PRO MEDICUS LIMITED — Call Transcript 2004

Nov 28, 2004

Attention ASX Company Announcements Platform Lodgement of Open Briefing

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Pro Medicus Limited 450 Swan Street Richmond, Victoria 3121

Date of lodgement: 29-Nov-2004

Title: Open Briefing, Pro Medicus, CEO on Canadian Deal

Record of interview:

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Pro Medicus Limited today announced an agreement with Canadian radiology IT services company AltaPACS under which you'll supply your full suite of practice management and digital integration software across 20 of the sites they service. How does this deal fit in with your recently signed agreement with Agfa HealthCare, exclusively licencing your software to Agfa in the North American private radiology market?

CEO Sam Hupert

Agfa introduced us to AltaPACS early on in the process of discussing our opportunities in North America. Because of the timing of the negotiations, and the importance of getting such a key reference customer, we agreed with Agfa that we'd build this deal directly with the client so it's on top of and separate to the Agfa agreement.

As a result, all the revenue from this agreement will come directly to Pro Medicus and will be in addition to the \$10 million minimum we have said we'll receive under our Agfa North America deal.

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Can you comment on your expected revenue from the Canadian agreement and its timing? How will the revenue be structured and how does this differ from the revenue you'll receive under the Agfa agreement?

CEO Sam Hupert

As we've announced, we'll receive revenue in excess of CA\$2 million for licences and upfront services for installing the system. The group requires an installation by January I so we'll be putting the system into a designated site by mid to end December this year. Based on successful completion of that first site we'll then do the remaining 20 or so sites within the first half of next calendar year. We anticipate completion by June 30, 2005. So we'll receive some of the revenue at the end of this financial half, being for the first site, however the vast majority of the revenue will be realised in the second half.

On top of that, there'll be ongoing service and support revenue, which is not counted in the CA\$2 million figure, so we'll have a significant annuity stream from those sites going forward which makes this a substantial and extremely important deal for us.

The key difference from the revenues we'll receive under the Agfa agreement is that rather than Agfa doing all the sales marketing, training and implementation etc. and us then receiving a percentage of the licence revenue, we will be dealing directly with AltaPACS so 100 percent of the revenue will come to us.

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What was the process by which you won the Canadian contract and what implications does it have for your ability to attract practices to your offer under the Agfa agreement?

CEO Sam Hupert

AltaPACS had been looking at combining a local practice management system with a Canadian digital imaging offering but apparently had some concerns about their combined integration and scalability. They chose our product after seeing a demonstration of the integration between the Pro Medicus and Agfa offering and looking at our 20-year experience in practice management software in a similar private healthcare market. It was also important to the group that we'd successfully installed the product at radiology groups of a similar size and larger. We were extremely pleased to be able compete with known local products in their own market as well as international products and win.

In terms of attracting further practices to our joint offering with Agfa, we think this deal will have very significant flow-on effects. There is no question that the AltaPACS installation will be a big, high profile reference site for us.

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How will you service the Canadian group? Won't it be expensive to service this client independently, outside the Agfa agreement?

CEO Sam Hupert

We'll be servicing the group using the internet much like we do for our clients in Australia, the majority of which are remote from our office. We already provide extended service coverage for our UK sites, and we'll be extending our hours further to cover North America anyway under the Agfa agreement. So we do not see direct servicing as a big cost or logistical issue. We expect the Canadian contract, which will be 100-percent Pro Medicus sold, implemented and supported, to provide a benchmark for what we do with Agfa in the North American market. It gives us an incredible base to launch our North American business with Agfa. We couldn't have asked for a better start.

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What are the indications so far of the outlook for sales of your products in North America?

CEO Sam Hupert

Certainly since the announcement of our deal in the US, the number of enquiries Agfa have received has been exceptionally encouraging. But, we'll have a much better feel after this week's Radiology Society of North America (RSNA) conference. The RSNA conference is held in Chicago every year and is the world's largest radiology forum. Agfa have devoted an entire section of their stand to our product and the imaging sector market. They see the imaging centre market as a huge growth opportunity and have hired new sales people specifically for our product. There is no doubt that the combination of launching our product in Chicago and having the Canadian contract in place will give us significant momentum in the North American market.

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Agfa-Gevaert recently announced the acquisition of German company GWI, one of the leading European providers of healthcare information systems and electronic patient record software. This followed Agfa's acquisition in October of French hospital information systems provider Symphonie on Line. What are the implications of these acquisitions for your relationship with Agfa in North America and in other markets?

CEO Sam Hupert

The implications can only be positive for us. When we announced our North American deal with Agfa we indicated that Agfa were looking to broaden their base in the health IT arena and that this may present us with further opportunities.

I think the announcements leave little doubt as to Agfa's future direction. These are company transforming acquisitions that will see Agfa become a major global healthcare IT company. Not only will they have solutions for radiology, orthopaedics, cardiology and women's health but now with these two acquisitions they will become a major global player in the hospital IT/Electronic Medical Record (EMR) space. This has the potential to open up significant market opportunities for us not just in North America but in other markets as well.

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You've indicated that ProMed Clinical, your recently introduced clinical desktop software, has achieved faster processing times and greater system reliability than incumbent software at practices in which it's installed. To what extent will these advantages alone persuade doctors to move from products they know such as HCN's Medical Director, which dominates this segment?

CEO Sam Hupert

There is no question that these will be two of the key issues influencing GPs as they review their choice of medical software.

We have been able to show that our product can provide that speed and reliability even on existing hardware as evidenced by Midtown Medical and all of the other practices that have converted to our product.

This is becoming increasingly more important as GPs using Medical Director face the decision to upgrade to HCN's new version which demands significantly increased hardware and server software specifications to run. Doctors can avoid the potentially significant costs of upgrading their systems by switching to ProMed Clinical and get the performance and reliability they are looking for, so our cost of ownership will be considerably lower. We see this as a huge advantage and therefore see this market segment as a significant long term opportunity.

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What's the outlook for ProMed Clinical both in Australia and in offshore markets?

CEO Sam Hupert

We've always said this is a longer term play, but we believe many GPs in Australia will face the upgrade decision in the next 12 to 18 months, and that ProMed Clinical is well placed to benefit. Overseas, we've been able to use large parts of ProMed Clinical as part of our radiology offering. And it may have a far bigger future, particularly now that groups like Agfa are expanding out of the imaging side of medicine and into a far more global health IT portfolio.

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Thank you Sam.

For more information about Pro Medicus, visit www.promedicus.com.au or call Sam Hupert on (+61 3) 9429 8800

For previous Open Briefings by Pro Medicus, or to receive future Open Briefings by e-mail, visit www.corporatefile.com.au