Ladies and gentlemen, welcome to the Cosmo's full year 2022 results and 2023 outlook conference call and webcast. I'm Moira, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions or comments in writing via the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Mauro Ajani, Founder and Chairman. Please go ahead, sir.
First of all, thank you and good morning, everyone. Let me say that I am very happy and extremely excited today to be here. It was important for me to share with all of you my perspective on the great things that are happening here at Cosmo, we have many great things that happening. Today, I would like to focus on GI Genius. I am sure that you read the different press release from us, from Medtronic, and also from NVIDIA. I am sure you already realized how big and how important and strategic this news is. Let me say that we are at a pivotal moment with our technology, before I speak more about the future, let me share with you the outstanding result that we have been seeing with the GI Genius.
Medtronic has installed about 1,250 GI Genius units worldwide. We already have major academic institution have adopted the technology already, and they are pleased with the clinical support that they are getting from our GI Genius in detecting precancerous lesion. We constantly receive positive feedback for gastroenterologist. This is very important. They share their excitement in having a solid, reliable, and cutting-edge AI technology to help them in this very challenging procedure called colonoscopy. This is important. This is the foundation and where everything started less than five years ago. The colonoscopy market opportunity remain very, very, very big. Medtronic is doing a great job in expanding the customer base. We are seeing strong increase in demand every month, which means we are passing the chasm of the early adopters and moving into the vast majority of endoscopies.
Remember that the total addressable market in the U.S. only is about 30,000 colonoscopy towers. Now, you might ask me the question. Usually, I am sure that is in your mind. Will AI replace gastroenterologists? Let me say that I think this is the wrong question. The right answer is gastroenterologists who adopt and use AI will replace those who don't, and this is not far to be the case. With this great foundation, we plan our next strategic move, and, here I am sharing the excitement of the announcement released yesterday. Artificial intelligence has the potential to revolutionize patient care and transform the approach to the healthcare. Everyone talks about data, and the world has already gone through the big data revolution. Now we must, and I say must, deliver big insights from this data and transform them into actions.
The time of the blah, blah is finished. That benefit the physician and the patient. This is where Cosmo IMD plays a key role, and it's not a coincidence, let me say, that we named our AI franchise Intelligent Medical Devices. We aspire to bring more meaningful, impactful technology to the market with the only objective to empower physician across the globe with the use of AI. Another question could be: Why NVIDIA? Very simple. NVIDIA is one of the largest tech company in the world with an extreme focus on developing tools that can help developers build AI algorithms. I am very proud to say that GI Genius is the first and the only device in medtech that will use their latest technology called IGX and Holoscan. NVIDIA saw the potential of GI Genius and is willing to support Cosmo and our technology with their hardware.
Just in a nutshell, let me say that this is a strategic partnership. This partnership will also help Cosmo reaching thousand and thousand of data scientists around the globe who eventually will develop AI application that we will be able to upload into GI Genius. Just to give you some data, the video that announced GI Genius using IGX and Holoscan yesterday has been watched by 9.5 million people worldwide. You got this right, 9.5 million. This integration has the potential to significantly accelerate AI innovation in healthcare. It also enable GI Genius to host additional advanced AI application. It is the only device in the market with this capability. We believe this will increase the scale and speed of medical AI innovation. Let me now talk about Medtronic.
As I said earlier, we are seeking great progress in the adoption of GI Genius. We know that this will continue over the next month. Medtronic has been a great partner who believe GI Genius has a huge potential. That why I want to share their excitement about this plan, to expand access with AI. I am sure you read some of the comments that were made by Giovanni Di Napoli, that is the President of the gastrointestinal business at Medtronic. They are committed, engaged, and willing to accelerate market adoption. Just to give you an example today, right now, as I speak, they are hosting the first GI Genius™ summit in their headquarter in Minneapolis, where more than 100 key opinion leaders are present to listen and learn more about GI Genius and what this technology can do for their hospital and practice.
Let me close by saying that Cosmo is leading the way in artificial intelligence in GI. Real-time AI, like GI Genius, will transform the med tech market. I believe that every real-time imaging technology could benefit of our expertise and innovation. Cosmo has shown with real data and success that a unique experience in developing AI software, proving them clinically, and in parallel work with the FDA. Building an algorithm, this is one of the major difficulty that people cannot understand, but believe me, building an algorithm is not enough. That's where our clinical regulatory experience come into play, as we have shown over the last 20 years successfully with our pharma business.
Once again, let me say that I am not sure how many other company have this skill set, and that's why Medtronic sees us as a very unique partner that can help expanding their access into AI market in med tech. Thank you. I would like to say just an adult. Yesterday, I approved this presentation with some friends, and the friends asked me, "Is your technology... You developed this technology?" Yes. You have to take in consideration that GI Genius is a technology owned by Cosmo. Thank you very much.
Thanks. I guess now is my turn to start with the overview and the rest of the presentation. Let me just go very quickly through the first slides. First of all, I want to recall that Cosmo is actually the only company its size who can claim six approved drugs in its portfolio and two approved medical device in three areas. You know we're active in gastroenterology, we're active in dermatology, we're active in health tech, again, not other companies with our current market cap can claim such an array of products. We have made very significant progress in 2022, basically on all fronts.
We will speak more in detail about GI Genius in a few minutes, but just to recap what has happened, first of all, we have shown the results of the first U.S. study that has shown a 50% reduction in missed colorectal lesions. There's nothing else in the world that can claim to be such advantageous to the procedure for the benefit of both the physician and the patients. We have expanded our agreement with Medtronic. Medtronic has won the largest ever purchase order for their gastrointestinal division with the Department of Veterans Affairs in the U.S., decided to install 115 GI Genius in one shot throughout all of their endoscopy suites in the United States. Last but not least, GI Genius has been named into the FORTUNE 2022 Change the World list.
I'm not sure how many in the audience know that this is the most important award in the world for innovation. The motivation for that was because of the ability of GI Genius to be very significant tool in the fight against colorectal cancer. We have also significantly expanded our business with Winlevi. First of all, we have expanded the agreement with Sun Pharma to Japan, Australia, New Zealand, Brazil, Mexico, and Russia. Let me here focus on one thing that's very important. Sun Pharma is known to be a giant generic manufacturer. They decided to use Winlevi as a pivot to shift their generic manufacturing business in the U.S. to specialty pharma.
The fact that they are taking over the responsibility also for Japan means that as a generic company, they will conduct The clinical trials in Japan that are needed for registration, and I think that this speaks volumes about the trust that they have into the project. 3SBio, one of the largest dermatology player in China, wanted the license for Mainland China, Taiwan, Hong Kong, and Macau, and we successfully closed the deal. We have started to bring Winlevi into Europe with the first deal with a European player in InfectoPharm for Germany, Italy, and Austria. We've also entered into a deal with a company Hyphens, listed on the Singapore Exchange for the whole of Southeast Asia. Cortiment, our budesonide product against more severe ulcerative colitis.
We have seen in this year the submission of the Cortiment's NDA in Japan by Ferring. We are expecting this to go through. If the drug is approved, launch will occur in August this year. We have expanded our agreement with Medtronic for Winlevi. Now the agreement covers the whole world except Canada, where the product is licensed to Pharmascience. With Lumeblue, we have seen a success of a very, very large phase III trial in China needed for registration with 1,800 patients meeting all relevant endpoints. Our partner in China has already filed for the NDA. Approval, if granted, is expected by year-end or Q1 2024. Why is Cosmo interesting and we believe an appealing investment? We have a legacy business that continues to grow. This is the business that pays the bill.
Our legacy business has totaled EUR 65.5 million in 2022, which is an increase of 13.2% versus 2021. Lialda has recorded a 6.5% growth in revenues. Cortiment has recorded a similar increase in terms of volumes compared to Lialda, which was 14% year-over-year. Made a very sharp increase, and you can see from the slides, in the revenues because there was a EUR 9 million milestone that was paid upon reaching both EUR 100 million cumulative net sales and EUR 20 million yearly sales. Other than that, we also have a very exciting development pipeline. We have one product which is entering clinical stage three now with high potential in the very large hair loss market. We're clearly talking here about Breezula. The phase III trial is about to start in the coming weeks.
Our latest forecast is that we will have the first patients treated by May. We also have two early-stage products which can generate substantial returns with low investments. One is our first and only incursion in oncology. The phase I has started, and we have already treated six patients and more to follow. This is the drug that is, has shown very interesting activity in animal models against advanced refractory solid tumors that would actually be reactive to anti-androgens. Second product is our drug against bile acid diarrhea caused by bile acid malabsorption. We have completed formulation and IP protection, and now we're moving into planning the clinical development. The company has a legacy business that pays the bill and continues to grow.
The company has an exciting development pipeline. The company has two key growth drivers, which are the assets that we have to look at to understand what's gonna happen in the very near future. The first one is Winlevi, and the second one is GI Genius. These are two revolutionary products because they are really one of a kind. They're performing in very large markets, and they are entrusted with very strong partners. You don't have to wonder whether we would be able to commercialize them or not. Winlevi is entrusted with Sun, and GI Genius is entrusted with Medtronic. Let's start quickly with an update on Winlevi. Winlevi is the number one prescribed branded topical acne product in the U.S. Sun has launched the product in November 2021.
The launch has been one of the most successful acne drug launch in years. I want to remember this is the first new mechanism of action in 40 years in acne. We have already cumulated more than 530,000 prescriptions to date, and probably even more important than this, Sun has reached out already to 13.2 thousand prescribers, which represent 82% of total healthcare providers in dermatology. This really also speaks volumes about their capacity to reaching out the audience that can effectively prescribe Winlevi. As I mentioned a couple of slides ago, it was the very strong U.S. launch that resulted in very strong demand from potential ex-U.S. commercial partners and hence the deals that I was talking to you about. If we just look at the...
Just look at the United States, we have provisions in our license agreement providing for $190 million in commercial milestones, high double-digit royalties, and exclusive manufacturing. I wanna spend a couple of seconds to explain you what this slide means in terms of potential, because anybody can wonder, okay, what's gonna be eventually potential peak sales for Winlevi? A very interesting answer come from this document. This document is an excerpt from a research that Citi, the bank, has done on Sun Pharma. We have nothing to do with this. The reason why Citi conducted this research is because Citi was puzzled by the fact that Sun Pharma was spending so much. Remember, Sun paid us $45 million upfront for Winlevi, and why Sun was paying so much for an acne drug. They found the answer in this survey.
They interviewed 112 U.S. dermatologists, asking them whether they were keen or not to prescribe Winlevi. The answer is here at the bottom of the page. They said that they were assuming that with a 5%-7% market share, the peak sales of Winlevi would have been $300 million-$400 million. Let me tell you, if this would happen we would. When the peak sales are reached, we would be paid $80 million in royalties, and all of our commercial milestones would result to be paid. What the survey is actually saying more, is saying that the survey shows that Winlevi can capture 12%-13% of the market share.
The reason for that is because basically all dermatologists in the survey, and you can read it yourself, again, this is not a document that's coming from us, all dermatologists are saying that they will be very keen to prescribe it. Why is that? Because it's the only available topical anti-androgen that can act at the very root of the cause of acne, meaning inhibiting the production of testosterone, therefore blocking the production of sebum, and therefore, relieving the patient. Just to clarify how important this drug Winlevi is for our partner, Sun Pharma, we thought that the best way to depict it was just to take two quotes from Mr. Abhay Gandhi, who's the CEO of the North America business of Sun Pharmaceutical, released in their last earnings call.
Again, these very simple words speak volumes about how Sun is looking at Winlevi. First one you see here, "The main driver of growth was the specialty business driven by ILUMYA and Winlevi." The second one, "ILUMYA and Winlevi were the key growth drivers for the quarter." Winlevi is one of Sun Pharma, two key growth drivers, I think that this again is very relevant in terms of making projection about what Winlevi can effectively do. Let's talk about the second product, GI Genius. Mauro has already briefed you extensively on how things are going and how we are expecting them to move forward. Let me just add a few things to make sure that we are actually transmitting the right message.
People that talk about artificial intelligence, they think that it's just about an algorithm, and then you can develop an algorithm, and then you have what you need. Well, you know, at least in healthcare, this is definitely not the case. In order to have a device as GI Genius, you need to be able to combine in a unique fashion six very different components. You need the science, you need the data, you need the certification, you need the regulatory, you need the hardware, you need the AI software. If you have just one piece of this, you cannot do anything. You're not gonna go anywhere. Even if you're so good that you have the science and the data, you might not be so good to develop the AI software.
If you have the AI software, you need to know how to gather the data, and you need to have the science to do that, and you need to have the regulatory expertise. It's only if you combine the six hexagon together that you have a product, and that you have a product like GI Genius. This is why we want to state it is absolutely unique. It is because of this uniqueness that we have been able, first of all, to strike the initial agreement with Medtronic because they saw what had to be seen here in terms of potential, but also to expand it in the way that Mauro has already anticipated and now we will describe with a little bit more detail. First of all, let's see where we are.
As of today, we have 1,250 units installed since launch. As you can imagine, here the progression of the placements of the installments is not like the progression that you can see in drug sales. That's very, very different. Agreements are negotiated not with the single hospitals. Agreements are negotiated with very large institutions that own several hospitals each. You have just a little list here on the side. You can see the logos of the people that Medtronic has been with the institutions, sorry, that the people has been dealing with in order to place these devices. These are behemoths of the healthcare industry in the United States. You can see Mingei. You can see, as I mentioned, U.S. Veterans. You can see United Digestive, which is a very big conglomerate. You can see US Digestive Health.
You can see Conant, Mingei. These are companies that own tens and tens of hospitals at the same time. In order to better clarify, we have provided here just a list. You see some names. This is just a list of some of the most reputed U.S. hospital institutions that have already installed GI Genius. You should be very pleased by seeing names here starting from the end. You can see Mayo Clinic, then you can see Northwestern Memorial, and you can see the cancer center in Arizona. You can see Minge, Indiana, Northwestern, Hoag, Veterans, Beth Israel in Harvard, Stanford, Cornell, New York, Rush. The big guns are entering into this, and they're entering into this all together. Again, just to be precise and to tell you how things are effectively tracking, this is an excerpt from Medtronic's last earnings call.
Everything that concerned GI Genius is grouped under the division that they call Respiratory, Gastrointestinal, and Renal. You see the excerpt, and the relevant excerpt about the gastrointestinal business unit is the following. Mid-teens growth in chronic and colorectal driven by strong U.S. GI Genius performance. I don't need to add more in this respect. Again, when we try to explain to you where we are, we are already present in 1,250 endoscopy towers. Bear in mind that the U.S. market only is 30,000 endoscopy towers. We have really just Literally, we have just begun. There is nothing else particularly that we have to do now with Cosmo when it comes to detection of lesions and colonoscopy. The product is ready, and Medtronic is selling it.
The space that we are occupying right now is very big because we are reducing the miss rate by 50%, and therefore we're changing the paradigm of the second-largest procedure in the US. Bear in mind, colonoscopy, in terms of figure, is second only to the blood test in the United States. Most important, Medtronic is using a business model which is absolutely revolutionary that it takes some time to understand. This is the subscription model. One of the company that has adopted this business model, and initially with a lot of skepticism, and which has instead turned into one of the greatest success ever, is Adobe. You can look at that. Adobe is the software company. They have, at a certain point, I believe it was 2013, switched to the subscription model, and you can see what the performance has become then.
What has to be understood is that in this AI business, what we're doing is completely different from what we're doing in the pharmaceutical business. How does the subscription model work? The subscription model works that the hospital undertakes to lease GI Genius for a certain amount of time, which is no less than 30 months. The first thing that you should think is that whatever revenue is coming, this is recurring at least for 30 months, which is something that changes dramatically any balance sheet if you can count on recurring revenue. This is exactly what Medtronic is looking for. This is also very important because once in hospital is locked in a subscription model, it becomes also an issue of fidelization of the client. The client then becomes highly fidelized.
Therefore, once you propose the client that there's an additional feature that he might be interested into, you really don't have to do any further great marketing effort because the subscription agreement is there already, and it's just sufficient for the hospital to say, "Yes, I would like to have this additional service." This additional service could be anything, but once it's added, it literally takes seconds to download the application that the hospital is interested into. Then it takes also second to start billing for that. You don't have to spend a lot of resources and time and money to do that because the whole infrastructure, the whole contractual infrastructure is there within the subscription model.
If you have 2,000 hospitals, and then you offer 2,000 hospital one service, additional service that's gonna cost EUR 1,000, as an example, EUR 1,000 a month, then the first month you already have EUR 2 million, and at the end of the day, you have EUR 24 million. This is the way the model works, and this is why Medtronic has decided to use it. If you understand the importance of the subscription model, if you understand the mechanics of this kind of business, then you are in the position to appreciate how relevant is now the shift that it's occurring. We told you where we are. We're telling you where we are going. We are pioneering human AI collaboration because GI Genius, since its conception, it's a platform with a modular architecture.
This is something that we have tried to explain in a lot of conversation with investors. Its purpose is to overlay artificial intelligence content to any kind of real-time video flow. Therefore, it is suitable for any diagnostic or clinical procedure performed by the physician who's looking at the screen to perform the procedure. You have to couple this with the unique marketing power of Medtronic, which is the number 1 med tech company in the world. Then you can start to figure out where we are exactly going. Let me do one thing for you. I don't know whether you have read it, but I would like, and I'm asking the operator to do this for us now, to please open the first link, which is the Medtronic press release that was just released yesterday. Let's have a look at this together. Operator, can you please open the link?
It's open, sir.
Thank you. Let me tell you the following. Medtronic is talking about GI Genius and is saying the following. Medtronic announced that Cosmo Pharmaceuticals and NVIDIA... You know, remember Mauro told you a few minutes ago, "This is our product. This is not anybody else's product. This is Cosmo's product." Medtronic is announcing that Cosmo and NVIDIA are planning to integrate the NVIDIA technology into the GI Genius intelligent endoscopy module. Medtronic says the following: "Developed and manufactured by Cosmo Pharmaceuticals, GI Genius was designed with the ability to host multiple AI algorithm.
Now, with the addition of NVIDIA technology, Cosmo is introducing an innovation center website enabling third-party developers with a cloud-based platform to efficiently train and validate their own AI models." Let's look at the quote from Giovanni Di Napoli, who is the head of the GI business at Medtronic. The possibility for GI Genius to host multiple real-time application is a game changer for physicians performing gastrointestinal procedures." Can we go back to the presentation, please? Operator, are we back to the presentation?
Yes, we are back to the presentation.
Okay, thank you. This was Medtronic press release. The press release of Medtronic comes after we have been doing a tremendous work to prepare all that was needed to open up the infrastructure, and we have dedicated a significant portion of our resources to do that. Our subsidiary that deals with artificial intelligence, whose name is Cosmo Intelligent Medical Devices, is currently employing 43 people full time and hiring other people because this business is literally exploding. We have specifically created a separated website for Cosmo Intelligent Medical Devices. I would like to show you now what this is and show you that this is already live, and this is something that you can go and take a look yourself so that you get a sense of the great work that's been done so far. Operator, can you please open the link to Cosmo IMD?
It's now shared, sir.
Thank you. I don't think that there could be a better statement from the one that you can see in the initial page. "We believe artificial intelligence begins with human creativity, and innovative ideas emerge from inspiring environments." There you have a sense of what our people are there and what they are doing, and we really have a fantastic team there that's doing a great job. If you please click on Innovation Center. Is that on the screen now?
Yes, sir.
Here you can see what this is. This is an open invitation to everyone to come up with us and cooperate into the creation of new applications for our platform. I can read it, and I think this is the best example of what's happening. "You can be part of the Innovation Center. The Innovation Center is a platform that provide developers and inventors of software companies or startups with the opportunity to build and test their real-time AI software for medical procedures. With access to a virtual sandbox and the GI Genius AI Access developer kit, user can reduce time to market and bring their ideas to life." Can we go back to the presentation, please?
We're now back to the presentation.
Thanks. This next slides really depicts also in a graphic fashion, the intertwinings between the company and what we're doing. You see Medtronic, you see Cosmo IMD, and you see NVIDIA in the corner. This is what is happening. As I said, GI Genius was designed to host multiple AI algorithm. We have created the Innovation Center platform, which will enable third-party developers to train and validate new AI application. Medtronic will create an AI Access platform also to support developers and accelerate the creation of real-time AI applications. These additional application will be distributed through the GI Genius module, offering clinician expanded access to AI tools with the potential to improve patient outcomes.
All this is gonna happen not because Medtronic will have to go knocking on the door of everyone, but because there's a subscription model that will make bringing these additional features into the market way faster, way leaner, and way quicker than anything else. I think that if you need to look for a comparison here, you can imagine a software company that makes gaming, and you can imagine yourself downloading a game to be played on your iPhone, on your mobile app. It takes normally one day for million of apps to be downloaded. It take only weeks for tens of millions of apps to be downloaded. Given the fact that here we're talking about healthcare, but we're not talking about gaming, just giving you a sense of the kind of evolution that we are expecting.
Because of this opening of our platform, we will be able to gather contribution for basically every corner of healthcare, and we will be able to expand the use of the GI Genius platform basically on all procedure that require real-time application. If you just take a look at what's happening just in the U.S., here you might have a sense of the potential of the market. You remember we've said many time that there are 19 million colonoscopies only in the United States. You also have 6 million upper endoscopies, and you have 500,000 ERCP, which is a different kind of endoscopy procedure, and you have 15 million laparoscopy. Here we're just within GI.
If you move into the non-GI, you can see that there's a 1.6 million procedures in rhinoscopy, 1.5 million in cystoscopy, another half a million in laryngoscopy, and 4 million in arthroscopies. All these procedure are just designed to have an overlay of AI content when the physician is performing the procedure. Basically what you will have is that you're gonna have a platform, and you're gonna have a platform that's gonna be uploaded with very different SaMDs. This is a word that you will hear a lot in the very near future. SaMD, as usual, unfortunately, in the U.S. jargon, it's an acronym which stands for Software as a Medical Device.
It is much easier to develop a Software as a Medical Device if you don't have to worry about the hardware, about the operating system, about the software that's running, that's running the hardware. You can develop your Software as a Medical Device if there's anybody else that's willing to host it. Can you imagine the potential of this if you also have a partner like Medtronic that's gonna do the marketing of this? This is gonna help us create the leading medical AI platform. It's gonna help us accelerate bringing AI innovation. It will not just be us developing applications, it will be also everybody else that's interested.
I can tell you, we are already in contact with several companies that have a piece of what is needed, that they just wanna do the full service. This will improve the patient outcomes. You see, we told you that we have 1,250 units placed as of today. Just imagine that every single app is gonna be priced at $1,000 per month. Here you can see what's gonna happen if you just have one app or what's gonna happen if you have five apps or if you have 10 apps. If you have 10 applications, only the client base, thanks to the subscription model, only the client base that's already been reached would generate revenues for $450 million. Let's now move quickly to the financial review. The financial review is very lean.
Our revenues have increased 57% versus 2021 at EUR 102 million. Our EBITDA, that's very significant, has improved 126% to EUR 42 million. Our operating profit, 153% to EUR 28 million. Our profit after tax to EUR 24.5 million. Even more relevant from a certain standpoint, out of EUR 102 million revenues, we have been able to generate EUR 33.2 million cash, which is the reason why you're seeing our cash in short-term investment position increase significantly since 2021 to EUR 241 million. In the meantime, we continue. Also given the inexplicable last period performance of the share price, happily continue to be buyer in the market of our treasury shares.
So far, the treasury shares that we own are worth they're EUR 73.6 million at 31st of December. We currently hold a total of 1,183,000 shares. Probably the slide that can depict better what we're doing is this one. This one is following that our business model is delivering. This is exactly what you should expect our business model to deliver. Remember, we don't have a commercial infrastructure. We don't have a cost base that increases together with the turnover. Our cost base remains relatively flat over time. This is why you can see this shift. Look at the EBITDA, which is probably the best indicator. You have EUR 13 million in 2020, you have EUR 18.5 million in 2021. You have EUR 42 million in 2022.
Now, just imagine how this has gone, what is going to happen if GI Genius is going to deliver exactly as we are telling you, and how impactful this is going to be on our EBITDA, given the fact that we already were practically all the cost there. Now we have to reap the rewards because the investment have been made, and there's no further money for us to invest, except, of course, have our people continue to work and continue to deliver. Here we're talking about headcounts, we're not talking about large investments. Again, what's the situation here? We are on track to capture our opportunities, and this is why an increased dividend distribution is now being proposed. Quickly on the key priorities and the guidance. Our key priorities for 2023 are very simple.
We're going to expand the GI Genius, sorry, GI Genius business with Medtronic. We're going to expand the Winlevi franchise in the rest of the world, and we're going to advance our clinical development pipeline. Our guidance, which is reiterated, total revenue between EUR 110 million and EUR 120 million, operating profit between EUR 25 million and EUR 35 million. Our key go-grow drivers will be GI Genius and Winlevi. You also understand, because of the nature of the business with GI Genius that we try to explain, that we have some issues in modeling this precisely, and therefore, this is the reason why we have this conservative guidance. Thank you very much and happy to answer to any question you might have.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and eventually turn off the volume from the webcast. Webcast viewers may submit their questions or comments in writing via the relative field. Anyone who has a question may press star and one at this time. The first question is from Bob Pooler from valuationLAB. Please go ahead.
Thank you. Good afternoon. First of all, congratulations with the record results and also the new agreement with Medtronic and NVIDIA. Coming to that, with the AI apps for GI Genius or maybe even other hardware products that you will offer in cardiovascular. Could you explain a little bit the business model? You know, who bears the costs? Who splits the revenues? Let's say I'm an app developer and I want to develop an app. How does that go?
The business model hasn't changed. I think we have explained that what we have with Medtronic is a revenue-sharing agreement. Whatever revenue is generated by Medtronic, in whatever form, we have a share of that. We're not allowed by Medtronic to say-
Okay.
-how large the share of revenue is. What we have anticipated in the, in the past is that for every $100 million, sorry, for every $100 sales made by Medtronic, we're gonna have a profit between $22 and $24. This is gonna be going through, this is gonna be the reference agreement. I hope this is a sufficient answer to that. When it comes to external party developers, we will clearly need to have an idea of what's gonna be the commercial value of the application that's proposed. Clearly here, the judgment call.
Mm-hmm.
from a commercial standpoint and marketing standpoint will have to be made by Medtronic. It's gonna be Medtronic who will decide whether a given application is effectively worth and what is the price that can be charged for that in terms of fee to be added within the subscription model. Therefore, there will be split between the developer, the, and the split between developers, us and Medtronic, but us and Medtronic will continue to split revenues in the proportion that I mentioned.
Okay. Yeah, because I'm just thinking, if you look at, for instance, the Apple, with the App Store, there you have developers coming in there. Apple provides the developers, this would be probably Medtronic and NVIDIA with all kinds of modules for the programming, for the regulatory and so. Then they are able to put it on the App Store, which would be then GI Genius or the platform that they have. Then Apple gets 1/3 of the, of the revenue streams there. Again, I'm not sure you-
Well, sorry. Sorry. Sorry. Sorry.
I think that's probably what's happening.
Sorry, Bob, it's quite different. You are, in my opinion.
Okay.
misleading. There is a marketplace.
Mm-hmm.
The app, there is something that is.
Mm-hmm.
Straightforward to the hospital and to the, related to the GI Genius application. It's quite different.
Mm-hmm.
You are not to. There is a confusion, in my opinion, if you consider the same. It's not the same. In the company came.
No, no, no.
The problem that is two different and separate business. At the end of the day, there is no difference because we cash money, but in different way. One is through Medtronic and the agreement and the contract that they have with the hospital. The other with through the developers and the Medtronic diffusion of the app.
Okay. Okay.
And then just-
Just shifting to.
Bob.
Yeah.
Sorry. Bob, can you hear me? Bob?
Yes, I can hear.
Yeah, just to clarify further, because you mentioned NVIDIA before. NVIDIA doesn't really have a play in this. NVIDIA is providing hardware components.
Mm-hmm.
Some of the software that's used to run these components. It's not really into the game of building the apps and then doing things.
It's paid by us. It's paid by us.
Unless they decide to...
Okay.
in the business of developing apps for healthcare, which I don't think is what they're doing right now. They're really not into this loop. This is a trilateral thing between the developer, between us, and between Medtronic. You should also bear in mind the following: when it comes to splitting the economics, that not necessarily the same. Not necessarily one provider is always providing the same thing, 'cause you're gonna have a provider that's.
Mm-hmm.
Let's call it a third-party developer that has a fully fledged, already running Software as a Medical Device, or you're gonna have entities that have just pieces of what's needed to assemble a Software as a Medical Device. We might play a larger or smaller role depending in developing the application, depending on what kind of contribution and piece is put on the table.
You know, the real problem is the access to the market. The people that know.
Mm-hmm. Yeah.
they know that it's not enough to develop
Mm-hmm.
-an algorithm or you have a software. The problem is how you can access market. We believe that thanks-
Mm-hmm.
the platform and thanks to Medtronic, we can help the developers, that they could be a professor or hospital or entity, and we can help them to join to reach the market. This is, at the end of the day, the true of this platform.
Mm-hmm. Yeah. Great. No, I think it was well explained with the six key elements that you need all together combined to actually.
Without the six.
Be successful and have access to the market.
Without the six hexagons, you cannot play. I remember it's three years.
Yeah.
that in every time that, I presented the GI Genius, the people ask, "Where is Fujifilm? Where is Olympus?" I answer it always.
Mm-hmm.
That is a different game. They are developing AI just to improve their colonoscope. We are developing a platform.
Mm-hmm.
I hope that the people can understand how much difference there is between us and the other.
Mm-hmm. Yeah. Your objective is selling the platform and growing that platform, whereas the others are actually selling the scopes. It's just an ad where they competitively then can say, "We also have AI included.
Oh.
They're really selling the hardware.
Finally, we get the point. Oh, one point for us. Okay, go ahead.
Go back.
I had them already, but...
No, it's three years that they ask always the same question. The same question. Their minds don't have the same question. We are just a little bit tired also. Just a little bit. Now we can.
Okay. Let's switch to Winlevi then.
Yes.
Just Winlevi, given the strong uptake, do you expect some to reduce maybe the co-payments or rebates for patients because, there's such a large demand from it, and physicians are also backing it as well?
Yeah. I think it is within standards plan for a pharmaceutical company to reduce co-pay in order to increase their gross to net over time. This is exactly what they're doing, and they're doing this in parallel with reimbursement starting to kick in in order to be as efficient as possible. This is one of the reason why we are forecasting to receive significantly increased revenues in terms of royalties this year.
Yeah. These profits that are made by Cassiopea, are they upstream to Cosmo? How is this done?
What do you mean by that?
The profits that are made, they're made by Cassiopea and then upstream to Cosmo.
Profit, the profits are made by Cassiopea.
Yes.
which belongs, I think, in 98% something.
Yeah.
Cosmo. Yeah.
100%. Yeah.
Not 100%. I think 90, 98-
98%. Yeah. You're still, I think, with a squeeze out of the remaining 2%.
Well, that's because there has.
Just on Breezula, then I'll go back in the queue.
There is not a squeeze out.
Yeah.
Bob, just because there.
On Breezula, the phase II... Yeah?
No, I said, Bob, can you hear me?
Get the mic, I think, in our call.
Yeah. No, yeah.
Yeah. I hear you now.
Because I said there has not been a squeeze out. That's why there's a remaining, I think, around 2% shareholders in Cassiopea.
Okay. Thank you. Then just on Breezula.
Sorry?
You broke.
We cannot hear.
The timing.
No.
We cannot hear.
Bob, you broke.
You not hear me anymore?
No, no.
No.
You broke. Say that again, please.
Okay. I'll dial in back. Do you hear me now?
Yes.
Yes.
Okay. On Breezula, could you provide more details on the phase III trial regarding cost, timing, and are you seeking approval for both the U.S. and EU?
The trial is designed for the drug to be simultaneously registered in U.S and EU. It's gonna be a standard, two concomitant phase III trials, and we're gonna have two co-primary endpoints. One is gonna be the so-called TAHC, which stands for Targeted Area Headcount. You will have a small
Mm-hmm
...of the skull tattooed. This will be photographed with microscopic precision to assess the change in the number of hair.
Mm-hmm
...this is the so-called objective, clinical endpoint. The second co-primary is what is called the subjective endpoint. It's called PRO, which stands for Patient-Reported Outcome.
Mm-hmm
...has to report, basically how he felt using the drug and his, let's put it into bracket, its experience with the drug and whether he liked it or not. This is the concomitant endpoint.
Mm-hmm.
cost is gonna be probably around $30,000, sorry, $30 million in the space of a little more than two years. Bear in mind that we do capitalize the phase III cost, you're not gonna see that them impacting the P&L. They will only impact the cash position. Also bear in mind, and I think that this is something that everybody should bear in mind, that whatever possibility in terms of outcome you give to Breezula, just bear in mind, this is the same active that we use in Winlevi in a higher strength. That's very important in terms of safety, in terms of side effects and in terms of everything else.
Again, bear in mind that the mechanism of action and the cause of androgenetic alopecia and acne are exactly the same. It's an excess production of testosterone. I think that in a certain way, the success of Winlevi, both from a regulatory standpoint and also a commercial standpoint, I think it's a good indicator about what's gonna happen with Breezula if the trial succeeds.
Okay. Well, thank you for answering my questions. Apologies for the breakdown about communication.
Thank you.
Thank you, Bob.
The next question comes from Laura Hindley from Berenberg. Please go ahead.
Great. Thanks so much for taking my question. I hope you can hear me. First of all, congratulations on the update with Medtronic. Super exciting. I'm wondering if you can give us a feel for how many applications are in the later stage of development, and when could these theoretically be launched? What's the earliest date? On the pricing scenario you laid out, in the theoretical $1,000, can you give us a feel of how much of that would go to Cosmo? Subsequently, what would be the business model for distributing these applications? Is it gonna be an upfront, an increase in the subscription fee? Can the end user select which applications it will or won't use? Thank you.
Yeah. Thank you. Well, in terms of number of applications, there are several under developments. I, as I believe I told you already also when we met in London, we have already started cooperation with a handful of companies that are very advanced in their own development and looking for a platform. I can think that this can be a fairly rapid process, and I'm sure that you'll be able to see something by the end of the year. Something coming up by the end of the year. This would be my forecast. When it comes to the...
When it comes to the split between the developers, us and Medtronic, as I said before, I think you should see us and Medtronic as a whole, and then you would need to ask what's gonna be the split for the developer. My answer to that would be it very much depends on the kind of software that's been developed for which kind of application and how the market is gonna be looking at that. Clearly, there has to be a split, and I cannot tell you exactly because it depends on how appealing the app is. What I would urge you to consider is that whatever you take out of the fee for the developer, then the remain you allocate according to our revenue share between us and Medtronic.
Uh, just to... I try to make a-
Okay. Go ahead
...more clearer and focused. In my opinion, there is a separation between the story of the apps and what we can do right now. We have, let me say several, three application that are ready to be launched within this year. These application are already done. We already finished the development path, and now we are in a test now. Just, it's just a test. It will be Medtronic, the decision to launch, when they're gonna launch the three new application. should be within the year for sure. Maybe it's June, maybe it can be in November, but within this year.
This is the story that belong directly to what we already done because you have to take in consideration that, when we talk about GI Genius, the people believe that we sell a product that is detection. No, no. Was since scratch a platform, and the detection was the first application. We already developed several application, and three of them are ready to be launched. Is clear?
Thank you.
No? Okay.
There are no more questions from the phone. We can now go to the questions from the webcast. Mr. Della Cha', over to you.
Okay. Thank you. I have a first question that asks if we are providing details regarding sales of GI Genius, total sales hardware, rental income projection for 2023. Answer is no. It's not our intention to provide breakdown at this stage.
We can provide a target. We believe that we will reach 2,000 devices in the, installed in the hospital.
By year-end. We have a second question, which is regarding the profit guidance. In terms of what are the assumptions for the lower end of the range and given the increase of the share of high margin recurring revenue. You have to consider the following because there has been someone saying or thinking that this maybe was a low ball in terms of guidance. The fact is the following: you have to consider that out of EUR 102 million that we have had in 2022, EUR 24 million were upfronts and milestones, so very significant portion of those revenues were one-off. If you take them out from our revenue, you go back to, say, EUR 80 million for simplicity.
If I move the needle from EUR 80 million even to the lower part of the guidance to EUR 110 million, now you're gonna have a EUR 30 million increase over the EUR 80 million that's not gonna be represented by a one-off because we are transforming our one-off revenues into recurring revenues. Our guidance should be read from that standpoint. It also should be read from the standpoint because, as I believe I've said, we're kind of conservative guys and certain things are, frankly, very difficult to be modeled, especially if you have to give guidance. That's quite tricky and we don't wanna, we don't wanna do mistakes if possible.
Yes. There is one point that is the people ask that is one shot is why just this year? There is a story. It's 25 years of story. It's the dynamics of our business. You can take Lialda as a model, and you can say, first, you cash the down payment, second, the milestone, third, the royalties. You cannot consider it is one case. It's one case that is repeated in the last 25 years. Sorry, not one case.
There's another question that says that there was no increase in third-party revenue in 2022. That's not correct. I think we have had a EUR 2 million increase, which was roughly equivalent to 13% in the third-party revenues, if reference is made to our contract manufacturing activity. Actually, there has been a 13% increase, and I believe we moved it from EUR 11.9 million to over EUR 13 million, if I'm not mistaken. I have a question on why we pay out dividends. Question is that we pay out dividends because-
Why?
We think that we.
We work in favor of the shareholders.
We think that.
Sorry.
We think the shareholders are entitled to receive as much money as possible. whenever there's a possibility.
Sorry if we don't work just to create a debt. I know that this sounds strange in this world, but we have no debts, and we have dividends. Sorry for this.
We think that every single time we have the opportunity to do so, we will do so. What is our strategy regarding our financial equity in investments? Wait and see. Apparently, I don't know if they can go lower than what they currently are, so we will wait and see. That was a chapter of our life that's long forgotten. I wish them well. I wish they will recover. If they will recover, we will sell. We're not very much interested into whatever is happening there anymore. Again, I have another question about the level of recurring revenues from GI Genius prescription. Again, also on behalf and following a special request from Medtronic, we have decided that we're not providing breakdowns. I have another question here.
You're asking me what are the characteristics of our bond. Our bond is a convertible one. It was issued at 95. We'll pay back 100. The yield was 2.5%, and there's a feature that allows the reimbursement of the bond in shares up to the issuance of a certain amount of shares. I think you have seen that the outstanding capital due is EUR 175 million. We have EUR 244 million cash at hand. We gonna keep all the optionality that.
Yes, because we have shares already announced.
We.
We have money. We will decide at our convenience at the end of the year in November.
The other question to follow is if we're expecting GI Genius to be a larger growth driver compared to Winlevi.
We expect that GI Genius will be the revolutionary in the healthcare system, not in the.
Answer is yes.
... versus Winlevi. It's something that is even unbelievable to understand, to trust us maybe. let me know that we are just at the beginning of a very, very enthusiastic journey. We work to the star.
The answer is absolutely yes. You're asking us what is your expectation from Winlevi royalty income in 2023. Again, we're not giving a breakdown there because the forecast that we are provided with by Sun Pharma are highly confidential. They don't disclose that, and therefore we cannot disclose ours, otherwise it will be very easy for anyone to figure out also what Sun forecast is, we're not doing that. I have a question on how has royalty ramped up through the course of 2022. Well, very nicely because it has followed exactly the progression in the sales. I believe that we have seen exactly what we were supposed to see.
One thing that I want to mention is that not only we have a fantastic collaboration with Medtronic, we also have a fantastic collaboration with Sun, and we have never seen a partner be so much willing to share with us forecasts and insights. We're really getting a very good visibility on how things are going. I had a question here about the upfront payments in total for 2022. Yes, they were $24 million. That is correct. $15 million were under Winlevi, and $9 million milestones were due for Cortiment®. We're not giving any breakdown about upfront and milestones projected for 2023. This also relate to whether certain sales thresholds are attained or not.
I'm expecting that our revenue line in 2023 will also be composed of upfronts and milestones. I think I have another question here, and it's about how we are investing the required amount, with which banks and currency. I can understand why a Swiss national is asking in which banks.
We left the Credit Suisse two weeks, two months ago.
No, more than two months ago.
More, three months ago.
No, more than that. We left, just for the sake of everyone, we had left.
Just for a case. It was a case
Credit Suisse in the fall, we have split our assets between more than 10 different banks. The big bulk is currently actually allocated within Bank J. Safra Sarasin. The second largest bank that we have there is Barclays, but we don't have deposits there, so our assets, sorry, our cash is all invested into assets owned by the company and mainly high grade and bond. We feel that we have chosen security clearly over risk, and the purpose simply with the increased interest rates environment was to have our cash at least yield what was necessary to pay the coupon on the bond. I think that we have finished with the questions. If there are no other questions, please, operator, let us know.
We have a question from the phone. It's a follow-up from Laura Hindley from Berenberg. Please go ahead.
Sure.
Hi. Yes, one more question from me. I was wondering, there was a considerably higher tax rate in the second half of this year. I'm wondering if you see that continuing or if that was a one-off.
Tax rate, actually it depends on the jurisdiction. I think that the overall amount was pretty reasonable compared to the income, wasn't it?
It was an increase in the percentage rate.
Look, it's actually was, I mean, we're subject to some, to some ups and downs and, you know, sometimes if you have a, if you have a lot of revenues coming from manufacturing, then these are taxed at a higher rate because it's Italy. If we have higher revenues coming inside Cassiopea, they're taxed at a higher rate because that is in Italy. If we have higher royalty flows and stuff that pertains to our intellectual property, those are taxed at a lower rate in Ireland. It very much depends. The swing is a consequence of the country where the revenue are allocated. Sometimes you see big growth in manufacturing revenues, so there's an increase in the overall tax rate because we have more revenues coming from manufacturing and vice versa. I hope this helps explain. This gives an explanation.
Yes, that helps. Thank you. Thinking about a level moving forward then, if it was a tick up in the second half of this year, that's.
No
just a one-off.
No.
it will swing around?
It's a one-off. We don't see the situation is not like doomed to get any worse. It's just swinging because it depends on.
Okay
... country allocation of the revenue generation.
Okay. Thank you.
There are no more questions at this time.
I think that we can thank you all very much.
Thank you very much.
... for your time. We wish you a good afternoon, and we'll speak soon again. Thank you.