Welcome to the Bactiguard Q2 conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. I will hand the conference over to the speakers, Interim CEO Thomas von Koch and CFO Carin Jakobson. Please go ahead.
Thank you, operator, welcome to today's call, where we'll share our interim report for Q2 2023. I hope you've had the chance to browse through the report, as I will now give you a verbal presentation commenting on the figures, the profit warning we announced roughly a week ago, and importantly, our strategic focus ahead. As usual, Carin Jakobson, CFO, and I are available for questions after the presentation. Before I dig into the figures, let's look at the world around us. As a background to why I believe so much in Bactiguard, why I believe every medical device which are placed in the body for more than 2 days should be coated with our unique technology. Just to recap, bacterias grow on implants and devices in the body after two days. That's why the two days are so important.
First, a quick introduction of myself. I assumed the role as interim CEO end of May. This is my Q1 report as a listed CEO, but as some of you know, I've been around this company for more than 20 years as the main owner, together with Christian Kinch, and a board member. I've also had another life. I've been a partner of the private equity firm, EQT, a firm which I was part of starting in 1994. I was also the CEO of EQT for five years, between 2014 and 2019, and just for transparency, I am a special advisor to EQT still.
I'm proud to now also represent the leadership of Bactiguard, one of the very few companies in the world with the ability to significantly reduce incidents of hospital-acquired infections, and consequently, be part of the battle against multi-resistant bacteria, AMR, you're gonna hear that word a lot, and one of the most important challenges humankind is facing in the years to come. You've seen this page before. It serves as the foundation of our strategy. Bactiguard has solutions to the issues and see vast opportunities in an $80 billion market. The focus on infections and AMR continues to accelerate on the global scene, and as I stated in my CEO comments, Europe is also taking a firmer stance with clearer goals set to reduce the use of antibiotics.
I hope you saw that Europe intends to reduce antibiotic use by 20% in 2030, and we're gonna help Europe accomplish that goal. The fact that WHO estimates that more than 10 million people will die from infections caused by multi-resistant bacteria by 2050, is nothing but unacceptable. Connecting this to our strategic therapeutic areas, medical device-related infections cause billions of dollars in healthcare expense, human suffering, and thousands of deaths annually. The U.S. has somewhat different approach to healthcare-associated infections, or hospital-acquired, or HAI, and AMR than Europe. Preventing infections is a top priority in healthcare. Still, 50% of all patients in American emergency hospitals take antibiotics preventively, meaning they get antibiotics when they enter the door of the hospital, and that's not sound. I think we can all agree upon that.
Even despite that, 3% of them will get hospital-acquired infections at the hospital. Nearly 700,000 patients gets HAI every year, out of which 70,000 die. Hospital-acquired infections and more frequent use of antibiotics feed multi-resistant bacteria. In 2021, multi-resistant bacteria increased by 14% in American hospitals. There is, however, a slightly positive trend, as deaths caused by AMR decreased between 2013 and 2019, which proves that infection prevention measures pay off. Still, the total cost of multi-resistance in the U.S. is around $55 billion annually. Just so you know, the U.S. healthcare providers are penalized, and the worst of them are penalized, and need to repay reimbursement if they don't take all preventive actions against hospital-acquired infections. All of this is not my data.
This you find on the Centers for Disease Control and Prevention homepage, please Google that up. The typical areas of hospital-acquired infections include bloodstream, urinary tract, and ventilation pathways, and surgical wounds. The infections are often related to medical devices used in these areas. Looking at Bactiguard, we have product and solutions for all of these areas, and we are non-toxic, biocompatible, and an antibacterial technology, and that technology is unique. There's nobody out there like us. As a reference, over 230 million Bactiguard-coated catheters have been sold over the last 20 years in the U.S., thanks to the partnership with Becton, Dickinson. More importantly, zero negative incidents reported to FDA relating to our coating. We are safe. Since assuming the role as CEO, I have delved into every possible detail of the business, what could potentially negatively influence our business.
This was a critical exercise to get the true and ugly picture of what we might sit on. Roughly a week ago, we announced a one-time adjustment of SEK 42 million impact in the EBITDA for this quarter or for Q2, and the full year, evidently, for 2023. I thought I'd give you some more flavor to that announcement. 50% of the reservation relates to write-downs of inventories, meaning stock of devices and raw materials that are either outdated or where the shelf life is running short. 50% relates to other structural changes within the organization. You might have seen that Anders Göransson has decided to leave the company, announced that to me yesterday. That's within the 15%. The bulk, 70%, is related to accounts receivable overdue and adjacent products. This relates to...
We have quite a large order to Well Lead in China, where we have had an issue with our third-party manufacturing partner, Amsino. We are solving it, we hopefully have to speak, but we need to make a provision for that. We also have had delivery issues when it comes to sutures. We have solved that now, we hope, with the suppliers, but with that comes accounts receivables that unfortunately are overdue and are in jeopardy. In addition, and this, I think it's important to highlight, when we struck the deal with Zimmer Biomet or the trauma implants in 2019, we got $4 million upfront from them to become their partner. Our commitment to them was that we're gonna provide work for free to help them take the trauma implants to the market.
It's no secret that they have taken, together with us, a longer time to get the trauma implants to the U.S. market. We have made a provision and assessed that our work to help them to get there amounts to SEK 10 million. Since we do, can quantify it fairly well, we have taken that as a provision. The deep dive into Bactiguard has shed light on our challenges. Once we are aware of them, we will be able to act firmly. We are aware of them, and we do have plans how to deal with the internal challenges we have. With the profit warning, we did a well-needed reset and can now focus fully on the future opportunities.
We are in somewhat of a perfect storm, and the reason why I say that, and I come back to that later on, is that at the same time, Becton, Dickinson is doing a one-time adjustment to the warehouse and the stocks that actually has been larger than they've done in the past. That hits us at the same time as we are getting our act together internally. We are laser-focused in what we intend to do, so I feel actually quite confident, despite these kind of ugly numbers I provide to you, that this is the start of a new day, and we do actually have quite good control of what we intend to do and how we're gonna execute. Let's dig into the figures. This is nothing I'm proud of.
They are what they are. These are reflections of the past. We have to start with a high-level data. Look at Q2 in isolation. Total revenues were SEK 51 million, which was a decrease of 50% compared to Q2 2022. EBITDA for the quarter was minus SEK 56 million. However, you know that SEK 42 million of those are the one-time adjustment, compared to minus SEK 7 million in Q2 2022. Operating cash flow amounted to minus SEK 20 million for the quarter, compared to minus SEK 1 million in Q2. Well, it's evidently, this is nothing I'm proud of, and this will not be repeated, but we remain extraordinarily focused on strengthening the license business we talked about before.
That is what's gonna create gold for us in the future, and that's where our strongest potential lies within, as well as getting our Bactiguard Product Portfolio profitable. It has always been an investment for us. We have always lost money within our own products because they've been under build-up, but now we're gonna turn the screw some more knots because we're gonna turn BPP into profitability faster than earlier anticipated. We had a number of important events during the quarter, which I will revert to in more detail later on the respective business section. Looking at the financial overview, Q2 , 2023, there are a couple of things to comment. Our license business is severely hurt by the decrease from BD, Becton, Dickinson. I will revert to that later in the presentation.
Even though the Bactiguard Product Portfolio shows progress with a healthy sales increase, we need to focus even more on profitability. Worth reiterating is that we are in an investment phase, which we started last year, when we kicked off our growth strategy and started our transformation journey to focus on license. I want to re-emphasize the long-term character of our business model, and that the license revenues evolve over time. Starting with revenues of non-recurring character, i.e., upfront fees, and we get paid for the R&D we commit to for our partners, and once commercialized, transformed into recurring revenues, which we call royalties and license revenues. The blue bar shows growth from the last quarter, and for Q2, obviously, the BD is down due to the stock adjustment.
The green bar shows the Bactiguard Product Portfolio growing slow but steadily. The yellow bar shows non-recurring revenues we relate to different development projects ongoing. Let's jump into licensing here. Revenues from licensing amounted to SEK 25 million , around 30% below Q2 2022. It's Becton, Dickinson's revenues that were lower than the last quarter due to unprecedented in-house stock adjustment. We actually did, after COVID, Becton, Dickinson really stocked up and got back into normal ways of operating, but they overstocked. What we can see, and I think that's very, very important, we have that transparency, the number of catheters sold to patients is virtually stable. We know that this is a stock adjustment from their side.
The bad news is that the indications for Q3 is that the stock adjustments will be even worse in Q3. We're going to be back on Q4, pre-COVID level in Q4. This might change a little bit. I really would like to be quite clear that unfortunately, BD most like is going to be worse in Q3 versus Q2. Our relationship with Zimmer Biomet is excellent. I'm very pleased about that. We have massive interaction. We have different collaborations. They're all making progress. They spend enormous amount of resources, on our common project. The different FDA processes are intense. What I mean by different, it's evident for trauma, but it's also for the knees and hips and shoulders, and also for our own product, as you know, the ETT and the CVC.
I'm sorry that I can't give you a transparent view of when we're through. It still remains uncertain. I will, though, as soon as I will know the pathway together with Zimmer, I will communicate that to you, and we will have much more, much better insights during the fall of the pathway through the FDA approval. As reported in Q1, the initial phase of the Dentsply Sirona development product is taking longer, but both tests and dialogues are moving forward. In general, we have scaled up our relationship building and are now and now have substantial closer interactions with all our partners. I mentioned briefly previously a little bit Anders Göransson, who was the CEO up until mid-May, stepped down as Global Head of Licensing, has decided to leave Bactiguard.
Anders Göransson has played an instrumental role in defining our strategy going forward and with separate ways on good terms. We will recruit senior resources externally and allocate more resources internally within the overall ambition to build a world-class licensing team. I would like to underscore also the great recruitments we did to our board, Richard Kuntz. He's the former Chief Medical Officer and Chief Scientific Officer at Medtronic, and has a vast experience of U.S. healthcare, and evidently, his network is going to be crucial for our success. The knowledge he knows about the FDA and U.S. market is, will be for us, priceless. Our Bactiguard Product Portfolio revenues, what's included there, that's the... You see the products there, the ETTs, the CVCs, the Foley catheters, it's wound care, and it's also sutures, amounted to SEK 19 million .
This is the positive part of our report. It's up 25% versus last year. We were affected with supply show issues, as I mentioned, and also you see in the reservation when it comes to wound care and sutures. What you see here, despite that, the investments made over last years is paying off. May and June were strong months for BPP, but we're still losing money, and that loss, we will see to that we will fix here during the coming quarters. Our efforts are focused on increasing profitability, and we have appointed Mikael Sander, a very senior recruit from Dentsply Sirona, to head the BPP effort and to get it back to where it should be, to black numbers.
Bactiguard Wound Care raised the bar during the quarter and had a specific section in specialist publication, Wounds International, covering HYDROCYN aqua product line. We were also present at the EWMA, you might call, in Milan, Europe's leading wound care conference. We are actually now present in the UK with our wound care portfolio, and it's growing actually quite nicely from a very low level, though. In April, we launched a study where Bactiguard's coated central venous catheters were compared with non-coated standard catheters. The purpose of the study is to gain further clinical evidence that coated catheters efficiently prevent both infections but also thrombosis, which I don't think we have highlighted, that we have that effect, in order to reduce within our CVC catheter. That is crucial, actually, in the treatment when using these kind of catheters to avoid it.
This page summarizes the issues and focus areas. I have already touched upon the majority of them today. They conclude the theme of our interim report, Q2 , that our strategy of bolstering, licensing, and U.S. go-to-market stays firm. There's not by coincidence that Becton, Dickinson makes a fortune selling our coated catheter jointly in United States and in Japan, and have not been that successful in the U.K. It's because how the U.S. market penalizes people that uses dangerous devices to put into the body. That, just to underscore, why do we focus on the U.S. market so much. With a profit warning, we did a well-needed reset and can now focus fully on fixing stuff and stuff, and capture the future opportunities. What I have not touched upon yet is the very core of our offering, our unique technology.
In parallel with handling our challenges, we continue to developing how we apply infection-preventing coating technology in existing partnerships through new license partnerships and new device areas. This is the core skill of our firm. You all recognize this page. It reflects the strategic drivers towards growth and profitability. Our financial targets for 2026 stay firm and assume that the various license development products progress accordingly. Looking at the growth drivers in detail, you know it's no secret that the success of Zimmer Biomet is crucial for us really, reaching our targets. The good thing also, we have had much more active interaction with Becton, Dickinson lately.
I actually have some hopes that our relationship with them is going to be further enhanced, which actually will hopefully enlarge our relationship with them, not only to the focus, but also in the broader context of the product range. It is decreasing right now, but as I said, we have a good dialogue with Becton, Dickinson, a very good one. We haven't had this close dialogue with them for many years. On Zimmer Biomet, we anticipate significant growth in the future, and it will be triggered by the FDA approval of trauma implants, and we really hope and believe that they're gonna make this an embedded feature within the trauma business line. Evidently, the even bigger opportunity is when it comes to the knees, hips, and joints with them.
New license agreements in our strategic therapeutic areas will contribute to growth, both through initial non-recurring revenues and importantly, royalties. Royalties meaning recurring revenues once products are commercialized. On our own portfolio, achieve profitability where we're not now and get the products to more patients into key healthcare markets. Smaller M&As, similar to Vigilenz, we have said it's going to be part of it. I can say right now where we are, we are fixing our home base first before we will do any assessment of any additional M&As. Looking ahead, we'll put our core strengths at the center of our transformation, which revolve around our unique technology and expertise in developing secure applications for a wide range of medical devices.
In stating the obvious, I'm far from happy with the numbers you see today, and this will not become a habit, but the vast opportunities in our strategic therapeutic areas remain, and we have promising conversations with both current and new potential license partners. Again, this is where the greatest potential of Bactiguard lies. To end on a somewhat higher note, we have a strong financial position despite these results, and cash to invest in growth. We have strong and dedicated main owners, I'm putting myself in that category, and we're happy to support the company come high and low tide. It's our firm belief that Bactiguard is a long-term investment opportunity in which you can be part of shaping the future of healthcare and creating a healthier world. It's not a question of if, it's a question of when the breakthrough comes.
Thank you, everybody, and I hand over to the operator for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Mattias Vadsten from SEB. Please go ahead.
Hi, thanks for taking my question. The first one, I appreciate the comments on the partnership with Zimmer. Obviously a difficult question coming here, but when do you assess the next trigger to come there? I guess that would be trauma approval in the U.S. Yeah. Some comments on the next big trigger for that partnership, to begin with.
A very relevant question, Mattias, thank you for asking it. There's no secret. We have intense, and I mean intense dialogues with the FDA together with them. Why do we have that intense discussion with them? Well, there's a fast path and there's a slow path to get approval in the United States, where the fast path is a 510(k), and that's a six months exercise, and there's a very slow path that's called PMA, where we need to add a lot of studies before you can take the products to the market and get the approval. We have indications that we are gonna hopefully go on the faster path, I cannot say anything more than that.
I will know, and I will communicate to the market when we do know the path that Zimmer will embark upon, and that's gonna happen during this fall. We have a very good dialogue and so big exchange with Zimmer, and they have a really tight dialogue with FDA. The thing I could say is that when we get the approval for the trauma, because it's a when, it's not an if question, the next products are gonna be approved, are gonna go on a faster path. We're gonna be a more known entity to the FDA, I'm quite optimistic regarding that. With that said, I'm sorry, I can't give you more transparency than you get a better indication during the fall.
I think that's a, that's a good answer. Next question on the U.S. Where do you see the more sort of substantial opportunity in terms of, product segments here? I think I have my guesses, and what approvals do you need, looking at, for instance, BPF or CDC, for instance?
There, it's a little bit combined. What Zimmer is doing with FDA now, and that's why we're so tight with them, we'll have also repercussions of the coming filings with the FDA. The faster path we get with Zimmer, the faster path with high likelihood we're gonna get on our other products. It's no secret, and I can be open about that. We have dialogues now about the ETT, the CVCs, as we speak, and I don't want to get your hopes up too much, but I cannot withhold my optimism that the initial discussions we have with several different vendors that could become our partners are very, very positive.
The reason is that, I mentioned that quickly in this conversation, the healthcare providers not taking all preventive actions against hospital-acquired infections are, and are the 10 worst in hospital-acquired infections in the United States, get the reimbursement repaid or taken back. That's why the products, when approved in the United States, as Becton, Dickinson have shown with our Foley catheter, when approved, we expect them to get a large part of the market, and so do the partners we talk to regarding that. It's evident our own product portfolio, that's next in line, Mattias.
Good. I think I will move on here. I mean, the, I would say the quarter-over-quarter increase in BPP sales look quite good, at least if you compare it to the development last year and into this year. Do you see any reason not to expect this sequential improvement also sort of going forward in the upcoming quarters?
No, I don't see that reason. The reason is simple. Normally, we have had a history of lumpy monthly results and sales. Now we have more a continuous sales level, which evidently gives me a lot of comfort. I am optimistic, given that we now resolve the sutures issue in Malaysia, that despite normally weaker summer months, that we're gonna have stronger months, summer months, when it comes to BPP ahead than we usually have. Have we cracked the code? Partly in some countries, India, particularly, we have also improving a take-up in Sweden, slow but sure. We are working with the BPP portfolio in a much more systematic way today, that's gonna take away the lumpiness or the volatility in the sales going forward.
Volatility will remain, but to much less extent, and the trajectory is quite clear. I would like to highlight, though, and that we've gone through in depth and detail, some of these products are highly profitable for us. Some are less profitable for us, so we will steer the sales force to the more profitable products.
Thanks. My next one, a little bit difficult, and I appreciate if you don't answer it, the accrual of, you know, accounts receivable overdue, I understand it's both distributors and license partners. If you could share some light on how much is related to sort of Vigilenz distributors and how much is due to old orders from Well Lead, and if you could update us on the partnership with Well Lead. That's the last one from me.
Yeah. I don't want to be too specific on that question, but I can answer you in general. When it comes to partnership with Well Lead in China, is something we haven't spent much time on in these conversations lately, but I would like to highlight our uniqueness in China. We are the only coated catheter approved by the Chinese FDA. For Well Lead, we are very important going forward for them to differentiate their offering to the market. They are a true OEM with very low margins. We have a tight dialogue also with them. The mishap we have had with Amsino, who currently manufactures our Chinese catheters, is being resolved as we speak.
China is, we haven't talked about it a lot, is actually a little bit of a hidden gem, and we are in a very intense dialogue with Well Lead in how to actually cement our relationship even forward, even more going forward. I don't want to give you any projections regarding China. I can just conclude that we are the only coated catheter approved in China, and getting approvals in China is virtually, not impossible, but very, very hard. It's a true asset. We are doubling down on that discussion. To give you comfort, though, we own the license in China, so either we agree with Well Lead, which we think we will, because they're a great partner, but we're also flexible given that we have our own license in China. We have a good dialogue.
Good. The last one was just, I mean, I heard everything you said about BD, the headwind for Q3. For Q4, did I understand correct that you will see more sort of pre-COVID levels already for Q4?
That's what we see today.
Okay, thanks for the answers.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
First of all, thank you for listening. I have to apologize on behalf of Bactiguard to provide this Q2 to you today. I like analogies. We are a boat at sea. It's stormy weather ahead of us, you know what? I see, together with the management team, a very clear blue sky, not that distant away from us. We have the pathway through that. Despite this gloomy message you get today, I'm actually very charged, I'm optimistic. I can tell you we're all, when it comes to the management team, we're all aware of where we are and what needs to be done. We are all over it. I really hope I can come with some really positive surprises in not too distant future. Thank you for listening.