Hello and welcome to today's presentation with OssDsign. With us today, we have the CEO, Morten Henneveld, presenting. If you have any questions, please use the form that is located to the right. With that said, please go ahead, Morten.
Thank you very much, and welcome to this third quarter 2022 webcast. My name is Morten Henneveld, I'm the CEO of OssDsign, and with me here, I have our CFO, Anders Svensson.
Morning.
Today, we want to walk you through the Q3 results and the highlights of the quarter, and there are really two things that stand out when concluding the third quarter. We again report a record-breaking revenue growth, and we now also start to see the truly transformative potential of our nanosynthetic bone graft OssDsign Catalyst. We also, for the first time, break out sales by franchise and show you how the commercialization of OssDsign Catalyst is going, which we are extremely pleased with. As always, when we do this presentation, the normal disclaimer, so why are we here? Well, we are here because the current bone replacement products fail to heal a wide range of skeletal defects. For cranial, 10% or perhaps even more of implants used end up becoming infected, of which many need to be removed.
For spine, we also know that one in five patients do not achieve a successful outcome, a so-called fusion. Ultimately, for both patient groups, it means that they must undergo revision surgery, which is not only painful for the hundreds of thousands of patients this happens to every year, but also extremely costly to the healthcare system and the society. If we then go to the highlights of the quarter, as I mentioned earlier, this is a quarter we are very proud of and which we believe actually will exceed many expectations. We accelerated significantly in Q3 and recorded another record-sales quarter, getting very close to triple-digit growth for the entire group. The U.S. was again the highlight of the quarter, with triple-digit exponential growth, making it the largest commercial region once again in the quarter, exactly in line with our corporate strategy.
We also saw an exceptionally strong acceleration of OssDsign Catalyst, which now, already in the first year after launch, is a very meaningful part of our business, but that's, of course, not enough. We're also going to keep increasing the growth opportunity, which is key for us going forward, and after the quarter ended, we announced the launch of a new size of OssDsign Catalyst to really complement the size range in the family, and this allows us to target additional procedures in the future, then last week, we also came out with the first post-market safety report on OssDsign Catalyst, which shows a remarkable 0% device-related complication rate, and finally, we've also seen very solid acceleration of our patient enrollment in our multicenter prospective spinal fusion registry called PROPEL.
And we actually hit the milestone of 100 patients ahead of time, clearly confirming the interest from surgeons in collaborating with us to generate clinical evidence on OssDsign Catalyst. I'll now hand you over to Anders to walk us through the financial results.
Yes, thank you.
If we turn to the results for the third quarter, we reported SEK 7.5 million in sales, which is almost double what we did in Q3 last year, as Morten was alluding to. We had some strong US dollar assistance in this, but even without that, on a constant currency basis, it's still 71% growth, so really good growth in a market that's still far from normalized. Going to the first nine months then, we reported SEK 37.1 million in sales. That's 64% growth, slightly lower than the quarter, 49% on a constant currency basis, and that's all to do with the first quarter of the year, which was a bit depressed due to Omicron. So you'll always see lower year-to-date growth rates for this year. Turning then to sales by geography, we have a really strong growth quarter from the US.
You can see that they really accelerated to 10.8 million SEK sales. That continues the strong momentum that we saw already in the second quarter, and they actually came in at an exponential growth of 144% in Q3. That now means we have a year-to-date growth of 117% in the U.S. To make things even better, the quarter we're comparing with Q3 last year was actually the previous all-time high for the U.S., so that makes those growth numbers really an outstanding achievement by our U.S. team. In Europe then, we reported 6.7 million SEK sales. We managed to grow the business by 49%. That's very pleasing to us to see that the growth rates have increased since we restructured the E.U. sales force over the last year, and this is also in line with what we guided after Q2.
So all in all, a very strong quarter driven by the U.S., and we're quite satisfied with that. I just want to spend one more minute on the U.S. figures. This is the bar chart of the last 12 months' sales in every bar in the U.S., where you can see that how it's really taking off. You can see the very strong trajectory starting in Q2 already. And now we can see how it's, from the last four quarters, really accelerating even more. So steady growth up until four quarters ago, four, five, and then we can see exponential growth. And also, we talk about growth profiles and growth, and also looking at the absolute numbers here. We came to the U.S. market in 2017. We worked very hard on breaking through and establishing a business over there.
It's taken quite a number of years, almost five, to reach the first 12 million SEK rolling sales, and now we can see in the last 12 months, we've pretty much doubled that, so clearly highlighting an exponential momentum that we have in the U.S. business right now, then for the first time, we're breaking out the sales by franchise, and as you can see here, cranial and bone graft respectively, and if you start with cranial, we have SEK 10.9 million in sales, continue with solid growth levels. For the third quarter, we reported 24% growth, despite quite a weak market still. It suffers from low level of elective procedures due to staff shortages, so the growth in Q3 for cranial is also in line with our year-to-date growth, and looking then at our bone graft franchise, we saw a significant increase in momentum during the last quarter.
That's as a result of more hospital approvals happening, both in the second and the third quarter. While I wouldn't pay too much attention to the growth numbers, as this is still within the first year of launch, so you're comparing with extremely low numbers. Reporting SEK 6.6 million in sales during the quarter is clearly indicating the scalability and the transformative potential in OssDsign Catalyst. This performance has certainly exceeded our expectations. Shifting to global sales contribution by franchise, as you can see here, very strong Catalyst numbers also mean that bone graft actually represented 38% of sales for the quarter, so a big chunk of our business. For the first nine months, it's 25%. This means really that already in the first year, that OssDsign Catalyst is now a very meaningful part of the business.
And also, as it has higher gross margin, it also positively impacts both profitability and cash flow. So those were the figures. I'll hand you back to Morten.
Thank you very much, Anders. So I want to walk you through some of the highlights that we also announced during the quarter and after the quarter ended. If we start with the first line extension of OssDsign Catalyst, I do want to add a few words to that. It's a new 1cc size targeted at additional procedures aimed at cervical spine, so the upper part of the spine, but also for potential usage in smaller extremities. We are expecting to launch this product latest in the first quarter of next year. And I just want to emphasize here that our strategic focus fully is on spine surgery.
But as we also know that a number of foot and ankle surgeons are high users of bone graft, and we do come across these once in a while, of course, we'll also make the product available to them. So why is it important with a smaller size? Because, you know, not surprisingly, ASP, of course, is lower on a smaller size. But the one cc extension is strategically important for a number of reasons. First and foremost, it completes the size range of OssDsign Catalyst, which now ranges from one to 10 cc. So we are able to cover all spine procedures. It also broadens access to procedures we are not really in today in cervical spine and in the smaller extremities that I talked to previously.
Having a complete size range certainly also increases competitiveness in hospital approval processes and also allows us to deepen our surgeon usage, as essentially, if we can provide a full size range, then a surgeon will not need any competitor products on the shelf. The 1cc also brings a specific opportunity to target what we call ASCs, ambulatory surgery centers. Many surgeons work part-time in some of these centers, and this will simply allow us to reach broader into the surgeon population, and as we already know and hear from most surgeons that handling is one of the absolute best features of OssDsign Catalyst, it's all about getting surgeons to try the product, and once we do, we, of course, hope to get them to champion the full range in their main hospitals. There is also another opportunity that is more mid to long term.
But of course, if we ever wanted to expand into other orthopedic disciplines, then certainly 1cc also has application areas in other areas such as trauma, sports medicine, and upper extremities. A week ago, we also came out with the first post-market safety report on OssDsign Catalyst that shows 0% device-related complication rate and therefore strongly supports the product safety profile. During the period, which is from launch in August 2021 until the end of August this year, we sold 511 units of OssDsign Catalyst, and only four complaints were reported. However, no complaints were device-related, nor have any device-related adverse events been reported. And therefore, we are extremely happy to report a 0% device-related complication rate. So why is this important? Well, when launching a new product, it is a Class III device, surgeons will always ask about the safety of usage.
Having this on record, on paper, to share with surgeons, of course, is something that we are incredibly pleased with. We know that this will resonate very well with surgeons who either consider using our product or are already using it as confirmation. Together with other clinical initiatives, solid data like this will continue to strengthen our competitiveness and our ongoing commercialization of OssDsign Catalyst in the US. I also want to talk a little bit to cranial because we recently had a scientific paper published. It is made by an independent clinical research team in New York led by Dr. Rami, who reported results from a retrospective study which was published in World Neurosurgery. The study, which is the largest US single case series to date, evaluated treatment outcomes in 18 patients who received OssDsign Cranial PSI between February 2019 and February 2022.
The evaluation shows that cranioplasty was successful in all patients and that only minor post-operative complications were recorded, all unrelated to the implant. At a median follow-up of six months, no patient had suffered implant-related complications such as reoperation or explantation due to infection. Furthermore, the cosmetic result was either good or excellent in all patients. The results that we're showing here, therefore, once again confirm the solid clinical outcomes that we also reported in our post-market surveillance on Cranial PSI. It adds to the growing body of peer-reviewed literature supporting Cranial PSI. A little bit as a segue to that, as always, I also want to give you an update on the clinical programs where we are seeing some very solid progress. For Cranial PSI, as you know, we're focusing on two things.
It's the post-market surveillance data, which will come out before the end of this year in an updated version, and it is also building a U.S. cranial registry, which we're working on right now. The U.S. cranial registry, we hope to go live with in the first quarter of next year. For our bone graft franchise, we've now completed all patient enrollment in TOP FUSION. There are now a number of patients that have completed their six-month follow-up, and we've also just received the first patient at one year. I think very importantly here, what we have seen is 100% what we call follow-up compliance, or said in another way, we have 0% loss to follow-up, meaning that every single patient has come in as per the protocol for the schedule of follow-ups that they needed to have.
That, of course, we are extremely pleased with because that ensures that we have continuous data recorded and, of course, ultimately aim to get minimum 15 evaluable patients out of that study. PROPEL is also now going at full speed, and as we mentioned, we hit the milestone of 100 patients ahead of time. More sites are currently included, and we hope that patient enrollment will continue to increase as we look forward. The sooner we collect clinical data, the faster we can simply generate publications with clinical evidence, so this remains an absolute top priority for us. We also provided some guidance and some milestones for the second half of this year, and we're extremely pleased to see now that all the guidance that we set out, the milestones that we communicated, have been delivered on.
As we also hit all milestones in the first half of the year, it now means that we have ticked all the boxes that we communicated in 2022. Of course, we won't stop here. We will keep pushing forward but that, of course, is something that Anders and myself are extremely pleased with that we're now delivering to the promises. I also just want to point out that the results shown today and the milestones that we have achieved have all been done despite a backdrop of a highly continued depressed market. The Elective Surgery Index is still only around index 70 in the U.S., which for context is the same level as it was a year ago, and it actually means that the underlying market as such has not improved since April this year when it recovered after Omicron.
We are, as many of you are, of course, aware, as Anders mentioned earlier, continuing to also see staff shortages impacting our capacity. This is omnipresent in both U.S. and Europe, although we are seeing some more robustness in the U.S. as many spine surgeries take place in the private clinics, and we therefore see the biggest impact on the cranial franchise, and in particular in Europe, which, of course, means that our international business as such is more exposed to the ongoing risk of staff shortages. Last but not least, as many other companies, we are, of course, also seeing longer lead times on several raw materials. At this point in time, as we also said after Q2, we handle this extremely well, and we do not see or expect any material impact on the business in the short term.
So going forward, we will continue to execute on the strategy. It is clearly working with the numbers we are reporting today and the growth profile the company currently has. So the five priorities that we shared with all of you in the beginning of last year still stand, and we are working according to those day in and day out. As a final remark before we go to Q&A, I hope everyone like us really sees the momentum and the acceleration that we have in the business right now and are pleased with the Catalyst commercialization and the results that we shared today. With more products and more clinical evidence in the future, we clearly expect to see further growth acceleration.
In a market that remains suppressed, staff shortages, cancel and postpone elective surgeries, and certainly not at a level where it was pre-pandemic, we are extremely satisfied with the overall performance in the quarter. It also means that we remain confident about the future sales trajectory for OssDsign. We have clearly turned a corner in the company with a stronger product offering and greater scalability, which ultimately will accelerate value creation. With that, I want to thank you all for listening to the presentation, and I'll hand over to the operator for questions.
Thank you for that presentation. Now we'll jump into the Q&A section. We'll start with the first question. Your year-to-date sales and Q3 sales for the orthobiologics? Is it possible to share the per-quarter financials so we can see the quarter-on-quarter growth, or at what rate it grew from Q2 to Q3?
Anything is possible.
But we show this the same way we showed the geographic split to be consistent with the other numbers.
And if I can just add, when we are walking through the last 12-month slide that Anders shared on the U.S., you can see clearly the split in the franchises on that, which will also give you an idea that the acceleration primarily came in from Q2. We launched technically in August of last year. As many of you know, you need to go through VAC approvals. In a normal world, that takes about six months, a little bit longer these days. But that, of course, means that we only really started to, I would say, sell probably from Q2 and onwards. Anything beyond before that was fairly minimal.
Okay. Thank you. We'll take the next question. Could you remind us of the revenue recognition of Catalysts?
Is that being booked when the product is used in surgery or when it's shipped to customer? And if it's the former, how many units have been dispatched to hospitals?
Well, that varies a little bit from customer to customer. We book it when we sell it, which means that if it's a customer who buys it outright and keeps their own stock, revenue is recognized when we deliver it. But for most customers in the U.S., we actually keep consignment stock, which means we just provide the goods. It sits on their shelf, but we still own it. And then revenue is recognized when it's used.
Okay. Thank you. And have you received any specific feedback from surgeons regarding Catalyst? And is there any pushback?
I think the normal pushback, which we also talked to about our post-market safety, is the very first question you get from all surgeons is, how many has been used and who else is using it?
I think that is by far the biggest question we get, which we, of course, with the post-market data we have right now, really can have a meaningful conversation around and show surgeons. The other one is quite natural. They're asking about clinical evidence and how are patients performing that have had the treatment with OssDsign Catalyst? As we also shared last time, of course, we are already using some of the patient data from TOP FUSION to share with surgeons on the NDA. But I think those two are the not usual suspects in terms of questions you get when you are introducing a new product.
Is it safe to use and does it work? And right now, people are really buying into our preclinical data. They like what they see on the images that we have so far from TOP FUSION relative to bone growth at three and six months. But I wouldn't say we haven't seen any real pushback as such other than, is it safe to use and the clinical data to support it?
Okay. Thank you. And is there a theme of surgeons replacing a specific product with Catalyst, or do you experience market share gains from basically all alternatives?
Yeah. I can say, I mean, all spine surgeons in the U.S. today use some kind of graft, either standalone or mixed with something else. So in 99% of the times when we get OssDsign Catalyst off the shelf and in use, it is because some other product is going away.
So yes, more or less every product that's being used would be a market share gain.
Okay. Thank you. Is the new smaller 1 cc option of Catalyst something that has been on your agenda for a while, or is it rather a result of surgeons requesting it?
No. I mean, I'll be honest, this was already part of the deal model when we acquired Sirakoss. In the company, we have more experience in biologics and spine, actually, when you look at years of experience relative to cranial. So we all knew upfront that you need to have a complete size range to be probably competitive. So that is no new thing that's been on the agenda for a long time.
For Cranial PSI, has the surgical environment become more favorable in terms of stability, or are you seeing a relatively volatile environment holding back utilization?
I mean, overall, as we mentioned in the presentation, it's highly volatile. I think many people don't appreciate or understand maybe that once a hospital or a healthcare system even drops, say, 5% or 10% on capacity, that already triggers a prioritization of therapeutic areas, and we know for a fact that the acute, which is the brain, the decompression of the skull to let the brain swell, that is the acute phase where you don't need an implant. That needs to be done, but once that's done, actually, the urgency of getting a new implant in is not that high. Patients can walk around potentially with a helmet for a longer period of time, so no, we continue to see a highly volatile environment.
Only over the last couple of weeks, we've seen more hospitals unable to operate in France and in Germany simply because they don't have the OR capacity to continue. So no, that is still a highly volatile environment. And I would say quite similar, actually, to the environment we had during 2021.
Okay. Thank you. What's your view of the current cash runway? Do you think it's possible to raise money from bonds or equity in this market?
Well, it happens all the time. So yeah, I think that's definitely possible. There's been a lot of equity raises in the last three or four months.
Correct. Thank you. It is typical to see a sort of S-curve adoption rate with this type of product, I believe.
If you look at sales to early adopters of Catalysts, has this been the case, or have they typically been adopted for broad use earlier than you thought?
It depends exactly how broad use is defined. I would say typically what happens is because in order to get approved in hospital processes, you need one surgeon to champion your product. Sometimes you have multiple surgeons behind the product. But I would say the typical process is that you have a surgeon who will champion in the so-called VAC approval processes, get it on the shelf, start using it, and then you broaden out from there. So I think you'll see. I'm not really sure what they mean with the S-curve. That's typically not how I see commercialization taking place.
That is a slow in the beginning and then an accelerating as you get more and more surgeons in and as you start to broaden out within those hospitals where you approve.
Okay. Thank you. Is there a difference in reimbursement levels in the ASCs setting? And would you set a different price per cc in that setting?
I mean, no. Typically, as you know, in the US, the reimbursement is on the full procedure. Having said that, the procedures typically tend to be a little bit smaller in the ASCs. It is something you need to be mindful of. For now, we haven't seen any price variation between that segment and any other accounts. But we do know for hardware and so on, they do tend to have a certain level of price difference, but not for us so far.
Okay. We'll take one last question.
Is there something that you're looking forward to in 2023?
There are many things we look forward to. No. Of course, right now, we look forward to continuing the acceleration that we are seeing right now. Hopefully, we will see an improvement of the situation for our cranial business and that volatility we just discussed. And then clearly, we look forward to seeing Catalysts becoming an even bigger part of the company, accelerating more and start to contribute because of a higher gross margin, even stronger to the group. And then, of course, our clinical programs that we are now is a strategic investment, spending a decent amount of money on clinical programs. Of course, we are looking forward to seeing some of these studies coming to the one year.
We are also expecting maybe the first white papers to come out of PROPEL in the second half of next year. So another exciting year, I would say, we are looking into. But right now, we are, of course, very pleased that we are ending the year with so strong momentum that gives us a much higher degree of confidence into next year.
Okay. Thank you very much for presenting today. And big thanks to all of you who tuned in for OssDsign's Q3 presentation. I hope you have a great rest of the day. And thank you and goodbye.