Earnings Call: Q4 2019

Jan 30, 2020

Ladies and gentlemen, welcome to the ex vivo perfusion report webcast. I will now hand over to Magnus Nielsen, CEO. Sir, please go ahead. Thank you very much. I have on my side Christophe Rosenblatt. Hello. And, I'd like to take you through a presentation of the interim report of 2019, the twenty ninth quarterly report. I have to excuse myself for having a cold here, so I hope you my voice come through. Alright. Slide number two. We have had a historic year, 2019, which ended with a record quarter, something everyone hasn't really appreciate, I think. But anyways, in q four, we had a breakthrough designation, in the with the FDA, for the heart preservation system, something that would speed up the process in The US. We have started up an Australian subsidiary, which was established then after the third of four possible XPS installations, and also in preparation for our clinical trial in Australia. During the full year, we had our first, PMA, the first for such a product, the XPS and Steam Solution in The United States. We have submitted applications, for clinical trials for the heart device and an updated technical file for Primaek. We have received patent approval in Europe for Parfex Plus, Patents for heart preservation fluid in US and Europe have had positive results from the safety study in Lund University Hospitals on the six first patients with the first prototype of c h 10. And we have actually the full the two year warranty program offered to all employees who are fully subscribed, the strike price of $2.79. Please number three. And said highlights, tremendous year for us. Record sales in the quarter compared to a strong q four last year. A little bit in details, we can see that in The US, more clinics bought more. This the only difference was really that the lung bioengineering stocked up very much last year. But if you look at the the number of clinics, buying more, has increased. In The US, we can also see a really good development on sales in Europe. Warm sales of disposables increased with about 50% the fourth quarter. China has taken off from a low start, but now we can see a start in China. So all in all, a very good year and quarter in in sales. And we can also see that we can keep a stable, gross margin of non doable goods at 77%. We also saw that for the full year, we passed the 200,000,000 mark, for the non ruble goods, with a good growth, 20%, non rubles and €1 up 25%, and also a good positive trend for the cold preservation. Next slide, please, number four. If we look at the profit and loss statement, there's a few points to look at, as we said, continued high gross margin is notable. We can see that we, excuse me, we continue to build our customer support, crew. We forcefully invest in the R and D. And, in spite of all this, we still have a very profitable lung transplant business. And if you especially if you then take away the, items that affect comparability of 7 millions due to the, warranty program we have for our, external for our employees If you remove that, you can see that the EBITDA profit actually increased. So all in all, in spite of a a heavily investment period, we still show a good profit level and a good gross margin. Next slide, please. So we look at the accomplishments over the year. Next slide, please, number six. We received as the first company a PMA for a warm perfusion device for lungs. In the multicenter, we showed that, in one hundred and ten patients, that were lungs that would never have been used without an EBLP. And we can see that the survival rates for one or two years was, similar to the, normal lungs. And we also saw a high use rate of DCD's line in the study. So more lungs can be used for transplant, which benefits, patients on the waitlist. Next slide, please. The breakthrough device designation granted by the FDA. This program is a means for the FDA to prioritize those medical devices that they are deemed to be especially important for patients by speeding up the development. So this would shorten the administration time for the whole process from applications to processing clinical trials and application for approval. So whole thing means that we get a decreased time to market, which is very encouraging. Next slide, please. We can also see in China, a very fast growing transplant, market, especially now we see in lung, relevant for us. It's the fastest growing market, with a 35% increase from 2018, and I think from last year doubled, between '17 and '19. And more centers are being certified to to to do transplants. And, we have have, installed the second, HPS, to the second largest transplant clinic in China in Beijing. We made more than 100 transplants, last year, twenty eighteen. So we have most of our products, already approved in China, with exception for the XPS, and we hope to gain that during the year. So we are in the forefront here, and we believe, China will continue to grow and be one of the biggest markets in two to three years in the world, we believe. Next slide, please. Number nine. Another big thing for us was the upgraded, ready to use PerfectX Plus. We have sold PerfectX now for more than twenty years, and it's the gold standard, in all clinics all over the world, more or less. More than, I think, 95% market penetration. And with the new, ready to use version, we increased patient safety and ease of use. And it was launched in Europe and US before, and we're now rolling it out in more and more markets. We also got now patent applications submitted in all relevant markets, something we didn't have for Perpilepsy. Next slide, number 10, please. Another key, thing for us in The US market is that we are collaborating with, Lung Bioengineering, a subsidiary of Natick Therapeutics, where they serve centers, especially, smaller clinics that maybe not have the organization to perform their own or not have the time to perform their own EBLP, they can then use this service to have lung engineering doing EBLP for them and then sending the lung back to the clinic. They're using, ex vivo technology and ex vivo products, so it's neutral for us. So we now co market with them to to extend the reach of EDLP in The United States. And they have now three machines we that they are are, for enrollment, validating, and and we they believe and we believe that they will use that during this 2020, and we hope to be successful. It's a very important, collaboration with us. We also collaborate with another subsidiary of in the area of xenotransplantation, where we have provided for them to to use the new heart preservation technology in that rigavacore subsidiary. Next slide, please. So let's talk a little bit about the R and D pipeline and what we do to ensure future growth. Next slide, please. Number 12. In the lung area, we continue to develop the XPS. We have released another new version where a lot of new with a lot of new features, and we plan to do that furthermore during 2020, with more sensors for metabolites, blood gases, other things, looking at also biomarkers in order to improve the, basis for the decision making that the doctor do should you transplant or not the organ that has been evaluated. We also, look at expanded use for non heart beating donors, DCD donors, especially during controlled and uncontrolled, which means patients that arrive dead to or die in the emergency room. We also continued to develop the protocol in collaboration with academic organization where they looked at ventilation, optimizing ventilation strategy, turn the organ, organ proning, and other things that could improve the EBLP technique. We also investigate the immunological response during EBLP. We know a lot of things happen during EBLP in terms of immunological response, and the target there is to, see if we can even better the short term organ function and long term survival. Next slide, please, number 13, is an overview of the new project development projects. Priority one, of course, is the heart transplant project, optimized put the preservation to sustain organ quality and to increase time outside the body. The second priority is the Primaek, which is an optimized primary solution to reduce the known side effects by using a hot lung machine. And second tier of priority done is the third is liver and kidney transplant. We continue to collaborate with clinicians using STEAM solution for livers. There are more than 30 transplants that we made with successful results. And then also another number of kidneys too. So we will look with that, in the future, a possibility to expand the reach of our technologies into other organs. As a fourth priority, there's still an interest, of perfusion, isolated organs, and tissues, with STEAM solution to administer especially cancer drugs, but also other drugs. Next slide, please. Number 14. Let's talk about the heart transplant project. The most exciting project we have right now, I think. It's a total noble concept with a very advanced, solution. We pump through, the heart during all the way from being taken out of the donor until it's into the recipient, and it's oxygenated or that solution is oxygenated in the device. So that means we can we can keep the heart in better better sustain the quality of the of the organ, when it's taken out until it's transplanted. And it's also in in animal expansion shown to be possible to prolong the preservation time. The data printing, Nikki, the most exciting was the pig to monkey transplant with a six months arrival, which was the kind of world record in the single transplant, only made possible with this, technology. And we also have the, obviously, the first human trial. This is ongoing still in Bloom University. They've made a number of patients, but what's been reported, is six patients after six months, where it's showing that hearts can be safely preserved with this technology and with a successful transplantation. And we can also see then a reduced risk for ischemic induced with refutation injuries. So very promising results, which have encouraged us to go ahead with full force, to develop the second, more advanced prototype of both the solution disposables and the machine. And as I said, been granted breakthrough device designation from the FDA, shortening the time to market. Got patents for the heart preservation fluids approved in US and Europe. We have built a clinical team to to run them, to be able to run the design to be finalized. It's been tested, validated, and the production has been ramped up ramped up for these making it possible to start up the trial. And the ongoing preservations for the multicenter trials both in Europe, US, and Australia are in full at full speed. Centers all recruited. Application's been submitted, and we have interactions with regulatory authorities in Europe. There's obviously six different authorities. It takes some time, but we're optimistic and hope that we now can start expect to start the first patient in during the Q1, depending obviously on authority approvals, same, subsequently in the other countries and markets. Next slide, please. The Primaec. So the background to this, their, primary solutions are always used in order to be able to use the heart lung machine before it's employed into, in open heart surgery. And this the thing is that this primary solution, besides having to prepare the heart lung machine, it also goes and enters the patient's bloodstream bloodstream at the start of the procedure. This, with these unoptimized, nonoptimized solutions, they are known to cause side effects. And there are six to 700,000 bags of these solutions used each year when running heart lung machines in heart open heart surgery worldwide. And alleviate those known side effects. Next slide, please. So accomplishments, in the PRIMEC with patented now in EU, US, China, Japan with CE Mark. Clinical studies already performed 40 plus 40 patients showing that it's safe to use, it improves fluid balance, and it reduces side effects using hotline machine primitive in the Sargent hospital study. We have now made a a production. First, Galatian was forced to change the bag into a eco friendly bag with a so now validated first production to satisfy the results. That regulatory file, the new technical file have been for a whole production process, relation, service station, everything, and packaging has been submitted actually in q three or early q three. And we now hope and expect to have that approved by the notified body in in q one twenty twenty. We have recruited a project team. It's completed that can run this. And we have again, we are now waiting waiting final approval from the body and ethical committee. Preparations are are are full at full speed to to start the clinical this clinical documentation trial, and we now plan a multicenter trial at seven Swedish hospitals to start at Q1. Obviously, administrative approvals. But this is, in late stage preparations and really waiting for the approvals. Next slide, please. So, all in all, we look forward, focus areas, obviously, thoracic transplantation surgery, primary focus. Lungs, further support development of EVLP technology is spread in more countries, more clinics, and and in more clinical practice. The heart, the startup and running of multicenter trials, all the important markets for regulatory approvals. And PrimeX, here we have an approved product in Europe, but we need to increase the documentation. We're gonna do that by starting and running a multicenter study for that clinical documentation. In abdominal, which we think will be the is a secondary focus, but it will be the the next area, so to speak, where we continue to exploratory, research to how we can apply the technology in liver and kidneys. Very promising, but in the early start. Further, we will further investigate during the year. Long term year goals, solidify position in thoracic surgery, lungs, heart, primek, build a new business long term Thank you. The first question comes from the line of Arvind Nikanda from Redeye. Please go ahead. Okay. Thank you for taking my question. Not too much for me today, so I'll spare your voice a little bit. But just summarizing the year and touching upon what you said in the report, how growth has accelerated in Europe during the year. You provide a bit more of a granular view of this? Is it where does the growth stem from? Is it maybe a few selected clinics that are reaching a degree of utilization, or are you seeing growth across the board? Could you give us some insight into this? It's actually both. We have some clinics that really excel and are increasing very much, like Paris, tremendous site. I think I know more than thirty percent, I think, of their of their transplantations, EDLP right now. But it's also spread into more clinics, applying or employing the technique. So it's actually a little bit of both. Okay. Yeah. And and just a a quick follow-up then. If you look at the clinics that have come a bit further, such as the the the Paris, clinic where you also have, adequate reimbursement, how far clinics would you say reaching how far is EDLP becoming from becoming more or less standard of care procedures such as in Canada, where it's the most advanced? Could you provide some insights into that? It depends a lot on the country and the basis for reimbursement because in the budget countries, so to speak, like Sweden and others, it's very hard. It's kind of an uphill battle to get these techniques established because of the cost. They only look at cost. They don't really look at the number of patients, unfortunately, treated. While on other places where, like in France, where they have an external or a special financing, I should say, then it's really increasing. So it's country by country almost, you could say. We know in Holland, for instance, there's a great improvement in the use, and they have this special system too with insurances. So it's a little bit of both. I mean, it's a little bit of depending on country. Germany, for instance, it's a lot of clinics now applying for they need to apply for reimbursement ahead. And we know the number of clinics are interested now, and they are applying for it, and it'll take some time. So a little bit of both, but you can see on the especially in the countries we have a special financing transplant, then you can see it's much more employed, if that is the case All right. Yes. It varies. Okay. Yes. Got it. All right. That's it for me. Thanks, There are currently no further questions from the phone lines. Do we have any on the from the Internet, Brian? No. I see no questions on the Internet. Okay. Anyways, thank you all for listening in, and I hope you will, join us for next quarter. It's been a tremendous pride in the company for delivering this, great year. A lot of things have been achieved, and we're really, anxious, and looking forward to to 2020 where a lot of things will start up exciting times ahead. Thank you so much. Hope you will join us next time. Thank you.