Earnings Call: Q2 2020

Jul 10, 2020

Ladies and gentlemen, welcome to the TxVivo ProFusion Q2 twenty twenty Report Webcast. I will now hand over to Dag Anderson, CEO. Sir, please go ahead. Thank you very much. Good afternoon or good morning or good evening, depending on where you are in the world. My name is Doug Anderson, and I'm sitting here in Gothenburg again with Chris Arthur Rosenblatt. Good afternoon. And, I have now been CEO for for as long as six weeks. And so it's my pleasure actually to present the first report here to to to to all of you. And just to tell you a little bit about my my background, I mean, served for eleven years before joining Nextiva as CEO and president of Diavira, which is the third largest dialysis provider in the world. And prior to that, I was the deputy CEO of Nondike Nondike Healthcare, a medtech company, also head office here in Gothenburg. So I will start just to make some comments on Slide two of the presentation. So if you turn to Slide two, ladies and gentlemen. When it comes to sales, we have between 2012 and 2019 had a yearly sales growth of 21% on average. Unfortunately, this year, because of COVID-nineteen, we've actually had a sales loss of 28% especially in Swedish krona. The positive news is that one of the positive news is that we have very strong gross margin, 8%. I think this is a very, very good number. We have actually managed to produce a positive EBITDA during the first six months, excluding onetime costs of 5%. Positive cash flow, we have sold two line machines, evaluation machines in Europe during the corona crisis, one to Italy during the sort of height of the pandemic in the country. Activity is increasing again. We have seen a start in activity increase in The U. S. From May and in Europe from June. So activity is now on its way up again. We have also seen COVID-nineteen patients being transplanted in U. S, Europe and Asia, and our product solutions have been used for transplanting in both US and Europe for COVID-nineteen patients. We have also launched successfully Perthedex Trust, which is the home preservation fluid with Clickport in Europe and Canada and full implementation. So completely that is a very unique and patented fluid that is now sold on on on our markets. So that these are the highlights of first six months. I will come back to explain some of the highlights in more detail, but I will now ask Christoph Lustenlot to talk with regards to profit and loss statement on Page three. Thank you. Yes, here is a big picture of the P and L. What can be said of the first six months is that as we reported earlier, has been COVID-nineteen effect on top line. Good news is that gross margin has remained high during this period of time. Also, we reported earlier we have a cost reduction program implemented, and we have been able to reduce costs to a large extent without reducing the speed of our projects. This is also about positive use of that. Look at the first half year, we also managed to have a positive EBITDA for the first full period. And I think with that, we turn over a little bit more to the COVID-nineteen effect on the company on the next slide. Slide four. Yes. So we talk a little bit about the impact on transplant activity. And as you can all guess and understand, I mean, COVID-nineteen situation has had a big impact on on transport activity and also surgical activity and critical activity in in the world because in terms of care, capacity has been utilized by by COVID nineteen patients. But you can see on the two graphs on Slide four that the number of land transplant per week in The U. S. The first graph is going up again. And you can also see on the second graph, which shows Spain. And and interestingly, Spain is actually the country in the world with highest number of transplants per inhabitant. And the activity level is is also increasing there, but a little bit later than than in The U. S. So that is the chance on activity, two examples of countries where activity is going up again. Page five, which I mentioned already on Page two, is that we have despite the pandemic, have sold to lung evaluation machines called XPS in Europe. The one that we sold in Austria in in one of Europe's actually leading hospitals, AKH in Vienna is is very prominent. Transplant center, one of the more prominent ones in Europe. And interestingly enough, we have also sold one machine to a pediatric clinic in Rome. And it's actually the first time, that we sell a machine to pediatric hospital. And this is also this was done during the height of the of the pandemic. When it comes to page six, it's a study linked to our heart preservation project, which I will come back to a little bit later on, so we can actually skip this page from now on or or for now. On page seven, this is just an example of what we continuously do. We we add features that are gonna benefit to our customers on on our machines, and this is actually an example of such a feature that we add. And it's a weight sensor. And the weight sense sensor makes it much easier to make a decision whether to use a line for transportation or or not. And previously, the weight of the lung could only be taken at the beginning or at the end of the evaluation lung evaluation period. So this is actually quite a unique feature that I think we are quite alone in in the industry. On the next slide, page eight, we are just showing that being market leader means that we are also taking a lot of initiatives in different areas. And one is to host ex vivo webinars where a number of key opinion leaders in the global lung transplant team should moderate them and present or participate in these webinars and share experiences from their clinics around the world. And it's quite interesting to note that in total, have around three fifty participants so far and very positive feedback. And we will continue to host these webinars at least once a price per quarter. If we then turn to page 10, which just shows the how we sort of continue to grow or focus on growing within the lung transplantation area, we are continuously looking at the protocol development related to our warm perfusion fluid called EVLP protocol development, where we are looking at ventilation strategy and and organ in proposition, etcetera. We are also looking at the machine strategy, how can we make the machine the machines easier to use, more customer oriented, more flexible. We are adding features such as the sensor I mentioned before. Biomarkers are also being validated. We are looking at the next generation of the warm perfusion fluid. The name is actually called Centimeters Solution, and we are looking now at Centimeters Solution two and where patents are being filed as we speak. We are also looking at expanding the use of DCD lungs, and this stands for donation after circulatory death as opposed to DVD lungs, which are donation of the brain deaths. So it's important to distinguish between those two type of effects of deaths, to be brutally. Next page, Page 11, heart transplantation. We have a key project aimed at commercializing a heart preservation device solution. This has been developed by professor Stein, who's also developed our warm perfusion and cold preservation fluids. And we are actually very happy to show to you today that we have done the first clinical study at Lund University Hospital in the South Of Sweden, where results on the first six patients of the six months indicate actually that our that hearts can be safely preserved with our technology. And safety preserved means that a heart transplant is out in in in success and reduces the risk for how do pronounce it? Ischemic induced ischemic induced reperfusion injury. So this is actually a publication in a magazine called Nature, which is very important. So this is the first, call it, initial evidence that our heart preservation device solution is successful. And when it comes to this project, the heart preservation project, we have actually managed to get patents approved in The U. S, Canada and Europe. We have a clinical team build up, and we are actually starting multicenter trials. I mean, the trial I mentioned to you before in Lund was a preclinical trial. But now we are starting the retrial in Europe, U. S. And Australia. And Belgium, France, we start first, and Germany then, Poland. And what I'm very happy to to mention to you as well is that our heart preservation, device and treatment has been granted rates in device designation by the FDA, which means that it will it's the first time that we will get an FDA approval for this. So planned IDE submission in quarter three. So that is on on on March. Fryneck, which you can read about on page 13, is a solution that will be used with the heart lung machines. And these solutions enter the patient's bloodstream at the start of the procedure to replace the blood volume filling the heart lung machine. And the objective here is to limit the damage on surrounding organs, mostly the kidney. And this is also a very interesting project, and we believe that this will have a commercial success. It has been patented also in Europe, US, China, Japan, CE marked clinical studies at Salkransky University Hospital in Gothenburg. And we are now preparing a clinical multicenter trial in various Swedish hospitals, and they are now ready to include the first patient. And I think this is also a very exciting project for Exivo. On page 15, if we look a little bit at the outlook, you know, the outlook this year, a little bit also into into the future. For us, of course, it's very important to to defend and develop our position in the lung transplant segment, and that means continuing to develop the wall perfusion fluid, clinical practice, machines. We have the heart preservation project with dViC and fluid, which I mentioned to you before, where the trials are now starting in Bedroom, France and Germany. And we have the Prinec project with the multicenter study in Swedish hospitals. When it comes to our long term goals, we have said, and I think we continue to say that we want to solidify our position in four f sodium, that means lung and heart, and that includes the heart preservation and the primary project. But we also want to enter delivery kidney organ segments. And how to do this? The future will tell. I mean, there is always an option to do it on our own or there is an option to cooperate with or or or acquire another player in in in the industry. And there are some interesting companies to to study for for for this sort of purpose. When it comes to the COVID nineteen situation, as I'm sure you've heard many other companies, I mean, there is COVID-nineteen has had an impact on transportation and on our sales. And we have implemented a temporary cost reduction program to bring expenditures to lower level. And what we have primarily done is to reduce the number of consultants primarily. And therefore, it's also very important that we focus on what is important for Exivo. And the projects I have talked to you about are absolutely essential for our development in the future, and we have the resources to drive and develop these projects. And as mentioned before, we have exciting clinical studies ready to start both for the heart preservation project and for the panic project. And on the last page page what is it? Page six bill actually, just to give you a little of my observation after the first month or six weeks now either, we have appointed a chief intellectual property officer. It is a person who ensures that we have the right of patents and IT protection in place throughout the world. And we have also appointed chief Medicare officer for the company. In the early autumn, a head of commercial will join Exivo with a great experience, and I'm sure that this person will be going to into into the company and be very productive from from from the start. The head of r and d will also join during the autumn. My focus right now is is very much on on further commercializing the invitation to focus on sales of skills, pricing, sales tools, but also to include product management and time to market. Is important to have project managers for the key projects to actually help them all their time on leading the respective sort of project. And being a company of relatively small size, it's important that we always are clear about priorities. We do cannot afford to focus on too many things. So we have our priorities. We know exactly what project to drive. We have the resources for those projects, and I'm sure this will lead to great success also in the future for the company. So that's all from our side. Thank you. We will now open up for questions. And our first question is from Daniel from Danske Bank. The floor is yours. You. Daniel from Danske. So my first question is really if it's possible to quantify, say, the physical effects of the cost reduction program going into 2021 and the following second half of this year. And my second question is really if you could give a, say, an updated picture on the activity level when it comes to warm perfusion procedures, especially concerning your largest customers and what we should expect going into the second half of this year in terms of growth or decrease? Okay. Okay. Yes, we can do that. Just after that, with the with the second question, is the p activity in our judgment right now is about a month later than let's say, the lung transplant activity in general. So it's a it's a slight delay with about a month country by country, and we we can see increased activity at the end of q two coming in. Again, it could be different country by country, region by region, but as a general picture, that's the best thing to have. And the first question, could you please repeat it? Yes. So I'm wondering a bit, you're mentioning a cost reduction program, and I'm wondering if you could quantify the effects on, say, how much will you slice OpEx cost on a full year basis? Is it possible think it's quite if you look at the Q2 reduction, I think it's quite apparent that we have reduced, especially after the variable cost during the quarter. And we have intention to to continue to do that as as as soon as needed. We we when we do that, we still review without we reduce the cost without actually short term at least reducing productivity. I think that's important to mention when it comes to country cost reduction programs. It's hard to quantify the exact effect going out the end of the year, but I think Q2 gives a quite good indication on the level. Okay. Thank you. And we have no further question at the moment. I give the floor back to you. Thank you. I have seen no question on the Q and A side in written statement either. I don't know if we should wait another fifteen seconds to see if there are any more questions on the line. No more questions on the line. Okay. Then we conclude this meeting. Yes. Thank you all for dialing in and listening to Chris's offer myself, and looking forward to meeting you all again in in a couple of months' time for the next quarterly report. Thank you all. Thank you all. Enjoy the weekend. Cheers. Ladies and gentlemen, this concludes our conference call. You can disconnect.