Earnings Call: Q2 2021

Aug 19, 2021

Thank you. And hi, and welcome, everyone. So for today's report, I will be joined by our CFO, Susan Anderson and our Chief Medical Officer, Peter Saki. So with that, let's get on with it and we can move to the next slide, please, which is our disclaimer slide, which I guess we can move through relatively quickly. Is it possible to move the slides, please? There we go. And then in disclaimer slide, we can move to the next Kuk A couple of things. Clearly, 1st and foremost, quite happy about sort of the approval of Cerakonda. We received the DCP approval in in sort of July and then subsequently the first national approval in France. And we anticipate the other sort of 14 countries to follow through in the coming month ish. We'll talk a bit more in terms of what this means for time line later. Sales continues to be strong sort of compared to an artificially high Q2 last year in Europe. And sort of it's a difficult comparison, but we're quite happy with where we are from a sales perspective. And most importantly, we see a lot of new customers come on board and the broadening of the use to beyond the COVID patient population and we'll show a bit more details on this as well. The U. S. Clinical work continues on track for IND towards the end of the year or in Q4 and start up of the U. S. Study program in Q1 beginning Q2 next year. And as we are moving towards launch. We'll continue to build the organization to launch Ceraconda in Europe and also to be able to Kirt on the U. S. Programs and we'll give you a bit more detail on that as well. So overall, nice progress in Q2 and we feel quite good about where we are looking ahead to launch and the U. S. Program. So with that, if we move to the next slide please. So now that we have the first approval, Basically, it's a very, very good step towards kind of realizing our vision, which is to make inhaled Todation a global standard therapy for critical care patients. If we move slides please, and we can move one more slide. As those of you who followed us probably can see from the presentation today, Next slide please. You can see that we have a slightly new visual outlook. Now I'm just waiting for that. Can you next slide please? Yes, please. So what you can see is that sort of there's the different visual outlook here, and that is that we've from a logo perspective, a slight update. But more importantly, We've now been able through the approval of Cerakonda in Europe, we are now one step further towards reaching or sort of being able to realize our vision, I. E. The tagline has changed with regards to bringing in air sedation to intensive care. So there's an update to that visual identity and 2, we've added the symbol as well to our logo and that symbol symbolizes the combination of Drug and Device, teraconda and teraconda ACD. So that's another change that we start to see today. And then we can move to the next slide. And for the sake of time, I will actually skip that one. So Let's move 2 slides ahead. And the sales development slide on Page 7, please. And from a sales development perspective, sales, We reached sort of SEK 40,000,000 in Q2. We have an organic growth of 3% year on year in reported numbers. Which page are you on? I'm on Page 7. Thank you. Minus 2% in reported numbers due to sort of currency fluctuations, we see quite substantial growth in Latin America and with Mexico being the 2nd largest market in Q2 and continued strong sales in Germany despite sort of COVID numbers or COVID patient numbers dropping quite drastically. And I'll show a bit more detail on that as well in a little bit. But if we go to the next slide please, Slide 8. As we've talked about in the past, we continue to see and a rapid increasing adoption despite the off label status. In Germany, our biggest market, we now have over 900 set of ICUs that are using it regularly, an increase from previous. And we talked about Mexico being a 2nd largest market. And on The right hand side, you see that map as well of the world where the number of blue countries where we are in present are increasing. And we also have additional countries coming on board that are in registration process. And then there are additional countries where we are also working with distributors to sort of further expand. And what we see have seen over the past couple of quarters is Distributors around the world are now approaching us with the opportunity of working with us and selling Anaconda in our disposables. And so that interest has increased dramatically over the past couple of quarters. If we move to the Next slide please, which is Slide 9. If you move to Slide 9, sort of as I said, we see a continued influx of customers during Q2. So if you look at our European direct sale markets, Our pace of adding 1 ICU per day has persisted in Q2. We also see more and more we're able to equip more and more hospital beds with gas monitors, which is an enabler for the use of inhaled sedation. So we have recovered 10% of the beds in Q1. That's up to 11% in Q2. So we continue to get that up and to have that up and running. If we move to Slide 10 please, I'll show a bit more detail on the German sales and we'll look at the other market as well to show talk through a bit of the dynamic that we've seen. On the left Hand side, you see the number of COVID-nineteen patients from outbreak in Germany. And what you can see here is that we had a peak in early Q2 on April 26, and then we've seen quite a dramatic drop off from April 26. And so what we look trying to understand is how much of our usage is coming from COVID-nineteen and how much is coming from non COVID patients. And the interesting piece is when you look on the right hand slide here, we see the monthly sales in 2019, 2020 2021 and a couple of things to highlight. Last year, we had quite a fluctuation. In the first way, we had quite a few number of hospitals that were in a somewhat of a kind of a panic sense of urgency mode, We're buying large quantities, so a bit of an artificially high number. Whereas this year, we see a high and stable level. So we are at a sort of a much of a higher and stable level using it on demand. And more importantly, It's not being affected by the COVID sort of waves up and down. And most importantly, even with from April 26. We still have quite a high and stable sales level, bit of seasonal fluctuation in June. So that tells us that that sort of customers are broadening their use. They're using it much more outside of not only in COVID-nineteen patients, which gives us confidence for the future. And 2, the other piece to highlight is that compared to 2019, We are at a much higher level. So we've taken another step in terms of where we are in usage. This pattern is Even clearer when you go to the next slide, when we look at the non German markets. So left hand side, Similar graph, these are the ventilated patients in the UK. And here you can see a similar peak, by the peak a bit earlier in January and then a drop off. And again, we're looking to understand how does that sort of affect our sales. If we then look on the right hand side, we can see a couple of different things. And this is the first half year sales in our other direct sales markets, and we can see a couple of different things. 1, we did have a similar artificially high sales figure in the first half of last year. And if you look on the 2020 graph. We actually have more than 50% of our sales in April, again, a lot of stocked up artificial. And we're actually seeing some of that use is coming now. There's still some hospitals still have stock. But the other part is that sort of despite the COVID patient numbers going down in first half this year, Our sales figures are still at quite a high level. And if you compare to 2019, we're talking 3x, 4x higher. So again, we've made quite a big jump with more hospitals coming on board using inhaled sedation in both COVID patients, but most importantly in non COVID patients. So we feel quite good about where we are from the sales perspective, even though It might look like it's not super positive compared to Q2 last year. The other part that makes us sort of excited for the future from a European perspective, if you go to next slide, regulatory approvals faster than anticipated. The first national approval came faster than we anticipated in 20 days. And also equally importantly, which Peter will touch on a little bit, that the product label is quite a strong product label in terms of helping us from a promotional perspective. If we go to the we can actually skip this one and go to the next slide please and we'll go through a little bit of detail on that Slide 14. So what will happen now is that we do have the national approvals now in August, August, September. And you can yes, thank you. So what will happen is there will be a number of markets where we could theoretically start to sell from day 1, but There's also a process of getting the product on shelf with patient information, leaflets, etcetera and all the translations. And that will take about 3 months. So, Noordaek's Germany, Netherlands will have product on shelf in about 3 months and then we can start to sell. And then there are a couple of markets that where we have price and reimbursement processes that take longer, and that is France, Spain and Belgium and they take about 6 months. So there will be sort of a slightly longer delay for those markets. But that's roughly where and then how this is going to play out depending on how quick the national regulatory authorities are. And then finally, from a commercial perspective, next slide, we continue to build up our sales organization. We continue to prepare for launch. And a couple of things to mention here is that, 1, our sales team is growing in Q3 to prepare for the launch. And 2, We have also which we talked about in the press release, we do have sales costs that are have gone up quite a bit this year and a good chunk of that is driven by price and reimbursement processes in the different countries, which are processes you need to do in order to launch, but you do it once and then you've done it. So A number of those costs is not going to come back next year, but they are super important in order to be able to go to market. So with that, I will stop there from a commercial perspective and I'll hand over to Peter to talk about the medical highlights. So if you move to the next slide, number 17, the 7 hundred study. So The study that was on date for our regulatory approval has been presented as a poster and will soon be published. The poster the main financial poster I'll share with you now. We move to Slide 18. This was a poster that won an award at the Austrian and German Annual Joint Meeting this year. And the first slide is that you're looking at ours showing the primary endpoints that was met in the trial, showing non inferiority for eye strains with regard to Seizhinavixe compared to the number one IV sedative top of all, well away from the non inferiority market. Move to the next slide please. Looking into other efficacy measures, the opioid requirements were found to be lower The ice cream group, 29% lower opioid use for ice cream patients compared to COVID-nineteen. And this translates into a number of benefits to dilute patients, including reduced risk of constipation and also reduced risk of inhibited spontaneous bleeding. This is also found an increase in sales gleaning on the high strength of the core group. This is considered to be clinically and beneficial for patients. Moving over to the next slide. Looking at wake up times, A feature of inhaled sedation, as Spike earlier, was confirmed with this largest inhaled patient study to date, where we can see that wake up times were short and no big growth. Ice cream significantly different day 2. Day 1, the nurse is Pretty significant difference, although the absolute numbers were again the same with ice cream. And this is something that is needed to be through the longer period of gestation. You actually see the shorter time to wake up and that has clinical significance in patients kind of being mobilized earlier, which is very important and also potentially most of the PICU environment. Next slide, please. Adverse events in the study, no serious events that would need to be treatment related. Looking at to the most common legal product, the restatement, the one that was different between the group, so hypertension It was more common after ENDERS treatment, the ice cream, which has been deemed to be due to the rapid washout drug. Moving on to the next slide please. So the summary of findings, that's Slide number 22, The time spent is the target RAS relation that range without restoration is similar in the groups. Both requirements were low in ice strain, but in breeding more frequent weaker than shorter and more strict over the ice cream and that the drug device combination was well tolerated. Now this next slide, and then we translate into strong SMTC, which is on base for our Marketing and Communication. And among others, so these are the highlights from S and P that we'd like to mentioned. One is that we did not we were not made to limit the allowed duration in the indications. So there's no 48 hour limitation. The study that we ran had a 48 hour exposure plusminus6 hours, but a number of patients were treated longer than that after the end of the study drug. And that's one of the reasons, plus pre Mitra Chavar to support the safe use of this therapy more than 40 hours, so that means a lot, Of course. Also, the Selleccon HD is the only approved device to deliver Selleccon that That's also a strength for us, obviously. And also, the statement that no effect of exposure by explaining patients the hepatic or renal function is something that is very important considering the critical care patients that often have impaired organ functions. And also VACID in particular onset and recovery from sedation It's something that is a clinically important benefit that we'll be able to discuss now that we have the market authorization. And finally, return on weight loss and cognitive recovery, which is also very important, the mobilization of patients and the discharge the IT. So all these things are in the S and P team and we will speak fully up in the near future. Now moving over from this to the early stages in the U. S. Clinical development and our program there. I'd like to then move to Slide 25. As we communicated before, we will have a combination of SIRACOMDA and ATV in the U. S. And before we can start that clinical trial, We have got some non clinical data to provide the FDA and we also have to have safety assessment NDA submission and the commercialization plan that he decides sometime next year. Next slide, please. So looking at the non clinical data we need to supply for IND and NDA, there are 2 different portions. One is the pre ISD part, which is 2 species that need to be exposed to the intended duration trials, that's 48 hours. And we have reached out with these studies, we almost completed them. And so far, no findings of Kamsarmen and this project is on track for our IND in Q4 this year. Besides these studies, we also are committed to perform full program. So we will be doing pre- and postnatal development study, and that's just started. And also repeat exposure study grows longer 28 hours sorry, 28 days and he's the design. They need to be finalized before we submit our IMTA 2023. So that's all on track. Next slide please. The other non sugar being supplied besides the animal studies, the human factors program, and there's also 2 portions, one for ID, one for the NDA. The first portion who covers the comments and phases of the impact, which is about testing the device, to design the training and safety measures on volunteers, I mean, our users. And we have developed from a first formative study, we have developed split roles based on the U. S. ICU staffing and we are going to test this in a second phase in September this year and that will inform the training program for clinical trials and also for our validation study, which does not need to be completed for IND, but it needs to be ready for the NDA. And there's actually a benefit of not doing the validation phase before I can have a trial, but today will also give us of Nathan that will be valuable for that validation. So that's all also on track. And we move over from that to the next slide please, Timeline there where you can see the top two boxes there and the top boxes show our 2 European trials, the the RECOMM study that was completed last year and will be published very soon. And then we have the ICARM study, it's ongoing pediatric study. And then we go down, we see the surgery and surgery for the U. S. Adult studies where we anticipate the CARS patient end of Q1, Q2 next year. And besides the sponsored sponsored studies. We have some investigative initiated trials that support the general use of concave Fadeusz and Ana Conden. There are 2 of them, CISA study and NACETRI are running Karan Vini and Tom, the member of the ESCATROW, which is a London National Observation Study of COVID patients. And then we will go to the next slide, Slide 29. Looking at the timeline for Europe and U. S, in 2021 in Europe, we have the marketing approval, Ramon Conner, and the finance front and as Jens mentioned. And the ICE contract is ongoing. We expect that to end next here and also then to submit more authorized application in some of the countries that we discussed in the first round. By 2023, we should have European market approval for pediatric indications in the U. S. We had our End of Phase 2 meeting earlier this year and that was successful in that we were able to get through a few things in the models, Morfei Google non inferiority margin that we had in the European study, 15% absolute percent non inferiority margin from the comparator. We also wait to include safety data from patients receiving the large anaconda that will now be marketed in the U. S. And also taking training patients before we start our clinical trials. And then as I mentioned, we have 3 types of studies that the pre IND study will soon be executed, the human factors for the testing as well. We have been very successful in the timing cycle, the U. S. That want to run the trials to establish a subsidiary of U. S. And then going after us clinical educators to other medical people in the U. S. And we will submit the CFO. And next year, we'll then be able to start studies and do the final tumor validation and start planning our U. S. Launch. And by 2023, we should end in 2023, complete the annual clinical study NDA application for approval rate 2024. Last slide just to show a map, the U. S. And The institutions that currently are interested to join the trial, these institutions are Not yet committed because we have contracts in place, which we'll refer to IAC, but it gives a feeling of the geography of the clinical trial, which basically similar to the model in the U. S. With that, I end my part. Thank you. I'll turn it over to Sam. Yes. Thank you, Peter. So next slide, we have the financial highlights. And if you change slides to number 32 with financial results. I can pick up a little bit from where Jens left it. We had Good sales in the quarter and growing 3% in local currencies with a tough comparison with last year. And Germany is still a stable country with like being the locomotive for the Spain. We have had very good sales growth in Rest of World Latin America, which also is a great contribution to our gross profit. However, in being a distributor market, it comes with somewhat lower margins. But despite this, we We improved our gross margin by 2 percentage points, and this is mainly due to that we had a large Propulsion of freight by sea in the quarter. What we see though in the market is that costs are still high. And given the Suez Canal or channel issues during the quarter and also the general Supply sourcing issues in around the world. We do foresee some more air sites in the second half coming back. We will, however, of course, strive for as much as possible by sea and we work daily on trying to find the best solutions for this. Our EBITDA came in as negative 14%. It's again Coming back to what Jens previously said, we are building the organization. And also in order to help you when analyzing our numbers, we have Try to break out costs in terms of or related to the Veraconda Lodge and including the MDR approval, Just for you to get a better understanding for our underlying running costs. We are building the company both in terms of organizations that are Market approval, registrations, etcetera, to address. And as a result, by end of June this year, we had 91 people on our payrolls and consultants This is including consultants. The SG, full time equivalents were roughly 70, 68 compared to 48% last year. So we are building the organization for our future growth. Next slide please. Kash. What we can say here is, again, Given that we are taking or building the organization, the cash flow from operations came in at Negative 12% for the quarter. The investment is also larger than last year. We had Negative SEK 23,000,000 in the quarter. The vast majority is then related to our product development here. Right now, we have roughly SEK 200 Milen Ziek on our balance sheet. About half of that is related to our EU registration and and the EU approvals. And if we get all these approvals in during the second half, We will start our depreciation. We do have a very strong balance sheet. Our cash balance is €308,000,000 by end of June. And I also like to remember all of you that we are debt free company, but There is a very strong balance sheet that we are very proud of. And next slide, please. Our largest shareholders as of June 30. It's not so many changes since last quarter. We have listed them all here. What I just wanted to comment here is that we did perform a split that was ended by end of May. So now there are 4 times more shares within the company. And with that, that's actually what I have to put as financial highlights. So with that, I hand over to Jens again On the next slide, we just have a quick repeat on our questions. Just a couple of things to mention. 1, that are not a highlight, but apologize for a little bit of the wobble in the beginning with slight transitions and kind of on sort of a bit of slowness from our end. But rounding up three things to mention here. 1, I mean, we feel we're in quite a good position and we're quite happy with Q2 and where we are. 1, on the back of the regulatory approvals for Zadarkonda that came through faster than anticipated with a very sort of strong product label that will sort of allow us to commercialize a drug and the combination with the device and making inhaled sedation standard therapy. 2, we are very happy with sort of sales performance. First half of the year, We have a 20% growth in local currencies and that's even with an artificially high comparison from last here. So even with that we're growing 20% on the back of many new customers coming on board and customers using it sort of well beyond the COVID-nineteen patient population. And then 3, looking ahead, U. S. Plans progressing very nicely with regards to sort of towards IND and then study inclusion next year. We have recruited our first employees to help us drive the studies. And as Peter mentioned earlier, We are getting very strong interest from the right hospitals and key opinion leaders in the U. S. With regards to participating in our study. That will be super important going forward. So all in all, we feel we're in a quite good place. With that, I'll stop. And then if there are any questions, please We have a question from the line of Peter Erstling from Pareto Securities. Please go ahead. Okay. Thank you. A couple of questions. You say that of the SEK 200,000,000 in Capitalized development costs about 50% relates to the European venture so far. So what Does the rest relates to since you have just started your U. S. Journey? And so various projects, and I mean we have started at the Huwis project as well. So I don't want to break them up, but they are All other projects we are working on. Okay. But the project will be amortized Now when the approvals are getting in, that's roughly around SEK 100,000,000. Peter, can you just repeat the last one again, so that we were sorry? Yes. The basis that you are going to amortize will be around SEK 100,000,000 then? Yes, correct. Sorry. Yes, we have these approvals now during the second half. So this will start now. Yes, okay. Could you talk a little bit about what's happening, what's going on in China. In China, the short version is that we are working with the local distributor in China with regards to sort of preparing the registration and the filing, and we are just sort of at the end of it. It's taking it has taken a slightly longer time to do it than initially anticipated, most primarily driven by the sort of COVID situation with regards to not being able to travel to China and sort of be face to face with distributors and do some of the testing, etcetera. So it provides a bit of pressure from a timing perspective, but sort of it's all progressing nicely in terms of sort of preparing the file and the registration. So it's progressing slightly slower than initially sort of anticipated, driven by some of these sort of time line delays. But no other reason for it, to put it that way. Okay. But do you still expect approval this year? I think you have said that in the past that you've That's our hope and aim, clearly, sort of it. If there is a bit of a delay here, could it sort of possibly but that's our we're still aiming for that, yes. Okay, great. Could you talk a little bit about the timing of the second wave of submissions, both in the EU and then, of course, For other countries where the EU dossier can be accepted, except Canada, for instance? If we start with EU, then sort of now that we have the sort of the DCP dossier Joseph, when we have the DCP approval, that takes us into the next step of filing in the other EU countries. Because of I mean, there's always a lot of changes in the DCP process. So that means that sort of the initial dossier that we submitted, which is the same dossier that we submit to other countries that needs to be reworked and revised. It does take a little bit of time and that's why we've said that We will submit in 2nd wave of European markets over the next sort of or before end of year. And what we have said in the past that we will sort of clearly go to Italy because Italy was part of the first wave and they but they couldn't commit to the same timelines as the other markets. So then we left Italy out. So Italy will be part of the 2nd wave and we are now working through sort of which other countries will be part. But Italy is the one that we've communicated it will. The other markets, we're still revising a bit over the next few months. We are in dialogue with the Canadian authorities and also sort of looking at sort of other markets like Australia, where there are similarly European it's like Australia, where similarly European dossier can be used to see sort of If the Europe now that it's been approved, then we need to reassess with them to see is this good enough and will this fulfill the requirements for regulatory filing. And when we've had those discussions and then we've had a clear feedback, then we will communicate sort of when and if we are able to go over it now in some of those markets. Okay. And lastly, one of my standard questions. Could you give Provide an update of on the studies that you're sponsoring, especially the CEASER study. The last time we heard from them was in I think it was in the middle of April when they had recruited around 260 patients. Can you say anything about that? Yes. So this is not our study and the investigators and getting some support from us. So our questions are usually quite cautious, but we've been able to understand that they have exceeding 300 patients, and they anticipate to be doing an interim analysis towards the end of the year. Okay. Do you know why the recruitment has slowed down over the last couple of months? Yes, it starts with a Z and ends with an X. So that's the COVID rate, severe COVID patient has reduced. So they have really high recruitment rates, I mean, higher than anticipated and That's unprecedented, I would say, the improvement rate in the SUSAN study that they had last year. So that's the explanation why they I mean, they're slightly above 300, They need to have, I think, 360 or 370 before they do the interim analysis. So they anticipate this happened before. And this is what they have stated, so I promise, just to make it clear, their hope to have an interim analysis by the end of the year. Hadn't they expanded the study to recruit also non COVID patients? Absolutely. Yes. So the CECL study was never intended. It started before COVID who was invented the NIGS. So actually the study has had a recruitment of a patient group that wasn't actually initially planned. And that of course may impact the outcome because these patients are somewhat different than the average ARDS patient. But that remains to be seen what the outcome will be. I don't know if they're going to do a set analysis on COVID and non COVID areas, yes, but Obviously, I mean, from a scientific perspective, that would be very interesting. Okay. Thank you. I'll get back to you in the queue. And As there are no further questions, I'll hand it back to the speakers. Okay. Thank you, everyone. And With that, I would just sort of well, thanks everyone for dialing in and for the questions coming through. We will close the call here and we close the call on the same note that I sort of previously from a highlights perspective. Overall, considering both current performance and looking ahead to sort of short term launch in Europe and longer term filings and program in the U. S. We feel like we are in a very good position and with a sort of very positive outlook on the future. With that, we close the call today. And thank you, everyone, for dialing in. This concludes our conference call. Thank you all for attending. You may now disconnect your lines.