Hello and welcome to today's Web Call with OssDsign. We are CEO Morten Henneveld and CFO Anders Svensson, who will present the report for the First Quarter of 2025. After the presentation, there will be a Q&A, so if you have any questions, you can send them in via the form to the right. With that said, I hand over the word to you guys.
Thank you.
Thank you and welcome. Good morning, everyone. My name is Morten Henneveld. I'm the CEO of OssDsign. As always, I have our CFO, Anders Svensson, with me. Today we want to walk you through our first quarter results. We have also come a very long way in a short amount of time with our clinical evidence and publications. Today's call will also put some extra emphasis on that. As always, when we do these presentations, the normal disclaimer. If we look at the highlights of the first quarter, firstly, we continue to see strong growth, and we follow the same trajectory as in the previous quarters. Secondly, as can be witnessed by the numbers, we continue to see more and more operating leverage in this quarter, and we are showing by far the best underlying result in the history of the company.
Thirdly, also as in previous quarters, we continue to see a very healthy development in the strong fundamentals with further access in the U.S. market. More and more approvals, increasing customer base, as well as more usage of OssDsign Catalyst within those accounts. Last but certainly not least, just after the quarter ended, we came out with an additional two publications. One preclinical study showing best in class potency of OssDsign Catalyst, and we also came out with a long-term follow-up on our Top Fusion study showing 100% fusion rate. I will now hand you over to Anders to walk you through the financial results for the quarter before I come back and spend some more time on our clinical programs and evidence.
Thank you, Morten. Just before we go into the numbers, I just want to call out that we have now operated as an orthobiologics pure play company for a full year, meaning we now compare to the same business last year as opposed to earlier when we had to compare each quarter to previous blended period. As Morten mentioned, we continue to see high growth in the company during the quarter, reporting growth of 65% compared to the same period last year on a reported basis. On a constant currency basis, the organic growth came in at 60%. As we have also said before, growth will not necessarily be linear, but will more take the form of a staircase where we increase accounts and users in one quarter.
We may slow down somewhat in the following quarter as we get all those new customers up and running and then go back to increasing again. I appreciate that although we mention this, that's not what actually has happened in the last couple of quarters where we've seen a strong quarter-over-quarter increase. We're, of course, very pleased with that development. We continue to believe that the best way to look at the underlying momentum in the company is to look at the 12-month run rate, which we refer to as LTM. As you can see here, for the first quarter, it's a strong trajectory continuing, and the LTM momentum is up 83% year- over- year. We believe that's an excellent performance, so we are really happy about it. Gross margin then, in the quarter, it remained at a very high level after the good Q4.
We ended up at 96.4%, which is up 270 basis points against Q1 2024. We see that we are able to maintain a very strong ASP level in the market. There were no particular items affecting the gross margin either positively or negatively in the first quarter. Moving on to tariffs and FX effects then. We received many questions on the U.S. tariff effect as well as the fluctuations in the U.S. dollar SEK exchange rate, which has been quite brutal lately. We just want to touch on the impact of this just a little bit here. Now, if we start with the U.S. tariffs, as you know, we produce partly in the U.S. and partly in the U.K. where the final products are shipped from. The tariffs are now in effect, the original 10%.
We have seen the first impact, and we can confirm, as we have indicated earlier, that the impact on our financials is minimal to the point where we do not see any need to change any of the previous guidance that we have given. Moving on to the U.S. dollar exchange rate. As you know, we have seen some really big swings lately in the dollar, and the SEK has strengthened greatly against the dollar since February. This will naturally impact the reported sales numbers, particularly going forward, as we have 100% of our sales in the U.S. There was no such impact in Q1. On the operating results, however, we really have a natural hedge these days as most of our costs are now also in the U.S. We therefore see any FX impact on the operating result to be fairly neutral.
On a more general level, it's important to point out that swings in the U.S. dollar rate can impact also on the gross margin. For example, if we produce at a high FX rate and then sell those products, say, six months later at a lower level, this will negatively impact the reported gross margin as production has then been relatively expensive, whereas the later sales are relatively cheap, so to speak. Of course, vice versa. If the opposite happens, it will impact positively. It's also worth noting that this will be more relevant when you compare different quarters where these swings will have the biggest impact. On a full year basis, we expect this to even out a bit more. I will now hand you back to Morten to talk about the clinical evidence that we are building.
Thank you, Anders. I know we've discussed some of this a few times before, so I'll go a little bit quickly initially. I want to set the scene before we go into our clinical evidence and repository. If we first look at the challenge in spine surgery, it's simply how to overcome human biology. The clinical goal is to stabilize the spine and relieve pain. To do this, surgeons will use screws and rods and cages and other metalware to create space for the nerves, which decrease nerve pressure and pain. To have a successful outcome, you need to have fusion between the vertebrae as well as the interbody space, and therefore require a bone graft to deliver successful fusion.
When the bone graft is in contact with bleeding surfaces, which is what we call a vascular environment, typically at the edges, there will be natural bone formation due to blood cells stimulating this. However, where there are no blood cells in what we call an avascular environment, there is nothing biologically in the human body to drive that required endochondral bone formation in the center of the fusion mass, or for example, in the void between the vertebrae. If endochondral bone formation is not happening and therefore a fully bridging bone is not formed, you will not have a fusion and therefore not a successful outcome. That is the call of spine surgery. It is to build bone in the avascular environment. What we're seeing with Catalyst is exactly that.
It's a technology that drives rapid, reliable bone formation, including solid, this is what we call endochondral bone formation in poorly vascularized environments. Traditional synthetic bone graft will form bone in what we call a creeping fashion, meaning that they operate outside in, essentially from the edges towards the middle. The problem here is that it may never reach the middle or it may take so long that you will see adverse events occurring long before that happens. OssDsign Catalyst, on the other hand, which is some of the things that we have just given more evidence to, is working simultaneously inside out from the center of the fusion mass to the edges and at the same time outside in from the edges towards the middle.
This is something that was specifically tested, as you can see on the slide, where Catalyst grew almost four times as much bone in the center section compared to a traditional synthetic. When we look at OssDsign Catalyst, it is essentially state-of-the-art innovation when it comes to operating at nanoscale, where we've managed to get it all the way down to mimic native bone. It's also the only synthetic to be combined at a level that we are with silica substitutes, and therefore we can see it triggers what we call a dual bone formation pathway. With that challenge and background, let's move a little bit on to our clinical programs and what we are doing and what we have published to generate the evidence behind this. This is an overview of, I would say, the larger preclinical and clinical programs, and we have four studies here.
The first preclinical study, which is called the Bowden model, was published in 2020 and is now fully reported and published. A week after we made the product technically available in the U.S., we also initiated Top Fusion, which is our first inpatient study. That study is now also fully completed and published. The following year, we started our prospective spinal fusion registry called PROPEL, which is ongoing and now has more than 300 patients enrolled. As we have previously indicated, we expect to publish the clinical results for the first 100 patient cohort in the near term. We have also performed an additional preclinical study, which was published last month in what we call an ovine intramuscular defect study.
The reason for doing that is that it's an even more challenging model than the Bowden, and it essentially mimics a very extreme case of an avascular error in the human body. We'll come back to all of these in a second. What I really want to demonstrate here is the pattern we are seeing when it comes to clinical evidence, preclinical and real clinical evidence on why Catalyst is such a differentiated and brings something substantially new to the table. If we go all the way back to 2020, we published the first preclinical study, which was also the study used for 510(k) clearance in the U.S. market. We not only saw a very high fusion rate, similar to those of the well-known BMP2 drugs.
More importantly, we saw very rapid bone formation after six weeks, which was double that of the FDA gold standard autograft and 4x compared to the predicate device that we tested against. Last month, we then published a highly exciting new preclinical study, specifically comparing the bone forming potential of different silicate-containing calcium phosphate synthetic bone grafts, which was published in the peer-reviewed scientific journal of orthopedic surgery and research. The research, which was led by esteemed professors from the University of Aberdeen and the University of New South Wales in Australia, compared various synthetic bone grafts in a preclinical setting. The results were quite striking. OssDsign Catalyst emerged as the first clinically available synthetic bone graft capable of generating robust functional bone in a very challenging avascular environment at an early time point.
The study employed what we call an ovine intramuscular defect model, maybe a little bit technical here, but it is a sophisticated model that basically mimics real-world conditions. Over six and 12 weeks, the researchers observed the performance of three commercially available synthetic bone graft substitutes. The result was very clear. OssDsign Catalyst outperformed its competitors, demonstrating significant functional bone, as mentioned after six weeks. Therefore, when we look at this, it is not just a scientific advancement. It is a very practical solution that really could transform patient outcomes. The ability to stimulate new bone growth in challenging conditions, of course, also opens up to new treatment possibilities for surgeons. Similarly, if we move on, when we published our 12-month data from our first clinical study, Top Fusion, in January of 2024, we not only again saw a very high fusion rate of 93%.
We also followed patients very closely, and after three months, we could see that every single patient was either fully fused or partially fused at a very early time point. Of course, last month, we followed up with a long-term 24-month result from the same study showing that fusion rate had now increased to 100%, meaning that all patients had a successful outcome. On this slide, you could also see the progression to fusion. I want to point out here, as you can see, that after only six months, we had 2/3, approximately, of all patients fully fused. The same observations have been consistently confirmed in the case reports that we've either published or written up as white papers, of which you can see two examples here.
To sum it all up, the very clear pattern we are seeing across numerous preclinical and clinical publications, studies, and registries is that we have now consistently reported not only strong outcomes, but also an incredibly fast speed of fusion that significantly outpaces what is typically seen in the market, which is something that surgeons also observe and are, of course, attracted by, and something that patients benefit from. If we take a step back, despite only being active in the orthobiologic space for a little more than three years, we have already built a very solid repository of evidence with a total of 14 preclinical and clinical publications and white papers.
I think it's worth pointing out, when we entered 2024 in January of last year, we did not have a single piece of clinical evidence, but had commercialized solely on the preclinical evidence from the Bowden model. During the last 16 months or so, we've therefore generated more than 10 publications and white papers, which is something that I'm incredibly proud of and which is crucially important to the company, not only now, but also in the future. We are doing all the right things here and setting ourselves up for future success. That is, of course, also knowing that we still have 90% of the U.S. orthobiologics market within spine, which is still on tap. Of course, while we are very pleased with the progress today, we are a lot more preoccupied in how to gain access to the remaining 90%.
Equally, as we contemplate entry into adjacent segment in the future, where we are already cleared, all the clinical data that we're generating will also help us when we decide to put some more weight behind future expansion. To sum it all up, you've all seen this slide before. We can conclude that things are going well. The company is on a strong trajectory with strong fundamentals in place. We're seeing a high growth momentum. We are maintaining a very high gross margin. As I tried to demonstrate today here, we have a highly differentiated offering to the markets that solves the core clinical challenge in this avascular space. We are continuously building further clinical support evidence to support this.
We have an enormous on-tap potential, and it's therefore all about continuing to execute on the four strategic priorities, which you know well, which is to build access and coverage in the U.S. market, leverage the powerful Catalyst technology to bring new products to the market, build clinical evidence, and gradually over time expand into adjacent orthopedic segments. I think with those words, I want to thank you all for listening to the presentation and hand back to the operator who will handle questions.
Thank you so much for the presentation here. As you mentioned, we will now carry on with the Q&A here. The first question here, can you elaborate on what is driving sales? It's quite hard to get a good picture with such little information. Yeah, I mean, we don't necessarily disclose all the operational elements of the business.
I can confirm that growth is driven, as you would expect, by two things. It is access to new accounts and onboarding new surgeons, but it is also driven by an increasing usage by surgeons in the accounts we've already approved.
Thank you. Has there been any pushback on price and have any customers decided to stop using Catalyst?
You always get pushback from customers who want to pay less, but we don't really accept that. So we've managed to maintain and even excel in terms of average sales price in the market.
Thank you. Can you elaborate on the expected patient population from PROPEL and how it may impact results from the first 100 patients?
If we go a little bit step back, the reason why a registry is very meaningful, not just to us, but also to surgeons, is that when you're doing a randomized control study, the patients are always very clean, right? They can be on NSAIDs. It's typically a very simple procedure. A registry, on the other hand, is a true reflection of the real-world population. We know when that publishes that it's going to be a much more complex cohort. You're going to have patients suffering from obesity, diabetes. You're going to have smokers in there. You're going to have multi-level procedures taking place. You're going to see several comorbidities with patients.
It will be a much more tougher and complex cohort that we will publish on than what you typically see in a randomized control study, which is, of course, something that everyone needs to be mindful of when they start to compare outcomes. As I said, we are waiting for the publication to come out, which we expect in the near term, and then we can talk more about that.
Thank you. What is your confidence level that the cash position will be enough for you to reach a positive cash flow?
That's a tricky one to answer because, of course, that depends on so many factors, not the least what our board decides for us going forward. I think if you just go back to the report, I think we feel pretty confident with the cash we have right now, at least in the medium term.
As you can see, looking just at the cash flow in Q1 reported, that was quite substantial. If you see what we've in our analysis there, and you take out the quarter-specific payments which occur in Q1, we're down to around about SEK 11 million, sorry, SEK 8 million, which is a fairly similar level to what we had in Q4 and Q3 last year. I think if you start at that level, you can see that that's going to last for many quarters. We do not see any immediate urgency there.
Thank you. Could you highlight how the momentum looked through the first quarter? Anything that surprised you, especially interested in the finish of the quarter and potentially also how Q2 has started?
No, I mean, we are seeing a good, solid, strong trajectory throughout, and we've also seen that continuing into the beginning of the second quarter.
I think as in previous quarters, we're seeing a good steady momentum.
Thank you. How are you seeing investment needs of the company from here? What can you share on timing of expanding to further segments such as extremities? Also, how are you looking up on the regions outside of the U.S.?
That is a few questions in one. Let me try to answer it. We have a very large on-tap potential in spine orthobiologics, where our focus is. We are preparing to enter new segments. We are collecting data. As you know, we have had users, in particular in the foot and ankle segments from the very beginning we launched the product. Of course, when exactly we will put more weight behind to enter that at full force, time will decide. That is not something we can guide on.
When it comes to new markets, we see a huge potential. I sound like a broken record here, but we have 90% of the market that we're not even addressing in the U.S. So we will remain U.S. focused for the foreseeable future. When and if we decide to go into markets later on, that will eventually also depend on what clinical data is required, in particular under the new MDR regime or any other markets in the world. For now, in the foreseeable future, we will be an entirely focused U.S. company.
Thank you. What clinical milestones do you think we should look out for in the coming 12 months?
The big one clearly is the PROPEL first-patient cohort. It's a first large cohort we'll be publishing.
It will carry statistical significance, and it will be an absolutely true reflection of the real-world population, as I mentioned before. To me, that's the big one. Of course, right now, we have more than 300 patients. We've decided to keep building that registry. It is extremely meaningful to us. We're also seeing the FDA taking a more flexible stand to using registry data for further indication expansion, potentially. We will keep publishing not only case reports, but also cohort studies from the registry. I can't say exactly which one right now. The next one will be the first 100-patient cohort.
Thank you. Did anticipation of tariffs lead to upfront demand in Q1?
Sorry, I'm not sure what you're saying.
Yes, I can repeat. Did anticipation of tariffs lead to upfront demand in Q1?
No, not at all.
I mean, the tariffs have such a small impact anyway, so I don't see why that would drive demand. They have the prices they have, so.
Thank you. How is the underlying market developing in the U.S.? What are the key trends?
I think we're seeing very much. I don't know if you would call it a stable market these days, but at least within the business we're operating in, I think it's fairly stable. I think we've seen more stability around the hospitals. Post-COVID, we saw a number of bankruptcies, hospitals posting really bad results. I think it's important to point out that we are typically dealing with a patient population which is + 60 years old. That population will only grow very, very significantly, not only tomorrow, but many, many years out.
On a global scale, it's set to double in the next 25 years or so. We are seeing a very healthy volume demand many, many years out in this industry.
Thank you. What is included in the net financials, SEK 1.9 million minus? Do you want me to repeat the question there?
Okay, okay. I just had to look at it, sorry.
That's just basically exchange rate effects from the balance sheet.
Thank you. How do you see your operation cash flow developing during the year compared with the -SEK 25.9 million in Q1?
I think Anders already answered that question, right? We have a number of items that occur in Q1, which is the bonus payment every year, and also some extraordinary relative costs coming in.
I think Anders guided that the underlying number around SEK 8 million-SEK 8.9 million, that's the true underlying number that people should be thinking of. Yep.
Thank you, thank you. Let's see here. How has the weaker USD currency affected sales and results in Q1?
First of all, it isn't weaker. It's stronger. It hasn't really affected sales positively. I think people get a bit confused because the dollar has come down so much from mid-February, early March onwards to a very low level now. It was extremely high all the way through January and half-February. If you look at the average for the quarter, it was higher than quarter one last year. We actually had a positive effect. As you've seen from our growth numbers, we had 65% reported growth, but only 60% if we reported in the FX adjusted.
On the profit or EBIT line, there isn't really much impact either way because we have so much cost now in U.S. dollars that it's pretty much a natural hedge. There is not going to be much effect there.
Thank you. Will you report currency-adjusted key figures on sales in USD so that it's easier to track sales going forward?
No. We are not going to report key figures on that level. We will mention how it affects sales, how it affects gross margin, and how it affects cost and EBIT as we do now. We are not going to break down and report new key figures.
Of course, as we have done for many, many, many quarters, we are reporting sales growth on a reported basis and on a constant currency basis. That essentially answers that question.
Thank you.
Moving on to the last question here, could you come back on your hiring ambition in the U.S. in the short term and the medium term?
I think we're not really disclosing exactly what we're hiring. What we do know is that we are building our production capacity right now, knowing that we're going to have to start producing into 2026 demand. That may drive a need for a very few number of people. As always, we have more approvals than we can necessarily chase on a day-to-day basis. You'll probably see us increasing the number of salespeople by a very small amount. It's going to be very moderate overall.
Thank you so much for the presentation here today. Thank you all for tuning in. I wish you a pleasant week.
Thank you.