For the fiscal quarter ended December 31, 2019 total revenue was $16.5 million primarily from three revenue units including one system upgrade as compared to $20.7 million and four revenue units including one system upgrade in the same period last year. Total cost of revenue was $20.4 million compared to $20.1 million in the same period last year. Total gross profit was a loss of $3.9 million compared to a profit of $0.6 million over the same period. Total operating expenses were $28.4 million as compared to $22.1 million in the same period last year. Net loss for the quarter was $35.2 million or $0.31 per share compared to $16.7 million or $0.17 per share for the same period last year. Turning now to orders and backlog. In the fourth quarter of 2019 we received four new orders for MRIdian systems totaling approximately $21 million compared to eight new orders totaling approximately $49 million in the same period last year. As of December 31, 2019, our backlog showed approximately $227 million as compared to approximately $212 million as of December 31, 2018. Two systems were removed from the backlog in Q4 and in total four systems were removed from the backlog in 2019. Regarding cash, excluding our December offering, we used approximately $3 million in the quarter. As compared to prior quarters, the low burn rate was the result of effectively managing working capital aided by heavy cash collections quarter as well as managing our cash based operating expenses. Lastly, our guidance for 2020 is for revenue to be in the range of $58 million to $95 million and cash used to be in the range of $60 million to $80 million. As Scott shared, we are actively monitoring the coronavirus situation and we intend to balance the need to drive our business forward with preserving capital in this time of uncertainty. Where we sit today, we do not intend to go to the public markets in 2020 or 2021. And our aspirational goal is to be able to say the same for 2022. Our ability to achieve these goals will be dependent on how the business evolves. And with that, we will open up the line for questions.

Thank you. [Operator Instructions] Our first question comes from Chris Pasquale of Guggenheim. Your line is open.

Hi, thanks and Scott I appreciate all of the detail around the plans for this year. I wanted to ask a little about the first quarter, because we are almost here in mid March, so I just wanted to make sure I heard you right. So $10 million record non-revenue recognized and then you said you had one additional system where there was maybe a little bit up in the air about whether that would be delivered on time?

That's correct, Chris.

Okay. And could you just talk a little bit about how the coronavirus situation is impacting the commercial side of the business? Beyond potentially getting in the way of instantly of trouble getting people to the right areas are you seeing hospitals pullback in terms of orders or focusing on capital acquisitions because they're distracted by other things that are going on?

Yes, I think the – what I can tell you definitively Chris is that hospitals have coronavirus on very top of their mind. We have had virtually all of our site visit sites shutdown to any visitors and accounts are frequently shutdown to any kind of commercial activity at this point. It's difficult to tell how long that persists and when things will free up. So it's difficult to quantify it for you here. We do have people in the U.S. and various countries around the world right now conducting commercial activity, but it's getting increasingly difficult. And the situation is remarkably fluid, as you see happening, not only in healthcare, but in every part of public life. So difficult to call it. Definitely our customers are distracted, but we have ongoing activity at this point in time.

That's helpful. And then just last one from me on the guidance, the very wide range there. Does the bottom of the range assume that those nine planned installations that are in areas that are potentially problematic because of the travel restrictions do not get installed and the high end what accounts for that wide range, maybe you could just help us with the assumptions there?

Yes, Chris this is something as you would imagine, we spend a lot of time on. If you go back to the December timeframe, when we raised capital, we were very clear with investors at that point in time, that we did not anticipate that our backlog would accelerate in the near term. And that's what you see in the high end of our guidance range. On the low end of the range to your point, we are contemplating not installing the systems that we've highlighted, but frankly, there is risk to systems that we intend to and anticipate installing this year. It's a very fluid environment. We are giving the Street everything that we can here. So investors have great transparency into our operations. But we do so with the caveat that the situation is changing in a very dynamic way, literally, day to day.

Thanks, Scott.

Of course.

Thank you. Our next question comes from Matt O'Brien of Piper Sandler. Your line is open.

Hi this is Jason on for Matt. Hi Scott, I appreciate the quarter to-date color there on order and revenue, but just wondering if you can speak to – maybe the state of the existing conversations or the conversations that were happening prior to the travel restrictions really shutting down a lot of activity. And whether those conversations developing in a bigger way with non-academic institutions and then has there been any greater traction with multi-unit orders?

Yes, I would say Jason that largely speaking, and I referred to it in prepared remarks, the commercial pipeline continues to get larger and larger and interest in MRIdian is growing. I think we're doing a better job of telling our clinical strategic and economic value proposition story. I think people are seeing how we're performing, even accounts I mean, I've highlighted previously, the work that our team has done at Moffitt, at Dana-Farber. I mentioned Munich on the call. There's another customer that I learned about this morning, that has been treating patients just for two months, and they've already treated give or take 50 patients. They're ahead of their pro forma. They're thrilled with the clinical results, and they're taking patients from competitive hospitals. This is a for profit provider. So these are the kinds of stories that are getting out there and that market pressure that we anticipate is happening in certain instances. So I would say globally prior to the unrest of the coronavirus we are very pleased with the work that our commercial team is doing, telling our value propositions and that pipeline is growing nicely. So hopefully that's responsive to the prior part of your question. Certainly included in that are multi-system deals and deals across academic centers, community hospitals, freestanding centers. I think we're getting smarter and smarter how to sell to freestanding centers. And I would say, overall pleased with the progress of the pipeline. We're looking forward to the uncertainty around APM being lifted. And I think our team is, generally speaking, just getting better and better.

All right, that's really helpful. And then I wanted to touch on maybe the elective collaboration there and just the lobbying for reimbursement that you'll be doing together. I mean, how should we be thinking about how this process develops? Are there any timelines that you're going to talk about just yet or are you at a point where you can discuss what you expect CMS is going to be looking for before granting this higher reimbursement?

Well, I would say a couple of things broadly. Number one, the collaboration with Elekta is going on in a very positive way. We're pleased with where we are both there and with Medtronic candidly on two different fronts. I recognize your question here is more on the reimbursement front. I don't have anything more specific to share in terms of timeframe. It's going to take us a bit for our efforts to bear fruit. But I would tell you, you see the depth and breadth of the clinical work that has been done on MRIdian. 30 new physician initiated studies being kicked off in 2020 and the Phase 2 and Phase 3 studies that we highlighted on the call, that kind of information, that kind of data is not only going to help us commercially, but it's going to help us from a reimbursement perspective. So hopefully you’ll see how the whole strategy knits together here.

Great, thank you.

Thank you.

Thank you. Our next question comes from Anthony Petrone of Jefferies. Your line is open.

Hi, this is Brianna on for Anthony. I just have a couple of questions. So on the install cycle, how many projects are being delayed and then what is the average length of time to complete these projects? And then just more of the capital allocation of hospitals, are hospitals talking about the capital budgets in light of coronavirus?

So in terms of the active installations, I'm going to let Shar take some of the detail. But right now, we have two that are paused that were active installations. We have seven others in travel restricted areas. Generally speaking, we have the capability currently to do somewhere in the four to six range concurrently. So hopefully that gives you a little bit of context. And our installations, when it's our team in control are taking anywhere in the 45 to 60-day timeframe to complete the installation itself. Shar, any color that you want to add?

Yes, I think to what Scott's point was earlier as far as fluidity in the situation, we're literally monitoring daily with the various hospitals and which I'll say travel restricted teammates from various countries can and cannot go in there. So that's just been kind of moving things around to make sure we can address the need. And that's where either they're having construction delays in certain cases, or they're just saying, look, let's just postpone the installation for a certain time period because of coronavirus and the priorities of the hospital. So there's not an exact timeframe on each one of these delays. We're hoping we'll get back to business in more of a normal course in the short-term. And if we do in the short term, I think that there is good probability that many of these projects are completed in a reasonable timeframe. If coronavirus does extend further, then I think it just puts it at risk for this calendar year as well, we'll reach some capacity constraints. So I think it's a balance there right now that we're trying to day by day assess and manage.

Okay, thank you. And then my last question, we noticed that you have a new 13D filer. Can you walk through how the dialogue is trending between the company and this new filer?

Yes, I'd be happy to. I've known these investors for a considerable amount of time across multiple different companies. The dialogue is highly constructive and welcome. We are pretty confidential about conversations that we have with any individual investor. So I wouldn't go any deeper than that. But I would say highly constructive and we welcome their entree into the stock and we welcome the dialogue between us and them.

Okay, thank you so much.

Thank you.

Thank you. Our next question comes from Craig Bijou of Cantor Fitzgerald. Your line is open.

Good afternoon, guys. Thanks for taking the question. Let me start just with the clarification on the nine plans installations, are those all outside the U.S.? And if that is the case, then I guess any more color on how to think about, the potential impact to installations in the U.S. as corona spreads here?

Yes Craig, thank you. There are of the nine, seven of them are in Asia, two of them are in Italy. And the real question is, when are they going to allow our team to have access to the accounts? As I mentioned, a couple of them were ongoing, and have been paused at the current point in time. As I mentioned, to Chris's question earlier, the situation is obviously very fluid. There are some positive signs in China. At the moment, we've not restarted anything there. But if we get good news, that would be just wonderful. Italy seems to be a little bit more challenged at the moment. And we'll be tracking, obviously very closely and as Shar mentioned literally on a daily basis, what we're able to do. Shar, would you add anything to that?

Yes, that's exactly right. So vast majority of the ones that are at risk are in Asia Pacific. Again, there is hospitals in the U.S. that are putting various restrictions on, but we're moving forward with the installations we have right now. So it has not stopped anything as of this moment.

Got it, that's helpful, guys, thank you. Maybe secondly, wanted to ask – you do have a bit of a range for your cash burn as well 60 to 80, so maybe just trying to understand what could put you at either side of the range. And then what happens if beyond those nine system installations, what happens if you see some other pressure? How does that impact your cash burn in 2020?

Yes, I think the most intense part of your question, hopefully I'm receiving it correctly, Craig would be around if we’re at the low end of our range, I would say we're at the higher end of our cash burn. And in that instance, if you contrast what we did last year in 2019, we burned about $80 million doing 15 revenue units. So we would have a similar burn on five fewer revenue units. It gives you a sense of the levers that we’re already pulling and the modeling and scenario planning that we're doing. To your point, could it get worse? It could indeed, but that situation that we're highlighting at the low end is a relatively negative situation. But again, I'll just repeat, it is very fluid and changing literally on a daily basis. If we were fortunate, and we were at the higher end of the range from a revenue and installation standpoint, then clearly we would be at the lower end of the cash burn range conversely there. Hopefully that is responsive to your question.

No, that's very helpful. Thanks for taking the questions guys.

Of course. Thank you.

Thank you. Our next question comes from Suraj Kalia of Oppenheimer and Company. Your line is open.

Good afternoon, everyone. Thanks for taking my questions.

Good afternoon Suraj.

So Scott, I do appreciate, I know it's a very tough environment for everyone. And I think you guys are one of the few companies right now giving us the current impact of coronavirus and on business ops so I appreciate it. Scott, let me belabor one of the things that people have already asked. The nine units, two Italy, seven Asia, got it, understood. The guidance seems to be on the low-end 10 installs, and on the upper end 19 installs, so that we get it. Specifically on the lower end on the 10 installs, let's say two have been done in this quarter, the remaining eight that have factored into the guidance, how many of those a U.S. based, how many are O.U.S. based? I guess I'm just trying to understand, we're all kind of waving our hands right now trying to figure out, with this whole coronavirus thing. What gives you the confidence on the low end and could coronavirus influence that even more?

Yes, Suraj. This is Shar. I'll try to answer that. I'd say of the affected or overall of the system, a decent number that has been historically our revenue as well, is international. So from the ones that you're saying are affected those and then there's some additional systems that are international on top of those. Again, we're feeling confident on some of those. We do have international teammates. So it's not all U.S. teammates that would be doing the installations. We have teams in Europe and we have teams in the U.S. So we think from a local perspective, as long as there is not a stoppage of personnel entering hospitals, I think we can assemble teams that can get into most hospitals. Again, there's always a risk depending on what kind of restrictions a specific hospital puts in. But I think to your point, overall, we're feeling at this point, confident that those other units will move forward. But again, it might change depending on what level of restrictions either in U.S. hospitals or other European hospitals may take place.

And then Suraj, I just want to make sure I heard your numbers correctly. Let me chime in here really quick on what we're projecting at the low and high-end. At the low-end, we're talking about eight installs and two upgrades and at the high-end, 12 installs and three upgrades. You know, normally we're not so granular, but we feel that this time is such that we've got to give investors everything that we can, so they can make appropriate decisions and think about our operations in the right way. Hopefully that's helpful to you.

So forgive me again, Scott. The 12 installs on the upper-end plus X number of upgrades. So the math, how do we get to $95 million? Sorry, I'm a little lost because in Q4, there were four unit orders for $21 million. So it seems like ASPs are slightly softer just parlay all of this for me and because I'm having a difficult time connecting the dots here.

Yes, I think I think ASP is pretty similar. And then you on top of the ASP with the installations, you've got service growing a bit this year. And the upgrades on top of it were awfully the offline kind of walk you through more of a detailed version.

Fair enough. And finally Scott, the reimbursement you are working with Elekta, is that outside the confines of an APM or any additional color there would be greatly appreciated. Thank you for taking my question.

Yes, happy to. So Suraj, the APM thanks for asking that. The APM right now is with OMB. I think some investors may be aware of that, others less so and we're hoping for a 2020 rule. We're not sure with coronavirus how engaged they might be on this particular issue, so probably some fluidity on that front. But I believe the reimbursement efforts that we're engaged in would be in both in the U.S. market and in the international markets. Whether or not it would impact the APM I doubt it at this point, given how much work has already been done there. But I think it would apply to the vast majority of patients treated if in fact we were successful with those efforts in the U.S. market.

Thank you. [Operator Instructions] Our next question comes from Difei Yang of Mizuho Securities. Your line is open.

Hi, this is Dan [indiscernible] on for Difei. Thanks for taking my questions.

Hi, Dan.

I guess to start, just to start, I know your Chief Commercial Officer left in January, I was just wondering how his responsibilities have been split up and if you have enacted any strategic changes since then?

Yes, I would say the - we essentially elevated the person who was running the U.S. market for us, U.S. sales and marketing to take on global responsibility. So in essence, it was just a position elimination there. And we're pleased with how things are going commercially, as I mentioned in response to a previous question. So hopefully that answers your question.

Okay, thanks. That's helpful. And then just one more. The customers that you're hoping to get in this year and install it, have you received any sort of timeline from them on when they think you could be in there or is it just so fluid, they are not committing to anything?

No, we have very frequent contact. The installation process from the permitting and planning process that our customers go through to vault preparation to the installation itself, it is a very high touch kind of activity that we program manage now with our customers. So there is very frequent contact, and in the instances where there is not kind of the coronavirus effect if you will, there is activity going on as we speak. So it's not as if there's everything is frozen by any means at all.

Okay, thanks.

Of course.

Thank you. Our next question comes from Andrew D’Silve of B. Riley FBR. Your line is open.

Hey, good afternoon. Thanks for taking my question. And just let me know any of this earlier I was jumping between calls so no need to repeat yourself. I'll just read the transcript. But as far as the APM goes, has there been any narrowing from CMS related to the timeline? I know they were talking about 2022 fairly recently as a more likely date than sometime this year. Any color there will be somewhat useful as we start to think about your adoption trends.

Yes, Andy, thanks for the question. The APM is currently at OMB as we speak. So we don't have any reason to believe that things would be delayed beyond 2020 at this particular point in time, we've got the big caveat there. That coronavirus could be preoccupying them. But our best information is, number one, it's at OMB, and number two, we're thinking and hoping there's something coming here this calendar year.

Okay, okay, fair enough. And then, you know, as we think about just broader adoption and how to patch your backlog over time, is maybe one of the reasons just year-over-year growth has been fairly this flat from a new order standpoint, primarily because of pricing of the product? And then as it relates to the four units that you had new orders for, in the fourth quarter, you obviously previously mentioned that it looked like the ASPs have declined below more normalized levels. I'm just curious how much of that reduction in ASP is tied to just maybe a strategy or related to you need to get pricing a little bit closer to some of the other offerings in the market?

Yes, so let me try to address that Andy a fair amount to your thoughtful question here. I think there are several things that are in play as it relates to orders. First of all, I would share and I think you see this with our friends that also have an MR Guided System, we are in the early days of commercializing what I believe and our customers believe is a paradigm shift in radiation oncology and that's a non-trivial thing to do. And to move these kinds of markets often takes time. In our instance, specifically, I would ask everyone to recall that we really seeded our U.S. field team in Q2 of last year. So they've been in territory less than a full year at this point. And our international team is maturing nicely, but that effort was a bit behind our U.S. team. So I would put that out there number one. Number two, I think there has been reimbursement uncertainty, which we have been saying I think pretty clearly over time, that that's not helpful to us. I believe fervently that the APM will be a tailwind. We highlighted for you on the call today and I recognized you may not have seen it, but take a look at the slide that shows how long it takes to treat a prostate patient via IMRT versus high dose SBRT on MRIdian, it is a dramatic difference. And we're beginning to have a bit more traction in freestanding centers as they look at the efficiency of MRIdian in current form and we anticipate being able to do better with that. And the final thing that I would share is I think we get past clinical interest with our customers pretty quickly frankly, and relatively easily. Because word is just getting out there with 8000 patients treated and hundreds of peer reviewed journals and abstracts on the utility of our system and even these brand new systems that are getting up to speed on track to treat 300 patients in their first year, these stories are non-trivial. But what we're focused on now in addition to building that clinical pipeline of data is telling an economic value proposition story that is clearer and working on the economic value proposition through simplified work flow, through shortening treatment times, and increasing the alternatives for how our customers can acquire this system. So, lots to your question, lots to my answer, happy for a follow up there, but hopefully that gives you a sense for where we're at.

Yes, that was great and just last question from me. For a good six months or so, you've really been talking about the cadence going forward isn't going to be too different, at least in the near term as it has been maybe over the last 12 months. And so, sitting where I'm at, it becomes a little bit difficult to look at metrics to chart success if it's fairly flat. Can you maybe outline what you're looking at internally, that gives you confidence in the business? And then if you can get additional color on how gross margins should shake out throughout the year, that'd be useful too? And that's all from me.

Yes, happy to share there, Andy. And again, I think some of this we may have covered, but just to give you high level, we detailed - we recognized that we've been really clear with the Street, saying that orders is the most important metric for us. That absolutely remains the case. And I think will be the case for a long period of time. But we also recognized that that's a lagging indicator. So what we shared on our call today is kind of detail around our clinical roadmap, around the strategic value proposition roadmap and also on the economic value proposition roadmap, and how we're gaining traction there. We also shared in our prepared remarks that 12 months ago, give or take, the number of customers that we had in our pipeline was in the double-digits. Now it's in the hundreds and we track in a very precise way, where they are in each stage of our process. So we look at that literally. I look at it on a weekly basis. Our commercial team is obviously looking at it on a daily basis. So we have a very clear eyed view of where that pipeline is. And those are the things that give me confidence along with just customer feedback that I've alluded to in your prior question.

Okay, great. Hey, honestly, best of luck going forward in 2020.

Thanks, Andy.

Thank you. I'm showing no further questions at this time. I'd like to turn the conference back over to Scott Drake for any closing remarks.

Thank you very much operator. Thanks for joining our call everyone and we'll look forward to updating you in another quarter.

Ladies and gentlemen, this does conclude today's conference. Thank you for participating. You may now disconnect.