Acarix AB (publ) (ACARIX) Earnings Call Transcript & Summary

Hi, and I want to greet to you all very welcome to today's live queue together with Acarix that has today presented their report for the fourth quarter of 2022. And today, we have with us the CEO, Helen Ljungdahl Round; and also the CFO, Christian Lindholm. Welcome.

Thank you so much, Filip. And good morning. Thanks for joining this update, the Q4 and full year report. I'm going to do this presentation in English, and I will continue to do them in English because we have an increasing number of international viewers that either want to tune in live or see the presentation afterwards. And as Filip said, my name is Helen Ljungdahl Round. I am the CEO and President of Acarix. And I'd like to start with just mentioning that 2022 was a really exciting year for us. We had made some important transitions. We made important changes in the company both strategically and operational. And today, we are a very different company compared to where we were 12 months ago. We are now fully operational in the U.S. with our own subsidiary. We're building up our commercial capabilities there, and we have now secured our first sales across 7 states in the United States. Our R&D department continues to be strong. And in manufacturing and operations, we are in a very good place now. And this was important for us to work on so that we can secure our guidance for 2024. But the purpose of this presentation today is not necessarily to go through all the numbers and details. The report was issued this morning. You all have it, and you can go through those details. What I'd like to do with this webcast in the next sort of 20 minutes is to give you some more insights behind the numbers about the progress we've made, where we are in our commercial journey, and I'm also going to touch on the financing. I'd like to, at this time, also thank those of you who participated in the rights issue in December. As many of you know, we did have that in December, and I know you all have choices. And I really want to appreciate -- say thank you and that we appreciate your commitment. And the proceeds, of course, will go to continue to drive our momentum in the U.S. The disclaimer slide is standard for these types of presentations. And then to give you a high-level overview over some operational highlights. The transition that we've done this year, I would almost categorize is that going from very sort of R&D-focused company. We had some commercial activity in Europe in the private segment of the market. But now we're really building up our commercial capabilities to succeed in the large U.S. market. We built out our sales network, and we've secured some now very important early customer wins. Our sales momentum in Q4 started to pick up. And if you compare it to Q4 '21, there was a 78% growth. Now I know we're operating on small numbers, but the signals are still strong. Our gross margin has now improved to 80% in Q4. And as you know, in our '24 guidance, that's the target we're going to try to keep. Another important part of succeeding in the U.S. market, and you'll hear me talking more and more about how we're going to succeed in the U.S., is reimbursement. And we have a CPT III code, which means that we have been approved for reimbursement. This became effective in July, and we're seeing some really nice evolution. And I'm going to be covering some of these points in more detail in the presentation. Not necessarily operational but strategically, the American College of Cardiology and the collaboration we have there is really important. And we have made progress. We're ahead of schedule at this time. We have a draft clinical framework now developed that is currently under review. And this is really designed to help U.S. physicians understand how the CADScor System can bring value. The financials, I mentioned the right issue in December, but I'll come back to that in more detail later in the presentation. Our sales traction is moving nicely in the right direction. So if you look at accumulated patches, it continues to grow. Today, we have about 24,000 patients that have used the CADScor System. And if we look at the rolling revenue, you also see nice increases there. The fourth quarter did pick up. And as I mentioned, the 78% increase versus prior year, the full year was plus 55%, and it's primarily now driven by the U.S. market traction. Our pricing in the U.S. is higher than what we used to have in Europe, so that, of course, also contributes. I think it's worth pausing for a minute to talk about what did we do. I talk about this transition, but it was really important in 2022 that we took the time to build a viable U.S. business. We weren't looking for distributor. We wanted to have our own business and build that in the right way. So if I look back at the end of 2021, what we spent time on for about 3 months with setting up a subsidiary. So by January, we were fully viable. We had everything in place. The product was imported successfully. We have a warehouse in Florida. We have an office in New York City. We are able to hire, and all that was in place within sort of 3, 3.5 months. Then in the first quarter, we recruited the beginning of our management team. Our first sales occurred actually very early in the process, and this was even before our own reimbursement code became active. But in July 2022, that's when our CPT III, our own code became active. And we've made some really nice progress during the last few months here in working with clinics and payers to make sure that we're getting the right type of payment level to cover the price of our patches, which is $75 per patch. In September, we signed the ACC agreement. We are expanding our sales force in Q3, Q4. And you probably saw last week or so, we issued another press release. We're not going to issue press releases on every hire we make, but this was -- these are important hires because they're coming from very successful companies in the U.S. They are very interested to join Acarix and to be part of this journey. And also I would say on doing the 4, our communication, our collaborations across clinics, hospitals, IDNs and the Veterans Administration, which are our key 4 sales channels, have increased. So we have a pipeline now for IDNs. I can't go into all the details there, but we're talking to small, medium and large IDNs and also the Veterans Administration, where we're making very good progress. But our initial sales, and we knew this was going to happen, was in clinics because the sales cycle time is shorter there. And then what we did here in January finally was to look back over the year, and we made some changes structurally within the company to really make sure that we're all aligned and we're all working towards driving success -- commercial success in the U.S. So now we have a new executive leadership team, and we're ready to really start driving this momentum even further. So on the executive team, 4 of us are based in the U.S. Carma, Jennifer and Jen, they've joined the team here. They -- all 3 of them come with experience from cardiology. They all have experience for -- of disruptive technologies and some of them also from start-ups and have worked very successfully with startups, so a strong team in the U.S. In Scandinavia, we still have Christian, our Financial Officer. He's based in Sweden. Thomas is Head of Operations and Manufacturing. He's based in Denmark. And Claus now leading the R&D team. And Claus is very familiar with the technology. He's been with the company for a long time. So that's now the new team that's working very closely together to make sure that all the needs that arise from the U.S. are addressed in a timely and fast manner. And then, of course, we have our Board, which we appreciate very much with Philip, Marlou, Ulf and Frederik. So a few words about the U.S. market. And some of you will have seen this slide before, but I think it's worth just highlighting again how big of an opportunity it is and also how well we fit into this opportunity. So there's 18 million chest pain patients yearly in the U.S., and they are flooding, as some of the physicians will say, waiting rooms, hospitals, emergency rooms, and they need to be evaluated. Now the health care system has recognized this volume of patients. And the American College of Cardiology, which I mentioned before and also together with the American Heart Association, came out with new chest pain guidelines at the end of 2021, whereby they said low-risk patients really should be sent home and not put through the diagnostic process. And that's really where we come in as an early diagnostic aid to assess these patients. And those that are at low risk, they can be sent home. So the timing really couldn't be better. And I said this before, we're seeing a positive response whether we're talking to a primary care physician, a cardiologist, a large hospital, a VA, the need is there, and they said this is a fantastic solution that we should be adopting. And it just -- now we've got to work on how to make that happen. Most of you are very familiar with our technology, but I just want to remind everybody that this is a easy-to-use noninvasive technology that's placed on top of the chest. The round part here is the ultrasensitive microphone that is very unique and, of course, patented, but it listens to the blood flow in the coronary arteries. And we can very easily detect if there's buildup in the arteries and then score the -- some parameters that it picks up will go into this body of the device and immediately, I wouldn't say immediately actually, but it takes about 3 minutes to listen, 10 minutes in total, the doctor will have a score on the screen. We have a lot of data, clinical studies. Our performance data is well documented, and we have 45 patents. The regulatory bodies recognizes the value of this technology. We have a CE marking for Europe, and we have an FDA de novo clearance for the U.S. An FDA de novo clearance essentially means that there's no comparable technology on the market, which makes us really unique. And then now the technology has been used on 24,000 patients. So what's the value? Why do we believe so much in this technology? Well, as we're having more and more discussions now in the U.S., the sort of essence that is coming through is that the CADScor System has the ability to transform early assessment of patients with stable chest pain. Patient comes in and then normally walk through the blue flow here at the bottom of the slide, which is a number of different tests. And many of them actually do not have coronary artery disease, and it will take sometimes months to uncover that is not related to the heart. The proposal that is becoming validated more and more as we talk to health care providers and also with the ACC is that the CADScor System should be used as a first-line diagnostic aid. And this is really important because this means that when a patient presents, they should be using the CADScor System. So the positioning and the acceptance that we need to do something here, it's well established now, and now we've got to work through this in the right way. But the initial reaction to the CADScor System if you -- in the U.S. is actually above what we would have expected. So our business model is attractive. We sell a device, and we sell the patches on an ongoing basis. The way we've approached the U.S. market is large, and we have a database where we can identify where the high-potential physicians are. So today, we have sales reps in Pennsylvania, New Jersey, Texas and California. But in Texas and California, they're big markets, and we've seen positive reimbursement signals there. We actually have doubled up with sales agents. The states are very large. And then the green states here are states where we do have these commission-based sales agents. And commission-based sales agents are essentially selling our product and making a commission when they sell. And then we are looking at additional states. The states marked here in peach, those are states that we're considering, but they could change over time as we look at the potential. We're looking at what is the potential for chest pain patients, what is the reimbursement climate in those states, what are the customer base, and then based on that, we're going to decide how to expand in the country. But I would essentially say that our strategy is to go deep in the states where we're seeing positive reimbursement and then go broad when we identify new opportunities in new states. But you have to remember with reimbursement, we work company by company and state by state. And the way it looks, we collect this data on a daily basis. And we can see that big payers are now paying. It's Blue Cross Blue Shields. It's United. It's Humana. it's Cigna. it's Aetna. It's Medicare Advantage. And today, our average payment is $155 from these companies, but we've seen payments up to $350. That number, $155 changes because we might have some really high ones or we might have some that are a bit lower. But we're working through this. And what physicians have told us is that as long as they make enough margin on that patch purchase, they're very interested in the CADScor system. So if the payment is around $155, most of them say that's fully acceptable. So that's a level. But we've seen payments up to $350 as well. I would like to give you an example. I know last report, we had an illustrative example of a clinic. And now we're, of course, gathering more and more insights as we go forward. Our key channels are, again, clinics, hospitals, the large networks and the VA. But in this case, I'd like to show you a primary care clinic. And what we're recognizing is that a U.S. customer is driving much higher value for us than what we've seen previously. They have higher patient volumes. They have higher patch use per day, and they have -- of course, we have a higher pricing in the U.S. So this recent customer that came on board in the fourth quarter, they're using 100 patches per month. So if we just do some quick calculations there, that this customer, in particular, is worth about SEK 1 million to us on an annual basis. Then themselves will make similar with the assumption of the reimbursement level that we just used, they will also make a similar amount. And then we need to ask ourselves the lifetime value of a system in the U.S. is going to be significantly higher than what we've seen based on earlier experiences in Europe. But I thought this would be an interesting example so that you could see that when we gain customers in the U.S., we're seeing a much higher patch per day usage than what we've seen in Europe. So this -- we continue to work and try to sell into these clinics. The American College of Cardiology, our collaboration with them has raised some questions and maybe it's worth just clarifying this. The American College of Cardiology is a large institution with 54,000 cardiologists as members and other staff members, et cetera, but they're working in cardiology. They have an important role in improving cardiac care. In the ACC, there is the innovation team, and we have been working with this innovation team. As you might remember, I've said earlier, they looked at what they told us, 600 to 700 companies that have novel technologies in cardiology and decided to work with a few. We were one of them where they said this technology has really significant value in U.S. health care system in cardiology. And what's interesting is when they now are out promoting their innovation strategy, the CADScor System is actually part of their strategy, mind map almost here, and it's listed under advanced technology. And as I mentioned, we are in -- working in through the format that they normally do. We're ahead of time right now in that timeline, and we already have a clinical framework. There is such an agreement as to how should this technology be used. And I mentioned this earlier, as a first-line diagnostic aid. So we're working hard, and we want to get these published. Once they get published, these guidelines -- not guidelines, the framework, then it will have the endorsements of the ACC. Now what does this mean then for the business? This is strategically very important. We have the scientific leader supporting us. But we've actually had big institutions reach out to us through our website, et cetera, saying, "We've seen that ACC as identify this technology. We'd like to meet with you. We want to learn more." So it works in both ways. One is for us to have information to communicate but also for others to see that with ACC behind us, that this is a very credible institution. So our guidance remains. We are not changing this guidance. We have a strategy in place to work through these 4 sales channels, how we go to the market, and as you know, 3,000 systems by the end of 2024, SEK 200 million and a gross margin of 80%. And at the moment, we're tracking there, but we'll see how we get forward -- how we go forward with the margin specifically. But so far, it seems like we're already at 80% for the margin. The financing. We had a rights issue here in December. It raised close to SEK 33 million, SEK 32 million, SEK 33 million, and the net was close to SEK 25 million that was provided here to us in January. Associated with this are warrants that with the subscription period will become open in May, and we recognize that we need to look at additional financial options. And I have mentioned before that we started in the fall to look at various options. And I have also attended a number of events in the U.S. One was in December, which was the Nordic American Life Science event, which is a very, very well-attended event, and there was a lot of interest there. I also attended last week, the BIO CEO Investor event in New York City, which is another large event. And today, we have 15 viable options that we are discussing and we're exploring. And the decision that we will take around the financing will very much depend on the value to the company but also to our shareholders. So that's what we have in our mind as we are evaluating these opportunities. But I have to say that it would be, I think for us, very interesting to engage a U.S. investor, a long-term investor that can come in and support the company in this growth journey. And even this evening, we have meetings related to these 15 opportunities. We're committed to provide communication before the annual meeting here in May. And now before I go to this slide, I also want to just highlight that there are 2 priorities right now as I see it. One is sales in the U.S. and the other one is financing. And that is what we're spending our time on. Communication. I don't think we can ever communicate enough. And sometimes it's difficult to see what do we communicate at what point. But we do believe that having these webcast presentations where we give a little bit more meat to the numbers that you see in the report and like the report released this morning. We're participating in investor events, of course, in Stockholm, but we're also starting to participate more now in the U.S. Press releases on key developments, and we'll have to use a judgment call on what's key developments there. But we've also talked about how can we keep you updated between these quarterly reports. And we decided actually after having a lot of internal discussion, we have somebody now in communications internally, but also our investor relations group that the best thing we can do is give you real-time updates. And the best way to do that is just on social media. So we have a LinkedIn, we have a Twitter account now that we're reactivating, and I would highly encourage you to follow us there. And we will try to push out as much as we can on an ongoing basis. Of course, we have our website. And then any questions, you can always refer to Christian, who's based in Sweden or myself. And you can reach us on our e-mails. That's probably the most easy way to reach us. So with that, I'd like to wrap up. So key summary points. There was a strategically important shift so that we can function operationally and drive commercial success in the U.S. The U.S. momentum is increasing. And as I said, we've sold into 7 states. We have now confirmed reimbursement levels in those states. We continue to grow through our 4 -- grow our discussions through the 4 important sales channels. And our uptick is really dependent on the fact that we're a disruptive technology. We're a new technology that's going to require a change in behavior, but we have the right scientific leader support behind us in making that change. Working through the reimbursement process, but you saw that, that an average amount of $155 is attractive enough for physicians. And then we have the sales factors. We're working through them in clinics being shorter term and then IDNs being more longer term to get to our end of 2024. So essentially, the foundation is there, and we are now focusing on sales in the U.S. It's what everybody thinks about every single day and then driving the profitability and getting closer to our 2024 guidance. So with that, I would like to finish up the presentation, and we can move over to a Q&A session with Filip. Thank you very much.

Okay. And we're back. Thanks a lot for that walk-through, Helen. So to start things off, I mean, I'm sure there are some investors on the webcast right now who has not maybe participated in the whole presentation. So probably some of the questions might sort of reiterate things that you've already touched upon or mentioned, but I think that still has its points. So I want to start with something that we talked about also in the last Q&A together. And that was that in 2023, which you've mentioned earlier here is, of course, going to be a very exciting year for the company, and you're focusing a lot on sales development, et cetera. And it could materialize sort of an inflection point in terms of sales growth for Acarix. But what would you say is the specific most important factor to achieve this sales growth that I'm sure a lot of investors are sort of expecting during 2023?

Yes. So not to make it sound like a long list, but I would say the first part is really adoption of the CADScor System in clinics. And what we see -- have seen in some of the states that we are in now is that if we sell one system, then another one will want to buy. In the U.S., physicians are often -- they are physicians, but they're also businessmen and they need the patients. So they -- if somebody down the street buys a CADScor System, then somebody else would want to buy. And so we've seen this already. So adoption of the CADScor System is a key success factor. Reimbursement, but we're making good progress there, that's another key success factor. Our footprint, and as I mentioned, we think the right strategy now is to go deep into the states where we have secured reimbursement but also to expand into additional states. So depth and breadth and then getting the clinical expert support. Being a new technology, in some cases, they call it a disruptive technology, but that's important to have the scientific leaders behind us. We have to remember, we didn't have any clinical studies in the U.S. when we entered nor did we have clinical experience. So we have been building that clinical experience here over the last few months. But we have a plan in place. And as far -- right now, we're just delivering according to that plan.

Yes. So word of mouth is sort of an important factor also in such an industry as medical technology. And as you said, you're working hard on several fronts here and a lot going on. But previously, we have talked about the repurchase rate of patches. I noted this also in the last Q&A session. Could you give some more brief figures and how are these figures looking right now in the U.S.? And please, if you can put it in a context compared to what you have seen previously in Germany, for example.

Sure. And this is an important metric that we monitor very closely. But I think, Christian, you work a lot on these analyses. So do you want to give some extra information on this question?

Yes. Yes, for sure. Thank you, Helen. And it's an important question. And to be more clear in our communication, we have changed the terminology from repurchase rate to simply patch per day. And patch per day, that means that we are measuring, on average, how many patches a customer use per day and per system. So in Germany, we are still selling on the private market. And without reimbursement in place, here, we see an average patch per day on about 0.5. And this is something that our German sales team is currently working hard on to increase this key figure, and they are very close to the customers on this one. On the U.S. market, we see a significantly higher patch per day utilization. We have actually one good example, high-volume primary care clinic. They are using 5 patches per day. And other customers who just started, they are a bit lower than that. So we are still in early stage, but we are monitoring this daily. And as I said in the beginning, it's -- that's an important key metric for us.

Could you also bring some additional flavor to why this sort of discrepancies between a lower figure in Germany and higher in the U.S.?

Yes. I think it's simply it's a larger size of the customers. In Germany, it's 1 or 2. It's clinics with 1 or 2 employees, kind of small clinics. And in U.S., we are speaking about a very -- I mean, bigger clinics with a flow of patients that is different from in Europe. We also have -- as Helen was mentioning, we are working with 4 client segments, everything from VAs, IDNs, which is like bigger hospitals and down to clinics. But the clinics that we are working with seems to be, as we see it now, bigger than the ones that we are working with in Europe.

You mentioned IDNs. And I know that also last time in this forum, like we were discussing it that you're having ongoing discussions with more sizable IDNs and you mentioned that the sort of sales period could be longer for these. But is there any news on this progress that you can share with us here today?

Yes, it's hard because I can't mention who they are, but we're working with small IDNs, medium and large. And one of them is actually one of the largest in the country. But I think, again, coming back to that ACC agreement, that agreement has validated the technology in their mind. And then, of course, they're looking at what's the clinical use and what's the economical impact of using it. So we are having very interesting discussions with very senior executives within these networks. But it is a matter of time. And in one particular case, I can share that we're thinking of doing a, what we call, a clinical experience, putting the CADScor System into a few of their hospitals and then see how should we best use it and then potentially then roll it out. So that's why it takes a little bit longer. They want to see it actually used in their network, and then we can -- they can take decisions on that.

Okay. Got it. But let's say, you get an order from an IDN like this in the magnitude that you're talking about here, would it still be sort of a ramp-up until they reach the full capacity? Or how should an investor look at sort of the sales ramp-up once such an agreement has actually been materialized?

Yes. Again, it's hard to say because we haven't completed a sale like this yet. I could imagine that there is a certain volume that's bought, and then they pick another volume. It keeps increasing. I would be surprised if it went across their whole network because we're talking a lot of hospitals, so potentially region-based around the country.

Okay. And you touched upon the ACC collaboration, of course, as sort of an important aspect in your communication with these IDNs and customers in the U.S. But could you please tell the investors what is the most recent news? Or is there anything you want to emphasize in this sort of collaboration with them that you think is really important to understand as an investor and what you really have our eyes on for here going forward?

So I -- when you work with a big organization like that, it can be good and bad. It can be positive and negative because maybe they want to enforce something that we don't want. But right now, we're tracking faster than the timeline. And part of that is because we are all in agreement that the CADScor System should be seen as a first-line diagnostic aid. And then it's just a question of what does that look like in our clinic, what does that look like in an urgent care clinic because urgent care clinics now are really growing quickly in the U.S. at hospital, et cetera. So I think what has been so positive is that alignment with the clinical experts and our internal team. So we have our Head of Medical Affairs working on this together with R&D to come up with that clinical framework. But it has been drafted and it's currently under review, and we're tracking ahead of plan, which is great.

Okay. Could you also discuss the de novo approval? As you mentioned, you didn't do a U.S. study ahead of this approval. And I'm interested in when you meet the cardiologists or your customers in any kind, what are the implications? And how do they react to sort of this piece of information that this is the way you got approval in the U.S.? And what are the implication in turn from a commercial perspective, I mean, having a de novo approval?

Yes. So de novo means, again, I just want to clarify that there's no comparable technology. So it's unique. But what physicians in the U.S. asks, is this tech -- because they see a lot of medical technologies. But the first they ask, is this approved by the FDA? Does it have FDA clearance? Yes. And then the second question is, does it have a reimbursement code? Yes. And then you're in a different category. Then all of a sudden, it's like, okay, now we can talk. Now the question then goes to what is the reimbursement level? And in our case, it's on average right now at $155, which they find acceptable. So those are really the 2 things, and we have those. And that's why I keep referring to it the regulatory approval, reimbursement approval and the work we're doing with ACC, that's going to open a lot of doors for us. But it's seen as very positive. And I would say we've met with some very top-level cardiologists now, and what they say to us is, "This is great. How can I not have known about this?" So we do have a little bit of catch-up at all levels, even at the top level, the scientific level as to, yes, we're here now. We're launching in the U.S. now, and we're bringing them up to speed on our data and our clinical program.

Very interesting. So there is actually quite a few questions from your investors, I would presume or potential investors here. So I'm going to give them a possibility to have a few questions for you as well. So I'll start by the first one here. I'm a longtime shareholder disappointed over the share price development. I am still a shareholder because I think that the CADScor System is a splendid product. Why is the sales so tough? And are there/have been any inquiries of buying the company from any investors?

There's a lot of questions in there. First of all, thank you for staying with the company and then believing in what we're trying to do here. That's important to us. The sales, why is it slow? I ask myself that every day, every morning, what can we do to go faster? What can we do to go faster? But there is this element I was saying that the 3 important parts is that it's a new technology. It needs to be figured out where it's going. The sales cycles are low. Some physicians said, "You know, I've seen a lot of medical technology coming in. Prove that this is better," right? So clinically, they really like it. Every doctor we talk to, they do say that, "This is such an interesting technology. It meets the need that I have. Now let's just work out the details. How do I put it into my practice? How do I make money on this device? And how do I serve my patients better?" So those discussions just take a little bit of time. I know in one particular case, we talked to a primary care doctor. And then, of course, the rep was working with them and if they're about 5 months, they said, "Okay, I have digested this now. Now I'm ready." Now we have a shorter timeline in our minds, so we want to go faster. But there is this element of building, it's like a snowball and people are starting to talk now and reaching out to us proactively. We have people reaching out to us, wanting to come and work with us now. We have these IDNs reaching out proactively to us, saying, "What is this? You need to come and talk to us about it." So it takes a little bit of time to get that. I think you said it, Filip, the word on the street. Now people need to say, "This is really cool." But I also want to say that the ACC annual conference is taking place here in early March. And we have a booth there, of course. And we're out there promoting that we are there. We're expecting to have a lot of traffic and a lot of interest. And that's their -- that's an international meeting. We will have cardiologists from all over the world coming but also a lot of cardiologists from the U.S. So we're really going to maximize that opportunity to showcase the CADScor System.

All right. So I think this is a follow-up to sort of the same question by the same person. And he's interested in, when will you present the report that shows that the sales is increasing to meet your forecast of your sales in 2023 or 2024, I'm assuming towards your financial target? So some sort of comment about that would be great.

So what I'm understanding on that question is just sort of when are we going to see the lift?

Yes.

And it's difficult to say. I wish I could say next quarter, but just we're working through this step by step. And hopefully, it will be sooner than later.

I mean should -- as an investor, should you think about this as sort of a swift ramp-up or sort of more like a catch-up effect, it all comes at once? I mean how should you approach this?

It's not going to be linear, it's not going to be linear. When we look at our forecast, I think I can say this and share this Christian, but there is a sequence. Right now, it's clinics. Clinics might buy 1 or 2 systems, and then it goes up into hospitals, then we're talking bigger volumes. And then as we start to add that up, but yes, the volumes are significantly higher with these bigger customers, but it takes a little bit longer.

Yes. So in the context, I saw that in the Q4 report, 10 of the systems you sold were in the U.S. And this -- there's another question here which is related to that, and that is if any of the new corporations/partnerships that you have established during the year of 2022 started to add any significant sales yet.

Yes. The answer is yes. Our commission-based sales agents, they're working -- it's working for us. They all have worked and are -- have an extensive network that they can tap into. And the good thing here is that they are a trusted partner to these physicians in these clinics. So they are definitely delivering. But they're working through the same just market challenges, as I explained earlier.

Yes. So in addition to that, I mean, as I said, I saw there were 10 CADScor System sold in the U.S. And of those, 7 were sold on sort of a financial leasing agreement. What are the financial implications of that? And could you please bring some color?

Yes. Christian, do you want to take that question?

Sure. So there are 2 questions really. So the financial implication in terms of gross margin, the gross margin will hit our P&L, our profit-loss statement immediately at the sales. So we are early revenue -- recognized revenues and the cost of sold goods, COGS, at the day when we sell the product. and the cash flow will be spread out [ linear ] during 24 months.

So would you say there is sort of a preferred method with direct sales compared to these leasing solutions?

Of course, we prefer direct sales because it will be an advantage for us cash-wise. So we are promoting that internally. But of course, we have customers that prefer the lease model, then we have a solution for those customers.

I would add to that, Christian, too, that when we look at individual clinics, they might need that kind of financing solution. But if we look at the hospitals, IDNs and the Veterans Administration, they don't buy on lease. They buy direct purchases.

Okay. So here's another question. Someone is going, the sales figures suggest that people are not very interested in investing in the product. How do you approach that question? So sort of what's your view against that statement?

You mean people being doctors, customers, not willing to invest?

Yes. Yes.

Yes. I don't think -- I don't agree with that statement because so far, every physician, every health care provider or a hospital that we have spoken to, there is an interest, a clinical interest and an economical interest to use the CADScor System. What they want to see is that it makes sense for them. Where do I fit it in? And do I get reimbursed? Those are quite simple questions, but it just takes time to get it answered. And when we look at reimbursement cycles, it takes time. I don't know if everybody is familiar with how the U.S. billing system works. But when a physician, a clinic does a -- it does not have to be a physician, it can be anybody in the clinic doing the assessment. But when the assessment is done, the billing manager has to send that bill to the insurance company, and then it can take about a month or longer than a month before the insurance company comes back. And sometimes they will come back at too lower level, and then there's an appeal process. And then after that, and this can take another 45 days before they have an answer. And they want to see these payments come in. They're called the EOBs. They come in and then they say, "Now I buy." And we've seen that repeatedly. When they have the confidence that they are going to get reimbursed from the insurance companies, that's the trigger point. So it's not that the interest is not there. It's just that they want to be sure that they're going to make money on doing these assessments.

Okay. Thank you for the clarification.

Yes, I hope that's clear.

So another one here, this is a quote. In 2022, we worked with a -- a quote from Acarix, I would assume. We worked with the U.S. Department of Veteran Affairs Medical Care, the VA, the largest integrated health care system in the United States offering care to military personnel and war veterans in 171 hospitals and over 1,000 outpatient clinics. Can you develop this? Can we expect a deal in the near future?

Yes. So right now, we're working with -- as you saw, there's 171 hospitals across the country. We are in dialogue with a number of them. And there is a very high interest, and I've said this before, there's a unique role for the CADScor System within the VA. And part of that is because there's a high degree of heart disease as in other populations as well, but they sometimes have difficulty assessing these patients. So the first test that many do is a stress test, and you have to go on a treadmill, and they're not able to do that because they've lost maybe a limb in the war. So that's not really an option. And then there's not that many CT scans. And then on top of that, some people have to drive 3, 4 hours for an appointment, which is in the future. So a CADScor System can really work through these chest pain patients quite quickly. So yes, we are working on this, but I can't comment on the timing of the first order at this time.

But should an investor view it as the VA has already decided to implement CADScor in at least to some extent?

I think the answer is there's a very strong interest, yes. There's a natural, even stronger interest than you would see in the overall health care system.

So here's another one, which is a little bit more forward-looking again. Could you give us some additional insight into the first quarter of 2023? How many units can we expect to get out this quarter? Or if you could provide any kind of context to this. I understand you can't give exact numbers.

Exact numbers, yes. But it's going to be hopefully a mix beyond clinics, if I could say that.

Yes. And again, touching upon your financial target. I mean, of course, a lot of interest from the investors on this end. You announced this now a while ago, but would you say that you are as confident today as when you proposed it, in reaching it?

Yes.

So nothing has changed there?

No, not yet. And I don't expect it to because it's -- because we're working across these 4 channels. That's what's going to get us there.

Perfect. And can you just again reiterate what are the financial targets in this context?

So we have, as a plan, to have 3,000 systems in the market by the end of 2024. And that corresponds to our calculations today of SEK 200 million and that we will have a gross margin over 80%. And the gross margins, of course, with the patches are higher than with the device. So there's a balance here. But right now, we're tracking on 80%, and that number is going to go up and down a bit depending on if it's more systems or patches, But our goal is to keep it over 80%.

Okay. I think we have time for one more question here on our end. And this is also related to the, as we discussed earlier, the sort of client evaluations on the CADScor System that you reported in the previous quarterly reports. So the question is earlier, there was 50 ongoing evaluations in the U.S., but during Q4, only 10 units were sold. Should this be interpreted as the majority of these did not lead to a sale? Or is sort of the sales progress just longer than 3 months?

That's correct. It's the latter. It takes longer. And as I mentioned, when the billing manager sends in that request to the insurance company, there might be an appeal in there because it's a new code. So the sales cycle can be longer than 3 months.

Okay. And how can Acarix sort of approach this sort of slowness in the process? Is there anything you can do? Or do you think that the ACC is sort of the -- the framework from the ACC plays an important role here? Or what can you tell them?

Yes. So the ACC framework will certainly help, but it's not critical. But what we do, we actually have an outsourced partner that provides support to the clinics. So we help them proactively to provide the documentation that needs to go along with a request for the payment. And then if there's an appeal process, we have experts that can advise them how to articulate that appeal and then get that moving. So we do have that on site, and the clinics can call for that additional support as needed. But it is some -- when you have a new code, it takes time to get it established. Sometimes an insurance company would say, "I've never seen this code before," so it's rejected. And then it comes back and then you have to submit it back in again. The product is FDA -- it has FDA clearance. It has the code, and it should just be transitioned to approval.

Okay. So I think we have actually time for one sort of last question to wrap things up here. And I mean we'll be talking primarily about the U.S. today and of course, your focus is primarily in the U.S., but also you still have ongoing operations in Germany, for example. But how should an investor look at I mean coming next year or so or 2 on the geographic segmentation of potential revenues? I mean historically, Germany has been the lion's share of the revenues you have so far. But how should an investor approach this?

Yes. So I think the key word here is reimbursement. We will link our investment to reimbursement when we see how much traction we get when we do have reimbursement. So in Germany, and I'll repeat it, I said this before, we have an ongoing study, the filter study. And results will become available in 2024. At that point, the GDA in Germany, they have officially announced that they will take a look at those data and determine whether to grant reimbursement or not. But the good thing is that initially, they had asked for us to do a separate study for Germany for them to take this decision, but they will use our study for that decision, which is very, very good. So you could imagine that now we're going to really work hard to get that reimbursement in Germany. But in the interim, the team that's there, we have 2 now, sales -- a team of 2 salespeople, and they're really working on the established customer because as Christian said, our patch utilization rate was quite low in Germany, and we want to see that increasing. And we can learn a lot from that. So when we have reimbursement, this will be a good insight to have. In the Nordics, we do have somebody just covering the Nordics part time, and its established customers there, but we have some projects running in the Nordics. And I also want to mention the U.K. The U.K. is a really interesting market. The NICE, National Institute of Clinical Excellence, they are favorable to the CADScor System. They want to see clinical experience in the U.K. And there, we are still working with Rapid Access Chest Pain Clinics to document the -- how the CADScor System should be used and the value it can bring. So we are still working, but we're not working to the same degree as we were, not at the expense of the U.S. But we certainly have every intention of coming back into Europe and expanding that, but we're a very small organization. And we feel that if we can now succeed in the U.S. or when we succeed in the U.S., I should say, and we start to generate that revenue, then we can reinvest into Europe. And then, of course, we have other parts of the world that are very interested. And we get quite often e-mail saying, "When are you coming to this market?" So that's part of the longer-term strategy. But for '22, it was about transforming the company, building up the commercial competence and really starting now to drive sales in the U.S. And then we are coming -- we're going to revisit and increase our investments again in the other parts of the world.

Okay. And I think that was all the time we had for today, but I'm sure we have reason to come back to the topics we have touched upon today in future sort of Q&A sessions because I guess that 2023 will surely contain several interesting events for the company. So thanks a lot, Helen, and thanks a lot, Christian, for your participation here today.

Thank you so much, Filip.

Thank you.

Thanks, everyone, for listening. Thank you.