All right, welcome everyone to this live Q&A with Paxman, which released its Q1 report this morning. I have the pleasure of having Richard Paxman here, CEO of the company. Welcome, Richard.
Thank you very much. Great to be here.
Yeah. Please go ahead and just give a brief summary of the quarter and the most important things.
Brilliant. Will do. I think we can all agree it's been an impressive start to the year, not only what we're producing on a financial basis, but I think the activity from, yeah, CIPN-related news, looking at the recent Dignitana acquisition, along with some other key points. I'll share those over the presentation. Just as a reminder, I think it's always important to keep a clear direction and what our vision is. It's our vision and goal to make sure that no matter where you are in the world, no matter what your income, no matter what your ethnicity, you have access to scalp cooling treatment. As we progress into the space of further side effect management, we'll be changing this vision, but with the same goal to supporting as many patients as possible around the world. The people are everything in our organisation.
I think those of you that are visitors before will see what a wonderful culture we have, an incredibly strong senior leadership team that continues to drive the business forward, offering shareholder value, but also supporting patients around the world. Very, very proud of what we're doing. We continue to add headcount, of course, as we grow. You'll see from Q1 2024 to Q1 2025, there has been some increases, and that will continue to increase at a reasonable steady level to really push and focus on that growth going forward. What's critical to me is ensuring that we maintain culture and also keep investing in our people going forward.
Looking at the results very quickly, I think we all know we ended up on a great year last year, 20% growth for the year and a SEK 50 million EBITDA, and we'll continue to push and drive that EBITDA margin. Looking at our growth for the first quarter, we reached our high sales to date, and we'll continue to push and exceed on that, but with about a 14.5% growth on prior year's quarter. About 17% growth came from the United States. I think it's important to understand, you know, we have seen some increases in operating expenses and personnel expenses, but that's about driving that growth, that future growth, the long-term sustainable growth that we're trying to achieve.
Taking a look at our net profit, of course, unfortunately, that was a loss for the quarter, but it's important to remember that was a forex loss as opposed to related to the activities of the business. Many of you will know, but we have large intercompany loans, and with the volatility of forex at the moment due to different leaders around the world, let's say, that does affect us, but it is at a moment in time and can change. Cash flow. We ended the year in a really strong position from a cash flow perspective, strong operating cash flow throughout the year, and then we started the year with decent operating cash flow too.
I think it's important to understand, though, overall, without the investment that we took in March, there was an outflow of cash, and that's really related to currency outflow of about SEK 2.6 million. We also made continuous investments into CIPN and the U.S., but also we changed our banking facility. We have reduced our overdrafts and cash availability and changed our banking facility. Taking those things away, we're still showing that positive cash inflow going forward. We continue to perform well in all markets, although I think we can do more, and we continue to invest in those international markets, and we have a nice order book taking us into the next quarter, which is always good to have that longer-term view.
ADTR is a great KPI that we look at, and again, we're really showing some strong average daily treatment revenues, and that will continue to be a KPI driven by self-pay income in the United States and our insurance-based billing model. For 2025 focus, really looking at reimbursement in the United States, that continues to be number one, and we'll talk about that today. International growth, as I touched on earlier, commercialisation of CIPN is critical, and then that transition to a multi-product company in terms of our positioning and branding. I'll touch on two things today, which is reimbursement and commercialisation of CIPN. A reimbursement update. Some of you might have seen our direct provider income or our insurance-based billing model income was a little bit weaker this quarter. Part of that was a timing situation.
We had probably more stock purchased in December as opposed to Q1, and then Q2 started reasonably strong. If you actually look at the number of patients treated in this model, it was higher than Q4 last year. I do need to see it gaining some more momentum, but I think what's important is the conversation I'm having around the insurance-based billing model because the CPT1 codes are becoming much better, much stronger, and there is much more interest. I think by the end of the year, we'll start to really see those transitioning sites in preparation for our CPT1 coding launch in 2026. Coverage still remains strong, which is great. 74% of patients are getting covered when they're using our hub services.
What's really important to myself and my colleagues is that we're still able to offer a wonderful patient assistance program, making sure this program is equitable for all patients, not just those that can afford. I always talk about this. Some of you have seen this slide before. Coding, coverage, and payment. Where are we today? We've got two CPT3 codes. They're investigational, temporary. We need to change that. Average utilization across our systems at the moment is about seven patients per system installed with an average price per patient of about $1,400, giving us that roughly $12 million worth of income, give or take. Focusing on the three things, we've got the CPT1 codes. That was a great effort last year, although it took many, many years, but a good start, and that's the foundations to what we need to do next.
Looking at our coverage strategy, we've already started working on this this year and last year. We've seen positive movement in Palmetto. We've also recently seen a positive published educational article with CGS, that's Ohio and Kentucky. We're excited about that. It's a slightly different take than a CD, but also really confirming that scalp cooling is covered in those particular jurisdictions. We've got ongoing work with First Coast, which is Florida, a really good market, not only for Paxman, but actually more so on newly acquired Dignitana, where we should start to see some positive momentum at the back end of the year from an insurance-based billing model perspective. Our next targets, which we've just started, are NGS and Novitas. Really moving that needle for Medicare coverage, which then leads into our commercial payer strategy for coverage too.
Looking at legislation, this is a very hands-off approach from Paxman and Dignitana, but what we're seeing after the really positive New York bill that was introduced, we're seeing multiple other states across the country also introducing bills, which is very exciting. That is taking its own course without too much intervention from Paxman or Dignitana. The third pillar is payment, critical to making this whole thing work. As you're aware, we've already had conversations with MPFS, which is the Medicare Physician Fee Schedule. That's all more about the community oncology science office-based practices, and also the Outpatient Prospective Payment System. Both these groups we're working with, and they'll publish their proposed rules in July, a really key milestone for us. Watch this space. We're hopeful this will then drive further payment from commercial payers too.
If we get all these bits right this year, what we want to see is that improved utilisation. We've talked about how sites improve utilisation when they switch to an insurance-based billing model. Even if we went from seven patients to 14 patients with a higher average price per patient, we're looking at up to $30 million per annum. Now, I'm not promising a $30 million per annum increase by next year, but I think what you can start to see is that improved utilisation and stronger driving revenue than what we've seen over the last couple of years. We had a wonderful start to the year with a directed issue. Thank you for those investors that supported this. It was oversubscribed substantially. Great job by Carnegie, but 1.9 million new shares raising proceeds of SEK 120 million.
That's really set us up for the next few years with relating to our commercialisation of our CIPN device, investment into our new state-of-the-art facility. As we start to look at these new novel therapies that are causing hair loss, we've got the ability to do some basic research into these drugs. Following it up, we're looking at whether we can go colder or using topical interventions and really supporting that future scalp cooling ability. Big news, I think, last week, the 8th of May, where we confirmed our merger with Dignitana. Absolutely delighted to welcome Dignitana to our new group. I was out in London earlier this week, which was fantastic, meeting the team, and I'm incredibly excited about what we can do together.
We'll be working over the next weeks and months to see where those synergies are, to see how we can rationalize and ultimately make a larger, more profitable group driving not only shareholder value, but a much better customer and patient service than we do today. We spent the last 20 odd years competing, wasting our energies, speaking to the same people, and now we can collaborate and drive growth forward, especially with the oncoming of the CPT codes. Very excited about the opportunity. Again, I welcome all the Dignitana team. New product timeline. Our limb and scalp coolers, we've still got the ongoing studies. I was hoping to present the data a little bit earlier, but we're planning to present it a little bit later.
We're very excited about presenting this and want to make a big splash, which will really support our commercialisation and expedite our process. There's been a little bit of delay in some of our progress. We have now submitted our breakthrough device pre-sub to the FDA. We are building devices at the moment to make sure that we can then send them for regulatory testing in addition to starting clinical trials with Dana-Farber. A slight shift in our commercialisation date for us internally, but not particularly externally. We are well on track, which is exciting. Nearly coming to a close, but our new building update, hopefully some of you have seen this. It's very exciting. It's not there yet. 2027, in reality, will be a moving date, but this will allow us to deliver on that growth in an appropriate space for our team, offering good well-being.
We'll have two production lines, appropriate warehousing, and an R&D facility, which is an exciting opportunity for the future, supported by our combined authority in the north of England. Thank you very, very much. I'm very excited for the year ahead and look forward to some questions from yourself and also the audience.
Great. Thank you very much, Richard, for a great presentation as always.
Thank you.
I received a bunch of questions here. Maybe we can start with CIPN. How big is the market opportunity here compared to scalp cooling?
Yeah, I think it's an interesting question. You could potentially say it's smaller than scalp cooling because you're only really looking at this moment in time at taxane-based therapies as opposed to all chemotherapies. There are some of the new novel therapies that do cause peripheral neuropathy, but we're still trying to understand the mechanisms there.
In terms of numbers, smaller, but actually, I think speed to market, acceptance of the technology, and the unmet need will be far greater and faster than scalp cooling based on its debilitating nature and its cost also in terms of what it costs the healthcare system and the quality of life burden on the patient.
Yeah, right. And how much one-offs did you have in the quarter related to the Dignitana offer? And maybe if there's any general dynamics in this acquisition that you would like to talk about.
Sorry, how many? Apologies.
How much one-offs you had in the quarter?
There is no, yeah, there is no costs associated with the Dignitana takeover in Q1. There may be some slight costing in there, but I would not suspect so it will be in Q2. That is when the transaction actually happened.
All right.
What one-offs do you expect in Q2?
Of course, you've got the legal fees associated with it. I haven't got an exact figure, and I don't think we should probably talk about it exactly. It will be negligible in the bigger picture of things. It's an investment and shouldn't be overly concerning. We work with some good professionals who are supporting us in the right way, cost-effective approach.
Yeah, perfect. When it comes to FX, what do you expect going forward here?
Good question. If I knew that, then I'd probably be able to do some decent hedging and make some decent money. I think we can all agree there's some volatility in the market, which is pretty hard to predict at the moment. We've seen some weakening, then strengthening of the dollar. The pound's probably stayed relatively weak.
You've seen some great strength in the SEK. Trying to manage that forex exposure on what is an intercompany debt is very difficult. I can't give an appropriate answer. One might go one way and the other might go another way. It's hard to give an answer, but we will always look to hedge appropriately if we can, but these are balance sheet items which prove some difficulty in hedging.
All right. Going into the systems here that you have installed, how many do you have installed in the U.S. and globally?
In terms of installed systems for us in the United States, we have over 600 systems. Dignitana has just under 300 systems, I believe. Three hundred locations, should I say, about 470 systems or something like that. A nice big increase for the U.S. market, especially if we're looking at improving that utilisation.
If you then look at the rest of the world, probably another 3,000, but remember, we don't generate recurring revenue streams from most of those systems other than in Canada, Mexico, and Japan. Hopefully, we'll change that. Dignitana, on the other hand, does have some product out there which is generating recurring revenue streams. We'll look forward to learning more about that model and implementing it also.
Yeah, great. You're talking a lot about reimbursement in the U.S., obviously, but outside of the U.S., how is the reimbursement situation here?
Yeah, it's quite different because we look at, and I won't talk about Sweden because I've got a limited knowledge and we have limited traction, as you all know. If you look at the U.K., for example, we've just sold capital equipment, so it is already covered and paid for.
And then many other markets, we just sell capital equipment. What we are starting to work on, though, is some key markets where we're looking at reimbursement, where there's a potential high level of growth and where we see a potential of some recurring revenue streams. Watch this space. It will take some time, but as we can now divert a little bit of attention away from the U.S., not a lot, don't worry, we can start to look at France, look at Germany, what does that reimbursement landscape look like? These are big tasks for small organizations.
Yeah, yeah, makes sense. Can you elaborate more on the currency loss of SEK 11.5 million? Are you concerned over the currency fluctuations we have seen?
We thought there might be some forex questions. I'm not concerned, no, because again, it relates to that balance sheet item.
We raise the money in Sweden in SEK. We then lend the English company money, which is then sat in sterling. What we do then is we lend the U.S. entity money, which is then in U.S. dollars. The U.K. company in the middle manages the forex exposure typically. What you see is then any shifts either way affecting forex. There was about GBP 1 million worth of forex negative on both sides, losses on the dollars, losses on the SEK. What happens is that debt, intercompany debt, has a big forex movement. Ultimately, it has no impact on cash. It has no impact in reality other than the bottom line at a point in time when we account for it. Today, it could be a totally different situation. I ask people not to be concerned about that.
When we get to a point where we can start to hedge those intercompany debts and pay them back and move them around, we will do. It is likely there is always going to be some forex movement in that circumstance.
Yeah, that's a great explanation. Do you see it as optimistic or likely that you would receive a breakthrough device designation for your CIPN device?
Good question. I am always optimistic if you've heard me speak before, of course. The key for me is on a breakthrough is this reimbursement pathway. It is worth a try. Yes, I think we are being reasonably optimistic. If you look at the definition of what a breakthrough device is, we tick all those boxes. It is important we try. If not, it is still not the end of the world. We will still proceed with a 510(k).
The 510(k) is still an expedited route to market. The breakthrough will not slow us down, speed us up in any way, I do not believe, but it will give us faster access to reimbursement. Thankfully, based on our knowledge, both internally and with our external consultants now in reimbursement, I think we will have a much quicker pathway to getting this paid for anyway.
Yeah, great. What is your overall view of the U.S. tariffs? How do you plan to minimize a potential impact?
The joy is tariff conversation. I am delighted with them, of course, now. What we are doing is, I think there are a couple of things. Thankfully, it is 10% in the U.K. today. Must be our good relationships with Donald. If we look at our capital equipment deployed, relatively low cost transfer price, 10% effect. That 10% is amortized over the landed cost of the device.
We depreciate it over five years, even though we've got 10 years lifetime of that device. Yes, it affects our margin, but over a reasonably long time, it's based on our depreciation as opposed to cost of goods sold. If we then look at our cooling caps that we sell to the U.S., we sell them at $300, being very open with you, to our U.S. company. That's a $30 cost. We are then mitigating some of that with a price increase, which unfortunately hits the U.S... consumer, the U.S. patient, which I'm not happy about. The reality is we must maintain our margins to keep growing and investing. We are mitigating it appropriately, but don't foresee it being a major issue for us, thankfully.
Right. As you know, merger with Dignitana, do you see any need for increasing the staff base?
I don't see a need for increasing the staff base in terms of field teams, no. I think we're working through a process of understanding both businesses, where the synergies are. No, I don't see we would be adding to the Dignitana team at this moment in time. What I think the huge benefit is, is those field teams in the United States, those clinical teams, can really support our commercialisation of the CIPN device. We've got a relatively small team in the US at the moment. We will double it with the Dignitana team. That gives us that really good geographical spread for 2026.
Great. Now that there is a selected partner for the topical solution product, is it possible to give a reasonable timeline for when the product can be commercialised?
Will any regulatory approvals be required to include this product with scalp cooling?
Yeah, so we've had some back and forth recently, actually. We've got our first samples of the formulation. We still need to make a very definitive decision on the regulatory route. We're believing it's a cosmetic at the moment, so we're not making claims. What's important is I am not distracted at this moment with a launch of another product. We're taking it steady in reality. 2026 is when you will see some more momentum with that.
The news about China comes and goes. You get your hopes up, and then it's quiet for several quarters. What is the status in China now?
I like that question. Gosh, I mean, if you've ever been through this process in China, you'll probably realize why it goes quiet and then not.
We had some issues initially with our contracting with the inappropriate partner, being very transparent with you all. I think that you have to be confident that you're using the right people. We took our time. We're now then going through the NMPA process, which in itself is difficult. Many people would argue, I mean, there's similar harmonisation to the standards, etc. There's so many nuances with the Chinese regulations that a lot of the things that we've already done in so many global markets just don't apply. We've been going down a route of looking at whether we can show substantial equivalence to our device that we used in clinical trial in the United States to then be able to use the clinical data for approval. That's not possible.
Now we need to, first of all, make some modifications to our device to meet the regulations in China and then start planning for a clinical trial. These things take time, and we've put a lot of effort into making sure that we're trying our best to not have to do a clinical trial because that takes additional time. We believe we're going to need to do a clinical trial now.
All right. Great. How much does it cost for you to install a system in the U.S.?
We look at a landed cost of about $7,000, a little bit less. That includes making the machine, shipping the machine, and packing, packing and then shipping a little bit more now for the tariffs, and then the sort of commissioning installation of the machine.
Great.
That was actually all questions, but maybe you could wrap it up with key triggers going forward, what you expect in 2025.
Yeah, absolutely. So I think keep an eye out for what we'll be doing with Dignitana. We'll be publishing together in Q2, which is really exciting. We'll keep people updated in terms of what that integration piece looks like. That cultural fit for me and the people piece is really important at the moment. We'll do the technology and those sort of things after. Looking then at insurance is critical. July is a key date, but we'll also be providing some updates throughout talking about coverage, a bit like the MAC strategy I've just talked about. November will be the final rule, so that would be key. Those are two key milestones that you need to be aware of.
Throughout that period as well, hopefully, we're driving the revenues for IBBM. Finally, hopefully, Q3 and Q4, we'll have some information on CIPN, so clinical data for CIPN, which is exciting. Q4, an update on where we're at with submissions. Big year, really big year, but very exciting year.
A big year, but even bigger year next year.
Yeah, absolutely. That's the plan.
Thank you for joining us, Richard.
Thank you very much. Really appreciate it.