Earnings Call: Q3 2020

Nov 5, 2020

Quarterly report

Welcome to the interim report presentation for the Q3 of Sirona Medical. And we can go directly then to Slide 3 to introduce you to the company. I think you're well aware of the company today, but I just wanted to give you some updates on where we are and where we are heading. And Peter will end this meeting and give you updates of the clinical development. And also, I will summarize the financial update in the end of the meeting as well. So I mean, as you know, our purpose and what we are looking to in our focusing on our in our company is to improve life during and beyond sedation. And our vision is to make our therapy inhaled sedation with our product to become a global standard therapy for critical care patients. And going to Slide 4, many of you have seen this before, but I think it's good to remind you sometimes that there are definitely medical need out there to improve the sedation within nice use around the world, where we can see inhaled sedation have advantages when it comes to wake up times, reliable wake up times and reduction of ICU stay and ICU free days. We also see a benefit when it comes to the safety profile regarding cognitive recovery. And we are also interesting to see also that we can have a possibility to reduce the usage of OPT8, which is important for I mean, for all patients, especially under discussion in the U. S. We also lately, I mean, during the last years, have huge interest regarding potential organ protection, especially regarding the lung functions where we can see now there is also within Halester Basin improvement of oxygenation and gas exchange. So these are the benefits for inhaled sedation. Going down to the next slide, Slide 5, the potential of the market you also have seen before and it's still not updated, but it's very much current. And it's EUR 2,000,000,000 to EUR 3,000,000,000 to total potential. And that should be divided into 3 different regions, where U. S. Is very interesting with also a high price level. Europe level is average price in Europe for the entire for the therapy, including both device and the pharmaceutical is also relevant and the price level of €100 per day. Then what are our strategies to actually to reach and penetrate this market then? Looking to Slide 6, you can see that we have there some visions based on that we should make inhaled sedation with our product become a new standard. And the golden standard in how to sedate the patient in the ICU. And how would we do that? And we as you know, we have already started in level 1, where we enter the market and the objective is to register Anaconda, the delivery device for delivery of volatile and aesthetic in as many market as possible, as fast as possible. And that we have ongoing disaster right now. And of course, that will continue over the next years as well. But then we need, of course, at the level 2, we need to go from off label treatment as we have today and to get the full label treatment and therapy where we are owning the therapy. And that is the establishment of this and the entrance ticket to start to promote it fully, the therapy. And that is what we're aiming now for in the end of in the second half year of twenty twenty one in Europe and then adding up in more markets step by step. But actually, to start to grow this market and then we need to have evidence based medicine. We need to have more supportive study showing that inhaled sedation are superior versus IV sedation. And there we are therefore, we are focusing very much on sponsoring investigator initiated trials as well as our own studies, Phase 3 studies and introduction of Phase 4 studies in the future. So and that will also end up in the Level 4 where we with both superior inhaled sedation together with organ protection. So you actually catch 2 birds with 1 stone with the treatment. And when you have achieved that, when we have achieved that, then definitely we have the possibility to become this standard treatment all over the world actually. So that is the step. These are the steps that we are looking into. And going then to Slide 7, what have we achieved in according to this plan, strategic plan there. Going to Slide 7, you can see the map and the blue countries become more and more. They are more and more. And still, we are lacking U. S, obviously. But out of that, we are coming closer to a very nice new map here. Also going to the Slide 8, as you know, we have an increasing adaptation of this treatment despite the off label situation. We have sold more than 500,000 units of our treatment. We have a rolling 12 month growth of 86% of the sales of our devices. In Germany, which is the 1st country, it's more of the test market, we have a capture rate of the 5% to 7% of the market. We have examples of even better capture rates around the world or penetration rates. This shows obviously that there is a need for this medical need and also that we are also adding up coming or are included in more and more guidelines also shows that this is an alternative I mean and that is the medical need despite of labor situation. And looking to the sales in the Q3 on Slide 9. We have today announced that we had a growth in local currencies by 39%, and in Swedish kronaes then that is 31% growth. And that is looking to 12 month rolling, it's 8% to 6% growth, which is massive, I would say, in the press. And as you see on sales, on 12 month rolling, we are up on SEK 160,000,000 on the Anaconda sales. Going then to the next slide, Slide 10. We I mean, we are now preparing for the full launch in next year. And we have direct sales now organization in Germany, Benelux, France, Spain, UK and Nordic. And we will add up some more markets before or just after the launch next year. And the intention is to have approximately 15 countries with direct sales in Europe. And in the rest of Europe, we will have sell via distributors. U. S. Organization and the commercialization setup will be we are looking into that different pathways, the alternatives just now and working on that. But we will not decide before 2022 what to do here if we're going to do it ourselves or together with a partner. Another strategy is actually to be included in guidelines and actually, we are that way become a standard treatment. And on Slide 11, we during actually after this quarter ended, we actually announced that we are now also reviewed by NICE and the MedTech Innovation Briefing. So there is a review on Anaconda saying that this is a good alternative to eye visitation in the ICU. And that's, of course, an interesting very interesting reference addition to the German guidance actually. And another step in this evolution is to also not only working through the guidelines and sales organization. In Slide 12, we are also, of course, focusing very much on the evidence and increased number of studies and the number of patients that are evaluated through controlled studies like this. So this is the package that we have now. There are some other studies ongoing in Parell, which are investigator initiated as well, but which is not included here. So we will have more studies actually coming up later on. But these are the most important ones. And the blue ones are our registration studies in Europe on top with CENDA 1, Peter will come back to that, as well as the pediatric study. And I think the interesting thing with the U. S. Studies is that we are very much aligned with in line with the plans, and we foresee that we should initiate these studies after next summer. And they will have different focus, as I have said before. 1, we'll focus on lung protection and and improved gas exchange. And the other one will really focus more on the cognitive recovery effects, such as reduction in delirium and hallucination. And that will be the same thing with the green ones. Seselstad is the one that is looking today our desks and improved gas exchange. And the Inno Z is looking to much more on safety side and cognitive recovery and reduction of the leader. The ISKA trial is interesting, of course, because that is looking to COVID-nineteen patients and comparing and that's an observation and retrospective study comparing IV sedation and inhaled sedation. So that's what we have now. And Peter will go into the updates of the clinical clinical development here now on Slide 13 and maybe go directly to Slide 14. Yes, please. So Slide 14, the European market registration study, you may know that this study was completed. It is still a Phase 3 trial that was performed in Germany in Slovenia. The study was completed in January this year, which was a randomized controlled open label study to confirm the efficacy and safety of inhaled patients with ISOSTRANE in mechanical ventricular ICU patients. And this was a study that design wise was discussed with the German content authority, which will be the referenced in the state in our application. And the study was a 48 hour study with regard to treatment and with the follow-up up to 30 days. And the primary endpoint of the study was sedation efficacy assessed as portion time within the target RAS on the sedation scale called RAS minus 1 to minus 4. And secondly, and most included wake up times, portion time it's spontaneous breathing, opioid requirements, ventilator and ICU 3 days. Could you just mention that spontaneous breathing, what is clinical benefit for such indication? So spontaneous breathing has various benefits, reduces the risk of diaphragm and atrophy and improves the pressure ventilated conditions for the patients and so with better pulmonary function. Yes, so the top line results, a nice color that you've been presented earlier. In short, we'll now present the primary endpoint, which is on Slide 16. So if you can move to Slide 16, the primary endpoint, sedation efficacy, we discussed as a proportion of time within the target interval on the RAS Ridgman Aditation Sulation Scale. And for I've seen unprofitable, the proportion of time was about 90 for both and with quite a tight confidence interval. The non inferiority margin was 15% relative difference, meaning that the lower boundary of the compensated valve could go down to 77%. And as you can see on this picture, the comprehensive dose is far away from the non inferiority margin indicating non inferiority of eye strain to achieve sedation in patients on cancer ventilation. Moving to the next slide. Adverse events and patients with advanced events were assessed and there were no safety signals, no concerns regarding this and no treatment emergent adverse events leading to handling the therapy. So all in all, looking at the data in more detail, we are confident that the study merits to be registration study for our marketing authorization application in Europe. We move to Slide 18. Sorry, the secondary and respiratory endpoints have been analyzed and will be communicated as per standard in scientific publication sometime in 2021. And then we move over to Slide 19, the total development for the U. S. And we go back to Slide 20. After scientific advice meetings with the FDA, the road map to the U. S. Was clarified and consists of a number of steps. As you can see on Slide 20 here, the one step is non clinical studies. Human Factor's engineering program is another step. And after those, we move over to 2 clinical trials, randomized line studies. And after completion of these and compiling this database, the NDA application submission will be done in 2020 3 2024. So we do go to Slide 21 where we see the timeline for the activity in Europe and in the U. S. As mentioned before, we have had the last patient in the ITILOGLA study and high level data. We are submitting the marketing authorization application in this Q4 2020 and also initiating 1st patient in the JADHAWK study, which is the ISA contract study, which is taking place in France, Spain, Germany and Sweden. So we are currently doing the final preparations to include the first patient in that trial. And for Europe, we anticipate to have marketing authorization approval in the second half year of twenty twenty one and in the second half year of twenty twenty two to complete the pediatric study and have a pediatric indication in 2023. For the U. S, we are currently completing the human factors formative testing together with Harvard Medical School and we are underway with the regional studies and we'll be going to the FDA to we're at the Phase 2 meeting and IND in early 2021. And thereby, we'll be able to start. For those as anticipated, we will be able to start to study after the summer and do the additional preclinical studies that the FDA request for example pediatric approval. And then we will be discussing Italian and planning for the launch. In 2022, we'll be doing the planning and in 20 23, 2018 NDA and then with approval in 2024. And we move to Slide 22. And back to Christoph. Yes. Thank you, Peter. And looking to the financial highlights then for the quarter, what we could mention here, and due to what I already have said, is I mean, the sales you saw now, SEK 21,400,000 in sales, which is increased by 31 percent in Swedish krona, but SEK 39,000,000 in local currencies. We have a slightly lower gross margin this quarter due to different reasons. Mainly, it's a leftover from the second quarter in increased transportation and transportation cost. And also, it's a little bit different product mix compared to what we have seen normally. It should be we are estimating that it should be on a normal situation around 70% plus. EBITDA margin, EBITDA, we have a loss of SEK 10,000,000. Compared to last quarter, we were approximately breakeven. But of course, then we had a higher sale. OpEx is increasing because we are preparing us for the full launch next year. So we are increasing number of people, both in sales and marketing, but also within medical regulatory and quality because, I mean, we will soon have a pharmaceutical in place, and we are also pharmaceutical companies. We need that. We are growing number of employees, as you see. Cash flow operation, last quarter, we were positive cash flow, thanks to the increased sales. This quarter, we are negative. Total negative cash flow is minus SEK 27,000,000, which is, I mean, relevant figure, especially we're looking forward when we're starting up in U. S. As well. I mean, the cash flow will be negative significantly also, especially during next year when the clinical studies starts up in U. S. But on the other hand, we are prepared for that since we have also good looking to Slide 24, we have a good cash situation, SEK 406,000,000 by the end of September in cash. So that is okay. And we are fully funded for European commercialization, which is the focus now as soon as we have the registration in place here. And then we also are funded for the clinical development in U. S. As well. So it looks good from that point of view. And next slide, looking to the shareholder list. It's not big no big changes compared to last time. Still, we are a combination between institutions, long term institution, both Swedish, but also international, German and French and British ones and together with the founders in the company as well. And that was the last slide going to the I mean, just a reminder here. I mean, it's Slide 26. This year has been very strange from many different ways. It has been I mean, from us our perspective, it has been a door opener for many new ICUs to look into these treatment. And but of course, it has been challenging from a clinical development perspective to collaborate with ICUs that are in the middle of a huge crisis. And but I think we have done it fantastic over this first three quarters, And I'm looking really much forward actually to follow the rest of the year, but also into going to 2021, which will be a very interesting year from many perspectives, both in Europe and in U. S. So that will be the last slide on Slide 27 where you have the question slide. So if there are any questions, we are open for that now. Thank Our first question comes from the line I have a couple of ones. First, I would like to ask you about one of the investigator sponsored trials that are ongoing, the ISKA trial. I noticed that there is this venture capital company called Repro Capital that has done a large map over potential COVID-nineteen treatments, vaccines, diagnostics and Sedona Medical is on that list. And I just noticed that they put completed for this specific COVID trial. I was just wondering if you could give us an update when you think that the results would be published or announced? So I wish I could give a straightforward answer to that, and speak to Sakhi. I believe the most recent communication we had with the main investigator there who was given a grant for data collection is that data being currently entered by the in the different countries. This is an observational trial, so there's not a prospective recruitment target. And it is just as I thought of that, there would be sufficient patients already available, but I can't give it a timeline for when they will be when they will have completed the data entry or when there will be a publication out there. Okay. Yes, but it should be as you're in the clear. Yes, absolutely. I mean, I would anticipate within the next 6 months, certainly, but which it's a question mark there. Okay. Did you say within this month or No, no, no, no. I think within I would anticipate that they submit something in the next 6 months. That's my it's not our study. So of course, COVID-nineteen surge leads to heavy clinical duties that this might be delayed. Okay. So maybe they have misunderstood it, raw capital that they put completed on their map. But So completed means that the patients are there. In each country, there's sufficient number of patients treated with inhaled patient and IV to actually compile the data. But the people who are doing this, the clinicians who work in the ICUs, so it's not that they don't have the same timeline as we do in case the situation that they need to work with clinical patients, that will go before publishing this, unfortunately. Okay. Understand. Then quick question, if you could give us some update about China. And then how many employees do you expect that your U. S. Operations would have at the end of 2021? Thank you. I can start with China. The registration process is ongoing. And so it will come within the time line that we have said before, and that was before next summer. That is the time line that we have given before and that we are following that that path. Regarding U. S, what we will do in U. S. Now and as long as we can go there, which we don't know when we can go, but expecting to go there at least in the beginning of next year. That is our aim. And then, of course, we will employ a handful of people during the next year, taking care of the clinical studies and networking with the key opinion leaders and I mean more intelligence work for the American market. So that is what we foresee now. It could be changed depending on what the outcome will be then, of course, in the future. But that's what we have now. Okay. And lastly, before I answer back into the queue. I might have misheard you, but when you talked about Germany and said that you had market share there of between 5% 7%, I believe you said that the market share in other markets are higher. Could you elaborate on that? No. I mean but I mean in a well, of course, when you look at the penetration in the market in different markets, there are different penetration rates, of course, in different markets. Germany do have 5% to 7%, which is I mean, it's a huge market. And then it could be for indifferent markets, obviously. And yes, and but most of them do have lower than that, of course. Yes. So there are markets where this the uptake already now has been better than the penetration of 5% to 7%. Well, I cannot comment on that. I don't know why I said actually. So I actually did not comment on that. I'm not concentrated today. Sorry for that. Okay. Thank you. I go back to the queue then. Okay. I have another question, which I should not order. But I mean, we I mean, regarding the trends, what's happening now in the ICUs around Europe, I mean, we see everywhere that COVID is hitting us, is hitting all the countries quite badly. What we have seen in Q3, what we have already said in our report is that the sales that we have in the 3rd quarter is back to normal, I would say. So, ITUs around Europe in the 3rd quarter were not affected, so very much on COVID patients actually. So there were a few of them. And that shows that we have a very strong position now after the 1st wave. And then it's up to you then to explore, I mean, now when ICU are starting to get more occupied again, what that will what kind of impact that will have. But I mean, that is the only thing I can comment on that. And but obviously, it's not like the first you can see that nowadays, they know much more how to treat this and I mean, this disease compared to what they knew in the beginning. So obviously, there are much less people that are dying and that is, of course, relevant when you're looking into the figures in the ICUs as well. So that is what I can comment on that. There are no further audio questions. I'll pass back to the speakers for more questions. Thank you. Okay. Thank you very much for this meeting and all the best and see you around and if not before we hear from you after the Q4. Thank you. Bye bye.