Good morning, everyone, welcome to DNB Carnegie. My name is Maria Karlsson Osipova, I am an analyst here at the bank. This morning, it's all about Paxman, we're going to talk to Richard Paxman, CEO of Paxman, about your Q4 report, which has been out now for an hour or so. Welcome, Rich
Hi, good to be here, and, I'm not sure how many of you will have had quite the chance to read it as yet, but hopefully, I can give you some insight personally.
Yeah. Please, take it away. We'll start with your presentation about the numbers and about the quarter, then we will move to some questions. Please, I'll remind you to ask questions in the chat. I'll make sure to read them.
Superb. Right, great to be here, as I said. Looking at the highlights for the quarter and really focusing on sales, group net sales reached about SEK 84 million compared to SEK 66 million the prior year. Of course, a large proportion of that really related to the work we've done through the acquisition of Dignitana, about SEK 18.6 million of that, and the rest were some small amounts of growth. I think what we should do is, though, look at the year's sales, SEK 330 million compared to SEK 253 million last year. Again, a large proportion of that growth was related to the acquisition of the Dignitana Group. We saw organic growth of about 5%.
I think we should also consider the Veterans Affairs sales as well, the prior year, that sort of one-off, which was about SEK 11 million. Overall, about 10% growth, which is not quite where we've been historically, but still reasonably strong and setting us up for a good year ahead. In terms of our insurance-based billing sales in the U.S., which ultimately is where we really want to see the improvement, we actually had a really strong quarter with about $3.95 million of sales, compared to $3.2 million the prior quarter. A large portion of that was driven through insurance-based billing. What's very exciting to see, we'll touch on it shortly, is the legislation activity.
It really is building a momentum of its own, and that, for me, just shows how important scalp cooling is, and it really helps that one of those pillars, that coverage piece, relating to better reimbursement in the U.S. We were very excited, although it was right on the end of the, end of the year, to submit our 510(k) application for our new neuropathy product. We'll talk a bit about that. Then, I think, not quite Q4, but it was due to the work we did in Q4, we submitted to the American Medical Association for CPT III codes, and hopefully, you've all seen that we've actually got those CPT III codes, which is years ahead of where we were with scalp cooling, so will really help with traction going forward.
The results, what you're all wanting to see in reality. You'll actually see a small dip in sales, but I think you've got to look at the year overall, strong results. If you really want to start to understand it on a group level for the quarter, as I said, U.S. was up, so that's where we want to see our growth. Sales were affected slightly by our rest of world figures, which we talk about, those sales to distributors in the U.K. Being honest, that was partially affected by not getting stuff out the door at Christmas shutdown. We finish at Christmas Eve, and then the offices are closed, and some of the couriers just couldn't pick up some of the equipment. Not ideal.
We'll work on that next year to make sure our cut-off periods are better, but that did affect us slightly. What you also need to look at is the Dignitana Group. Our strategic acquisition was about the U.S. business. We must remember that. About 2.5 million SEK difference from the prior quarter was seen based on sales to other parts of the world. We've been actively closing down distribution agreements, therefore, we have to expect some reduction in rest of world sales. Looking at the U.S. business, the U.S. entity of Dignitana remains strong, that's the most important thing to look at. Overall, a dip, but good sales for the year. Gross margins remaining reasonably strong.
What we did see, though, is, of course, our operating costs increase, and that's really still seeing the tail end of the merger, finalizing certain costs, which the restructuring fees, in essence. That means that when we get into the new year, we've got a clean plate, so we really can start to realize those improved margins going forward. It's also really important to understand that we continue to invest in the work on CIPN, and that will continue throughout 2026 as well. Those additional costs will not go out the way, but what we will do is keep presenting what we're calling a sort of an adjusted margin, so you can actually start to see the underlying trends of how the business is operating.
You've got to understand, again, as I said, that CIPN and that restructure costs for that period is about 9.2 million SEK. If we start to adjust those, it improves the overall position and gives us an EBITDA of about 13%, which again, is not where we need it to be. You know, we've been at 20% before, and we'll continue to drive that where we can. We've got to understand there are pressures of the merger and, of course, investments into peripheral neuropathy. I am personally happy with where we're at. As I've said in the report, it really sets us up for an exciting 2026. Again, remember, there will still be pressures from CIP and investments going forward.
From a Dignitana perspective, we will see a decent sort of return on our investment. The acquisition continues to progress well. I think this year has been incredibly difficult for the team. I think it's a new experience, but actually what we're really starting to see is the benefits of the acquisition now. We've managed to do all the restructuring. Everything is in place for us to move forward with a really strong group. I think some of you will be asking, how are things going with insurance-based billing with Dignitana? We are starting now to see sites that are interested and contracting. It won't be as quick as what we're seeing with Paxman, but we will definitely start to see momentum at the back end of this quarter and into Q2.
What 2026 will be for the acquisition and the merger will be very much about improving systems, improving connectivity with both businesses. Really looking at how our ERP works, how our typical finance systems and other things work together better, so we can improve overall efficiencies. The team are doing great and really pleased with the progress so far. The majority of the restructuring, 99% of that is now complete. I think it's important that we really focus on the U.S., that is where our growth is expected. I think you're all waiting for the results from the CPT I codes that are now in play. I think Q4 demonstrates that the noise is starting to happen.
I think we're starting to see the positivity of the CPT I codes coming into play, improved utilization at those insurance-based billing sites. We did see an increase of the number of caps that were purchased through insurance-based billing. I think it was about a 10% growth on the prior quarter, which is great, and what we are hoping to see is that continual trend going forward now. There really isn't a reason why we shouldn't see that. CPT I codes, as we all know, really start to break down those coverage issues, those payment issues going forward, which is fantastic. We're moving now into 2026, of course. I can't talk about the numbers going forward, but the general sentiment is very positive.
I'll talk about the legislation stuff very shortly, our sites are now waking up to the fact that we have CPT I codes. We are now in good contracting discussions with locations, which feels very, very positive. A real shift from where we were last year, both from a hospital outpatient setting and community oncology setting. Very, very impressed with that. In terms of coverage, this is just a snapshot, of course, of CPT III codes . We'd like to think this number increases with CPT I codes, and I'm pretty confident it will, and I'll tell you a short story as to why. We see about 74% of patients using our hub services with the CPT III codes.
As you know, and as I've spoken about before, when we do remove the barrier of CPT III codes and convert to CPT I codes, they move away from that temporary status. It's moving into that to a more permanent code, and payers listen to that. A great example is, I was at Memorial Sloan Kettering recently, and my colleagues spend a lot of time there, our biggest customer in the U.S. They've really had some struggles with Aetna, which is a huge payer in the United States. Not all across the U.S. we've seen this issue, but at Memorial Sloan Kettering, we have done. Aetna was not covering the product. We switched to CPT I codes along with the New York insurance bill, and they are now paying for scalp cooling.
That, for me, is a huge breakthrough, and that is the trend we expect to see across the country throughout 2026, really helping with that simple switch. Our focus for 2026 in the U.S. is all about rolling out those CPT Category I codes, as I've said, really encouraging those partners to switch. Now we've removed all the barriers that are associated with typical CPT Category III codes. A big piece of work will be around working with our community oncology customers, so the large aggregators like U.S. Oncology, OneOncology. Those are critical for our success in terms of driving utilization. They are really listening now, which is great. We're having good conversations, which doesn't happen overnight, but we're confident we'll start to see a few of the practices switch, giving confidence and moving others to switch, too. We know switching creates improved utilization.
Another piece of work, which is probably the biggest piece of work, will be about engaging payers. This is about twofold, really. It's about our field team, a new field team that we've invested in on a fractional support basis, that will be out in the field understanding what the issues are, then taking those back to payers to get real answers to understand the issue. In addition to then talking about real coverage policies to support coverage of scalp cooling going forward. We'll be doing some work with our consultants, looking at budget impact models to try and drive the switch faster, to show that there is a benefit financially for sites. Again, we'll be working with those payers, and we'll continue with coverage with our MACs.
We'll also be really working strategically with the large IDNs and other providers to not only support scalp cooling, but then move into this peripheral neuropathy discussion as well. An exciting year ahead, especially with the content of legislation that is happening as well. On to the legislation. I touched on it in the opening remarks, but what we are seeing is phenomenal across the United States. These are all independently led mandates to require scalp cooling to be covered across a number of states. two have already passed, which is fantastic. Maryland yesterday, which is not on this slide in terms of an update, has now gone through both houses. It has to go through one sort of process, and then it will go to the governor to be signed off. A huge opportunity with many sites in Maryland.
These other 11 states all proactively working. As we move into 2026 as well, we've got someone leading on this program, which will start to push and look at other potential states across the U.S., as well as a federal opportunity, too. Again, this is all driven independently, and I think it shows the importance of scalp cooling. Neuropathy. I mean, this for me still remains such an exciting opportunity, and we can't be taken away from the excitement that we have with scalp cooling this year. Also, this is a big year for us in terms of a product launch. We submitted at the end of the year. It's now in substantive review. We've got no red flags so far. It's going through nicely.
We know there'll be a couple of areas that we need to support and improve on and handle as and when the questions come in. It's through the STeP program . We've got a dedicated review process, but so far, so good, and our timelines are not looking affected. From a European perspective, we have just done a technical audit at the office, which was great and going through nicely. Few questions to answer. Next week, we've got our QMS audit. Again, on track for our U.K. and Europe launch as well, which is wonderful. This, for me, is probably some of the biggest news we've had and puts us in a strong position. Our CPT III codes now being established for cryocompression.
I mean, if any of you have followed what we did with scalp cooling, we were nowhere near having CPT III codes, even a number of years into our commercialization. To have them ultimately before, or at least planned for before our product launch is phenomenal. What we'll be doing now is working with CMS once we've got FDA clearance to set that OPPS payment statement, status correctly, so that APC rate for new technology. That means when we launch, we can launch as an insurance-based billing product, which again, improves utilization, improves access, and really speeds up that commercialization process. Back to just reminding about what we'll be doing. Four markets, key focus, U.S., of course, U.K., potentially Singapore, and most likely Germany.
Revenue business models, it will be very similar to scalp cooling in the U.S., U.K., EU, will be capital, but with a type of consumable purchase, probably an annual purchase of the wraps, as opposed to a single patient use. It's difficult to launch that model in those particular markets. What we're going to be doing in the U.S. very soon, after my visit recently, is starting to work with some very key influential cancer centers to set up some pilot programs, looking at pathways, looking at adoption, looking at quality assurance. When we're ready to launch, we'll ready have really good workflow data. It's not efficacy, it's not safety, but it's all about implementation.
In the U.K. as well, we're working closely with our health innovation networks across the U.S., primarily the one in Yorkshire, initially looking at the NHS trusts around where we live, along with some other London trusts, to look at adoption and pathways. What we don't want to do is get in a situation where we were like with scalp cooling, using charitable funds to get access to this equipment. We want this adopted in the pathways, we can really start to do this properly this time. Very excited about the opportunities and interest there. Capital deployment will be similar process in terms of what we're doing. We did from a scalp cooling perspective, far more targeted, which is really important. Clinical trial progress as well. I was out at some of the clinical trial sites recently. The feedback is brilliant.
It's anecdotal, but gives me real confidence. 557 patients we're in. There is talk about finishing recruitment by the end of the summer in this clinical trial. Remember, we do not need this for FDA clearance, but it's good, strong data, which will give us miles and miles of opportunity for marketing and publications. Location. I think some of you might be worried that we won't have space to build our CIPN devices because our new unit's not ready. Do not worry, we have the keys to our new premises, which we are now in the process of fitting out to allow us to develop our neuropathy product build.
By April, this will be complete, and we will start building neuropathy products in May, ready for our first phase pilots, and then a more aggressive approach at the end of the year to roll out into the U.S. for our product launch. We expect to place equipment in the U.S. at the back end of the year, for our product launch, with some early sales, the main launch will be into 2027. Of course, we have our state-of-the-art new facility, which is still ongoing. Funding is in place, planning is in place. We're just waiting for the Secretary of State to sign off, we can start build, hopefully very soon, with a view to move in mid to late 2027. Exciting times for all of us.
Just touching on strategic priorities for the year. Of course, it's really about the simple switch, which drives insurance coverage and payment, drives utilization, increases revenues, and EBITDA, which is what we all want. Product commercialization via new cap and coole r, along with our alopecia and neuropathy products, moving to this multibrand company. Pushing our Rest of World markets, we must continue to see delivered growth there, which we have done, but it's not always easy to see. Operational excellence, really improving how we do things at work and making it a great place to work, along with continuing with that clinical excellence, staying ahead of the competition, and investing where we need to do. Thank you very much. Hopefully, I'm not too much over time, and I look forward to some questions.
Yes. The questions we do have, there came some here in the chat as well, but I'll start with a more top-line driven one. Rest of the World revenues, you mentioned the shipping timing effects. Could you maybe quantify how much was delayed? Is it all recovered in Q1, or how should we think about that?
Sorry. Yes, it will get recovered in Q1. There was probably, not a huge amount, but maybe SEK 2 million, SEK 2.5 million of equipment that was sat in the warehouse ready to go, but no one to pick it up.
Yeah. That happens. We saw some numbers in your report for IBBM, but Paxman U.S. only, Dignitana was not included. The next question is a little more about how is the IBBM fraction for Dignitana sites in the U.S.? What are you hearing out there?
The reality is, and I think we might have talked about this previously, but Dignitana did not have a strong belief in insurance-based billing model like Paxman did for the years we've done. They knew it was the right thing to do and was working on the insurance piece, but less about getting customers to commit to that particular model. In essence, what we've got to do and what we started to do at the last quarter of last year is start educating our customers about insurance-based billing. What we're seeing now is those conversations to increase, but we have started to see. I think we've got three or four contracts in place, and we'll start insurance-based billing this month or next month, really. Small number of customers, but some big customers.
I'm not supposed to probably say which customers, but a big New York customer that they've got, which is just about to switch and just placed a nice order. Yeah, we're definitely moving in the right direction with them. There'll just be a little bit of a lag behind Paxman.
Overall, all the U.S. sites you have, what proportion of them are now converted?
Still relatively low numbers in comparison to where we want to be. I think we're at about 130 locations over the 600, maybe a little bit more. But a push. We've contracted a few more, and that will start to build. What we're gonna do in Q1, I think I've stated it in the report, in my CEO comments, is actually provide you detail quarter on quarter. You'll see number of self-pay sites, number of insurance-based billing sites, number of patients, each, so you can track utilization and understand. We may even throw a number of systems in there as well, so you can really start to track our utilization better.
Mm-hmm. If we move on from the top line, a little bit on the cost side, there's a question about noting a significant decrease in personal costs in Q4 compared to sequentially to Q3. What are the reasons behind that?
Yeah. What happened is, we actually accrued for a large proportion of the Dignitana severance costs in Q3, so you saw less of that in Q4. You've got less impact in Q4 of personnel costs.
Mm-hmm. The next question was also a little bit about actually Dignitana's top line, if you could elaborate more on why those sales decreased. You've mentioned some distributor contracts that having been terminated this quarter.
Yeah. If you look at the Dignitana business, you've got around 18 million SEK running through the business, eight per quarter, yeah, roughly. Then you typically would have had some Rest of World sales, whether that be capital, whether it be consumable caps. We've, of course, been working in this last quarter or last half of the year, saying to our distributors through Dignitana, "Sorry, your contract is canceled. We're not supporting you anymore." You're of course, going to see some reduced Rest of World sales. That's the rationale behind that. I think it was about probably, compared to the prior quarter, it was about, again, another 2.5 million SEK.
This question actually came up a couple of times here, and I also had that. I know that you're not supposed to put a CEO hat on and talk about your outlook on 2026, and you've mentioned it briefly. Can you just give us a little bit more color? What do you see out there in the clinics in the U.S.?
When I've spent some time, I spent some time out there a few weeks ago, and I'm also sort of stepping in a little bit more recently with some of the aggregators and trying to have those conversations about the rationale to switch. The CPT I codes, the legislation, the track record we've got is really. The tone has changed. It's gone from sort of, "Oh, we will look at it, you know, we'll get round to it," to now, "We must do this." It's a very different approach. Again, it takes time. I think we all must understand it takes time to implement this, but the conversations aren't, "Come back later when you've got your CPT I codes." It's more about, "Right, let's start to do this.
Let's start to put this process in place," which is good. I said, Dignitana is getting some good feedback. We've got some big locations coming on board. We've got some community oncology aggregators now, which are going, "We've got to do this. This is the right thing to do." Which is great. Keep watching this space. I think the next six months is going to be really interesting as we start to see the changes in the locations. There are always going to be some that are a bit longer, that take a bit longer. I think the movement in legislation, even if there's less value in the actual mandate, let's say, you know, commercial insurers don't immediately look at it. The noise it creates, the discussions it creates, it's like a PR machine of its own across the U.S.
It's doing us some good.
Yes, thank you. Okay, the next one, next question is a little bit on a clarification about the new facility in Huddersfield. You've mentioned quite a lot now in the presentation, the one thing is, this gentleman is wondering is, how much will Paxman's total cost be for this move, and how it will affect?
Good question. The building itself is not ours. It's going to be leased, and that's actually been partially funded by a project in the North region. I can't say too much on that until it's been confirmed. Not confirmed, but published. The actual fit out and things that we will be responsible for in our original raise of SEK 123 million, we'd put anywhere between SEK 10 million-SEK 15 million in there as a project plan. Will we need all that? That's we're unsure at this moment in time, but we'll try and keep it as minimal as possible. This is a long-term investment for improved capacity for the organization.
Thank you, let's move over to CIPN. You've had the slide on the timelines...
Yeah.
If we understand it correctly, there have not been major questions yet from the FDA. Have you received any questions from the European side? Maybe can you expect the same questions to come up in the FDA process, or how should we think about that?
Yeah, valid, a valid question. We have done, yes, some more technical questions. Anything that we have to answer from a European regulator, or not a regulator, it's our, it's our notified body that does the technical review, will help feed into any of the documentation in the U.S. Nothing, nothing too difficult. It's slightly different, the approach we've taken in Europe, because it's more of a change in sort of indication, and it's not quite the same as a 510(k) application . They still need to see the same reports, the same test reports, the same biocompatibility, et cetera. The learnings that we do get from our European regulators or our European notified body will support any of the FDA stuff.
We're quietly confident that there'll be nothing that can't be overcome.
Yeah. Another follow-up on the CIPN. Here's a question from the chat. A lot of investments have been made to get CIPN up and running. When in time will we start to see income from this investment? That's, I guess, back to your timeline projections on CIPN-
Yeah.
product launching.
Absolutely. I think we have to remember it's a medical device, investments, they take time, don't they? Because of product development, clinical, then regulatory, and then now we're in this sort of commercialization phase. But I'd like to think that we can start to see revenues at the back end of the year. At Q3 and Q4, we should start to see some revenues coming through.
Mm-hmm.
modest revenues, I will add, but revenues.
Yeah. Yeah, thank you. We touch upon this theme, and now we've done these earnings calls with you for quite some time, and we always talk about the bottlenecks that you see for the quarter. Now we have the CPT coding in place, but what do you see about the clinic workflow, maybe staffing? Have you seen some changes in that out in you, on U.S. sites?
I guess Memorial Sloan Kettering is a good one to look at that. Not particular bottlenecks, but because you're removing the barrier, there's increased patient numbers wanting to access scalp cooling. It's just about making sure it's resourced properly, the process flows are in place. I mean, they're treating hundreds of patients, scalp cooling every week. I think if they can manage it, most sites can manage it. When we work with implementation and when we work with the sites to switch, we're very clear that utilization could increase. The equipment they've generally got should satisfy that, but there may be additional nursing time needed. That's why it's paramount that we get a better payment rate from CMS going forward, so they can have some contribution for that additional nursing time.
I didn't mention this earlier, but we are still working on improved CMS payment rates. Only last week, we wrote to CMS from an MPFS perspective, and the week before that, we held an online meeting with CMS, with two of our best cancer centers, presenting directly to them. It was two nurse practitioners actually talking about the real work involved in providing scalp cooling, which is sometimes not fully understood. It never helps when I sit in there talking about, you know, how difficult it is or how much it takes to implement it, because I'm the CEO of the business. You actually put a nurse in front of those people who do the work, who really understand it, and are not talking about financial gain from it. Hopefully, that has helped them sit up and listen.
Yes, thank you. I think this is all from me and from the chat. If we just close with some closing remarks, what do we have to look forward to in 2026?
I mean, number one is gotta be scalp cooling, simple switch, growing in traction, improve utilization. Look out for the legislation stuff, look out for the coverage updates. I'm excited about that. We then move to CIPN, I mean, what a year we've got ahead of us. I'm very excited about the pilots, both in the U.S. and the U.K., and we'll share more information about how we're going to plan that and what the feedback looks like throughout the year. Be mindful, we will still see pressures from CIPN investments, but we will get a strong return when we're ready to commercialize. Overall, it looks like a really promising year for us.
Thank you very much, Rich, for talking about Q4 with us here. Thank you to everyone for listening in and asking questions.
Thanks very much.