Hello and welcome to today's webcast with Neola Medical. We're here with Hanna Sjöström, CEO, and David Folkesson, CFO, who will present a report for the second quarter of 2025. After the presentation, there will be a Q&A, so if you have any questions for the company, you can send them in via the form to the right. With that said, I hand over the word to Hanna.
Thank you so much, and everyone, a very warm welcome to this quarterly presentation for the Q2 and half year of 2025, where we are summarizing an intensive and productive first half year for Neola Medical, where we continue to reach our milestones according to our business strategy and plan. Presenting here today is myself, Hanna Sjöström. I've been the CEO for the company since 2019, and with me here today I also have CFO David Folkesson. First, I will shortly present Neola Medical as a company, our market, and the significant events during the quarter and the first half year of 2025. Thereafter, David Folkesson will walk you through the numbers and the financial summary. Before we start, please note that today's presentation may include forward-looking statements.
Actual results may differ due to risks and uncertainties, including, but not excluding, such as market conditions, regulatory processes, and execution of our strategies. To Neola and Neola Medical. Neola Medical is a deep tech company developing Neola, Neonatal Lung Analyzer, the very first medical device designed for non-invasive and continuous monitoring of the lungs of preterm-born babies, with the aim to have instant results of severe lung complications that today the babies are lying much too long with. Our mission is to transform neonatal care by giving preterm-born babies a safer start in life.
With Neola, we aim to support healthcare professionals with real-time respiratory insights, enabling instant detection of lung complications, earlier prevention and intervention, and also proactive care so that we can have, ultimately, our goal is to have better outcomes for these very vulnerable patients with the potential to also reduce morbidity and improve long-term quality of life. Neola Medical was founded in 2016, and we have our headquarters here in Lund, with also a small hub office in Palo Alto in the U.S. The technology behind Neola is based on very advanced research from Lund University. Today, we are in the clinical phase with our medical device aiming for market authorization primarily with the U.S. Neola is based on our patented technology called Gas and Scattering Media Absorption Spectroscopy. This is a method that was developed at Lund University and further advanced by our team at Neola Medical.
We currently hold eight patent families covering both the medical methods, device, and disposables, ensuring protection of our core innovation, but also enabling scalability to other patient groups. As you saw in the Q2 report that we published this morning, we continue to strengthen our patent portfolio, a real highlight in this quarter that I will soon talk more about. Our revenue model really extends beyond the primary sales of Neola main unit, but also includes the sales of disposable probes that are changed daily on the baby and also service agreements. Those disposable probes are very important for us, and we expect them to be really a key driver of our future revenue and our future margins.
As we move towards market launch, clinical support is incredibly valuable, and we do also get that from the very best in the U.S., such as Stanford's Associate Professor in Neonatology and also from the main key opinion leaders in Europe. This is something that we have worked relentlessly for many, many years to build up a very strong credibility with the key opinion leaders and a strong key opinion leader network in both Europe and the U.S. ahead of our market launch. We are importantly also a Stanford Impact1 company, as Stanford has recognized Neola Medical as one of the most promising innovations with the potential to really transform neonatal intensive care from day one in clinical use. This is one way of how we really make sure that we have those most important U.S. endorsements with a lot of connections to the entire U.S.
neonatologist community before launch. One of the reasons why we really get this support is that we are addressing such a growing clinical need as more babies are being born preterm. Today, 1/10 babies arrive too soon to this world and often depend on intensive care for their survival and for their long-term outcomes. Many of these babies face underdeveloped lungs that can quickly advance to life-threatening complications and lasting disabilities for them. Preterm birth is the leading cause of death for infants under five years of age after pneumonia, so it's very dangerous. Specifically, the respiratory failure is the primary driver of death. That is the reason why neonatologists really want to find lung complications much faster than today because every single minute really counts for these babies. This is a significantly underinvested market, so the current monitoring methods in neonatal care are highly insufficient.
Doctors really rely on manual observation time, mainly by the nurses. They do chest X-ray on a daily basis. They have some blood gas sampling and some pulse oximetry tools that are really slow and provide only snapshots of what's going on in the lungs. Many of them are potentially also harmful for the baby, such as repeated chest X-ray. In the critical cases, results may take up to two hours for chest X-ray while a baby might already be deteriorating. With Neola, our aim is really to provide that continuous and real-time lung monitoring that is safe for the baby's fragile skin with instant results within seconds. Exactly the type of neonatologists said that this is definitely the type of tools that they would like to have to improve care.
Looking at the market worldwide, preterm births are really increasing, and the number of neonatal intensive care units continues to grow. This also creates a strong demand for improved monitoring solutions, especially when the U.S. is particularly attractive due to its very high rate of preterm birth. We have more than 10.5% of all babies being born in the U.S. that are preterm. This comes a lot from the success of fertility treatments in the U.S. that is causing more twins and triplets, but also in general, a focus on really having more neonatal intensive care units to address these needs means that the number of, for us, relevant beds in neonatal intensive care is really growing.
Currently, there are 35,600 beds in neonatal intensive care, where our market research and our clinical advisors estimate that 50%- 70% of all these beds should have a Neola next to it in the future. It's a great market opportunity for us. In the U.S. alone, our addressable market is 400,000 preterm-born babies annually. We have identified the 10 leading children's hospitals as a priority market for our launch. Importantly, we have already established a relationship mainly with two of them, as you would say here, Lucile Packard Children’s Hospital at Stanford. We're very much connected to Stanford, and this is also where we have our U.S. office, but then also Cooper.
You have seen that during this quarter, we have also signed a contract with the Children’s Regional Hospital at Cooper to lay the foundation for that very early adoption through doing our first pivotal clinical study in the U.S. together with them. We have also received an approval from the hospital's IRB committee, which means that we are now also ready to start that study as soon as we are also signing a contract for our second study site. I would say a lot of progress towards the clinical study in the U.S. during this quarter. For hospitals, Neola not only addresses the pressing clinical need, but also creates a clear financial value for the hospitals by enabling faster detection of complications.
Neola really has the potential to shorten length of stay in the neonatal intensive care unit and also reduce the number of very invasive procedures such as blood gas samples and chest X-ray. It might also free up the nursing time for manual observation, which is important in the U.S. care, as so many nurses have left the profession, especially after COVID. There is a decrease in nurses available, and this has really pressed up the salary levels. It's not uncommon for nurses today to have a similar salary as the neonatologists in the clinic. This is also a very important perspective from the American hospitals that any type of technology that can really reduce the burden of the nurses is very welcome in the clinic.
Step by step, we have really moved from research validation amongst the early validation that we got from the independent research study in Ireland on 100 healthy newborns to now being currently in a clinical study in Sweden, our pilot study that we're doing ahead of our pivotal clinical study in the U.S. in order to make sure that we capture any learnings that we want to bring into the U.S. study. We're in a very exciting stage in our company history, and now we're working with a sharp focus on what we need to get done in 2025. We're really focusing then on our clinical studies, the regulatory process mainly with the FDA, but also our continued preparations in terms of preparing for our market launch. With that short company introduction, I will now go into the highlights of the Q2 report.
For the first 1/2 year of 2025, we initiated the clinical pilot study in Sweden following the approval from the Swedish authorities. This pilot study will evaluate the safety and performance of Neola in preterm-born babies. It's the very first time we're doing a clinical study on our intended population, preterm-born babies. In addition, this study is designed to demonstrate both the utility of the product and its compatibility with the clinical environment. The patient group ranges from a gestational age of 28 weeks, and they weigh between 1,000 g and 3,000 g. The study is in total 10 preterm-born babies. These babies are in intensive care when we do monitor them during the study. The study is also conducted at Södra Älvsborgs Hospital in Borås, an excellent regional hospital in Sweden with a really high level of neonatal care. The study team consists of experienced neonatologists but also neonatology nurses.
I will talk more about this in a minute as well. Some of the key highlights of this first half year are that we completed a direct-to-share issue of approximately SEK 20 million, securing financing ahead of our clinical study start in the U.S. and in Sweden, and really also strengthening our shareholder base since we got our first institutional investors on board, Adrigo and Cicero Fonder, alongside the support from existing shareholders. Our international IP portfolio was further strengthened with corresponding patents in both China that were received during Q1, and then the same patent granted in Europe in Q2. These are two very strategic markets for us. These approvals are within a new patent family, and they really reinforce the protection of our core medical technology for non-invasive lung monitoring and how we detect pulmonary complications.
This is a very important medical patent for us, and we're excited to have it in both Europe and China at the moment. An application is also sent into the U.S. market. A strong and expanding IP position really remains central to sharpen our competitive edge as we move through this clinical development phase, and it really secures future value. We continue to focus a lot on our patent portfolio. This new patent family really complements the protection of the company's first general patents on the basic fundamental concept of how we measure gases in body cavities using diode laser spectroscopy. From that perspective, it's also a very important patent for us. Moving into Q2 and the significant events here, during this quarter, we have then had the very first baby successfully included in our ongoing clinical pilot study on preterm-born babies with Neola.
This marks the very first time Neola Medical has been continuously monitoring the lungs of a baby, and it's the very first time we have done it also on a preterm-born baby. First time in our intended patient population. This is a major milestone for us. We have now reached halfway with our clinical pilot study, and once all the babies are enrolled and have completed the study, the data will be analyzed, the results will be concluded in accordance with the common practice and standards for clinical evaluation, and thereafter communicated. Just as a reminder, this pilot study really serves as a preparatory step to ensure that we capture any potential development refinements of the product or the clinical study protocol or process before entering the pivotal study in the U.S. It is very much from our side also a de-risking study.
One of the main topics for this quarter as well is that we have now signed an agreement with our first U.S. clinical study site, the prominent neonatal intensive care unit at Children’s Regional Hospital at Cooper in Camden, New Jersey, in the U.S. Together with that, we also have obtained the IRB approval. That is the approval from the Institutional Review Board that we need to have in order to sign a contract, but also to start our clinical study. We have all of that on board, and this really represents a key regulatory milestone for us. It enables the initiation of the pivotal clinical study on preterm-born babies in the U.S. We are honored to collaborate with Professor Dr. Vinay Nadkarni , who will be the principal investigator of this study. He is a globally recognized neonatologist. He is a member of the Board of Directors for the U.S.
Neonatologists Society. He is very much, I would say, one of the key stakeholders within both non-invasive and respiratory monitoring, but also as a very well-recognized neonatologist and key opinion leader in the U.S. We are very excited that he wanted to be the principal investigator on this study, and it's also a signal of how important this new technology might be in the neonatal intensive care unit as we come to market. This study will really play a central role in how we build our clinical evidence base for Neola Medical's planned FDA application, and it will then lay the foundation for our market launch. It is an important study for us coming up. This study will be initiated after the clinical pilot study. This study site is 1/2 of U.S. sites, and we will also be able to confirm the second U.S.
site in a couple of months. With that, I move over to another really exciting Q2 event for the company. Neola Medical was named a finalist for Sweden's new Global Innovation Award, the Pioneer Prize, and we were invited to be part of Sweden's official delegation for the company and our product to be showcased at the World Expo 2025 in Osaka in Japan. This award is organized by the Swedish Institute together with Business Sweden, and the delegation was led by His Majesty the King of Sweden. This type of recognition really puts us in the spotlight as one of Sweden's most promising companies driving innovation with global impact. For us, this was a true privilege to represent Swedish innovation, one of a few life science companies as well, to be present and to be present in this global stage.
Standing alongside other visionary companies across industries really gave us not only the visibility but also valuable opportunities to build networks and strengthen Neola Medical's international profile. These types of acknowledgments really help us position as an incredible partner for future collaborations and international market growth. That was some of the highlights from the Q2 report, and I hand over to CFO David Folkesson for the numbers.
Thank you, Hanna. Let's see if we can get the next slide. Okay, I have one more. Yeah, thank you, Hanna. As you can see, operationally, the first half year has progressed in line with last year's previous period, and we keep our costs at an efficient level. With that said, we keep a financial focus and our path towards clinical validation, which will be a cost-driving activity in the coming quarters. Also, as we discussed in previous reports, operationally, we're now focusing on the clinical validation phase for Neola. That means internal preparation and executions for studies. This has resulted in this year's total cost being slightly lower than last year's, as the need for external resources has decreased. With that said, the majority of the cost for our ongoing study in Borås will occur in the second half of 2025.
If we change slide, and as you also can see in the shareholders' list, we're still very grateful for the confidence from the shareholders. We can also see that the existing shareholders are very strongly believing in the company, which has given us no major changes in the list of the shareholders. To the next slide, this is the financial calendar for the coming three periods. Next time you will have a report will be on the 5th of November, which will be the Q3 report then. Over to you, Hanna.
Thank you so much, David. Just to summarize, we are really working towards our strategy with a very clear focus. You can see that we have a large and growing addressable market that we're really focusing to penetrate bit by bit by really moving towards the top 10 hospitals in the U.S. with the greatest demand for this type of new innovation. There is a great clinical need and demand for continuous monitoring of preterm-born infants, and we have also built in a very attractive business model. Our disposable probes that are changed daily on the baby will be critical for our revenue growth. We have a proven core technology that we have seen throughout the different studies that has the potential to be an important application within this target group.
With our highly experienced team, we think that we have definitely the right resources now for the next step in Neola Medical's journey towards market authorization and launch. I thank you so much for attending this presentation, and I also leave the floor open for any type of questions that you might have.
Thank you so much for the presentation. As you mentioned, now we'll carry on with the Q&A. The first question here is, how many patients have been included in the Swedish study?
We're now halfway. In total, we have 10 patients to be enrolled in the study. To share some details around it, we can see that we have a healthy inclusion rate. Approximately 50% of the eligible babies, where the parents are asked for consent, also give their consent. That is, I would say, a very healthy enrollment rate.
Thank you. In the report, you expect the Swedish clinical study to conclude in the fall. Has there been a slight delay, or is it according to plan?
It's always hard to plan exactly when you will have a baby in intensive care. It really fits also the weight class and the specifics of the baby that needs to be monitored. It's really one of those that we always have a team that is standby to do measurements as we get an acceptance from the parents. There was always an intense summer period in terms of personnel schedules, but we now have, I would say, we're now in more of the everyday action in the clinic, and we have done some measurements here after vacation times as well. More or less on track.
Thank you. You said earlier that the U.S. study will likely be initiated a few months after the Swedish study has been finalized. Is this still your expected timeline?
Yes.
Crystal clear. You secured IRB approval in the U.S. What are the next steps and timeline before starting the pivotal study, and how do you view the regulatory risks ahead?
In terms of when we're going to start in the US, we have everything in place in order to start. What we're waiting for is the results from the clinical pilot study in Sweden to make sure that we capture any learnings or potential refinements or development of either the product or the clinical protocol before we enter the US, because that is then a pivotal clinical study that will form the foundation of our technical file to the FDA. It's important that we get that one really right. We are also in a parallel process with another hospital, the second site, so we're also aiming to get them on board here during this fall, and then we'll start the study when both study centers can start at the same time.
Thank you. From the Swedish pilot study, what key outcomes are you looking for, and how might they guide the U.S. pivotal trial?
Mainly we're looking for a safety study, so we want to make sure that there are no adverse events on the babies. We want to make sure that we have no device deficiencies, and we also want to make sure that we optimize the clinical protocol as much as possible to ensure that we have even better outcomes in the U.S. study.
Thank you. With 26.5% in cash and negative cash flow, how long is your runway, and should investors expect a capital raise?
It's always hard to tell when or if there will be a capital raise, but there's no such thing initiated at this time.
Thank you. How are you preparing the market for Neola beyond regulatory work in terms of partnerships, distribution, and early hospital interest?
We're working very closely with the hospitals that we aim to do the clinical study with in the U.S. With those two hospitals that we have in place, we're working to secure that even after they have done the clinical study, they would like to keep Neola in their clinics and expand it. We're really working, I would say, clinic by clinic since this is very much a key opinion leader-led work. One other example of how we're working is that we're very much on the ground in the U.S.
In a few weeks, for example, I'm going to a summit in Texas near Texas Children's Hospital in order to talk to key opinion leaders, but also with representatives from the FDA's children's group in order to see how we can ensure that more medical devices are coming to children, and very practically, how we can make sure that as many of these key hospitals really adopt Neola as fast as possible. It's very much, I would say, an interaction on the ground in the U.S. that's going on.
Thank you. Moving on to the last question here. With the new European patent, how strong is your IP protection globally, and what is your strategy for securing it in the U.S. and other markets?
We're working very actively with our patent portfolio. We've always done that. There is this medical patent that is important for us, is currently under investigation in the U.S., and we hope to be able to communicate on those patents in the next future as well. We're working with specialists within the areas to make sure that we continuously, for everything we also discover in terms of the clinical study now ongoing, for example, that we always take those ideas fast to also send in for patents. I would say it's a very active part of our culture to apply for patents, and it's important.
Thank you, and thank you so much for presenting here today and answering all questions. Thank you all for at home tuning in.
Thank you so much for having us.