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

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[Foreign Language] Thank you. It's a pleasure to participate in this event today. And I also want to thank the [ Pensa ] team for accommodating this presentation on Teams as I'm based in the U.S. As you heard, my name Helen Round, I am the President and CEO of Acarix. Acarix is a company that's focusing on very innovative acoustics and AI-based technology in diagnostics. And we are now focusing on cardiac diagnostics. The presentation today will really focus on an overview of our company and the transformation that we are currently undergoing, going from a very R&D-based focused organization into a commercially successful company, and we have a strong focus now on the U.S. market. We are in the process of launching our product, the CADScor System in the U.S., and we have done this in a very systematic way, building our business to secure a solid platform that we can build our commercialization on. To date, we are starting to see the signs of a strong momentum. But -- and that's also due to these building blocks that I'm talking about, but we also need to recognize that it takes time for a company of our size to get established on the U.S. market. To start off with, just a disclaimer, which you're all very familiar with, we're a publicly traded company. And then I thought I would take just a minute for some of you who maybe are not familiar with Acarix. Just to give you a very high-level overview of the company. We are a Swedish medical technology company, and we were born out of Academia in Denmark. Our focus is really on combining acoustic, very ultrasensitive acoustics, where we're listening to the body and linking that to AI and working in the diagnostic space. And as I mentioned, we focus on heart disease right now. At the moment, we are driving hard in the U.S. We have important approvals in place in the U.S. We have a regulatory FDA de novo clearance, and we have reimbursement, and there's a large medical need. So that's why we're focusing so hard now on the U.S. We've been building out our management team, and we've been able to recruit individuals that have very specific skills and knowledge that we need to be successful here in the U.S. And as I mentioned, we are traded on the First North Premier Growth Market. But our mission is really on transforming early cardiac diagnostics. And I hope in this presentation that you would get a sense of how are we intending to do this and what opportunities do we see. But let's start at the core. The main issue that we work on, and that is identifying patients at low risk of heart disease. The starting point really is chest pain. Chest pain is often associated with the heart but it's not necessarily linked to the heart. So chest pain, many of you will have experienced this. It's very common. 20% to 40% of adults are expected to experience chest pain at some point. So a physician seeing a patient like this that you see on the screen will prompt a number of investigations. There are very few doctors that will send this patient home. But what's so surprising is that as patients go through this workflow, 9 out of 10 do not -- in 9 out of 10, the chest pain is not linked to the heart. So it's a question of, is there a way to quickly assess these patients, identify those at low risk and take them out of the system. And this is really where our CADScor system comes into place. So as you can see, this is a small device, it's placed noninvasively on top of the chest, the round part here is an ultrasensitive microphone. And I just have to say this really slowly. This microphone listens to the blood flow in the coronary arteries. And if the arteries are healthy, there's a very smooth sound, but as plaque starts to build up, a murmur is created, the turbulence is created and the microphone will pick that up. And it will run that through an AI algorithm and then the score will come up on the screen. Overall, it takes about 10 minutes to do this assessment. But the actual listening part is about 3 minutes. And if you get a score below 20, indicating you have no risk, the physicians can rule this patient out with a high degree of certainty. Our negative predictive value is 96.2%. We have -- a lot of studies have been done over the years, 15 years of R&D. We have 45 patents. We have thousands of patients in the clinical studies. This has resulted in a regulatory approval in Europe with CE marking but also in the U.S. We don't yet have reimbursement in Europe. We're working on that. But in the U.S., we have received a CPT 3 code approved. And to date, the technology CADScor system has been used on about 26,000 patients. So I talked about this traditional workflow. This patient presents in front of a doctor and this is what normally happens, the stress test [indiscernible] in Sweden, nuclear stress test, angiograms, CTs, et cetera. And this can take 3 months, I think, is very optimistic but it could take up to 10 months with waiting times, et cetera. Our value proposition really is to transform this. And the CADScor system is getting greater and greater acceptance as a first-line diagnostic aid, something you do before you go into this almost as an EKG assessment that is done. And as I mentioned, it takes about 10 minutes. So of course, coming into a market like the U.S., we needed some credibility and justifying this positioning. So we started having conversations with the American College of Cardiology. It's a big organization, professional organization with about 54,000 cardiologists and started having discussions in about April, May last year, we signed a collaboration agreement together in September and then the team worked very quickly on defining how should the CADScor system be used. And it actually, the work here went faster than we thought and in May we launched this clinical workflow. And what essentially it says is patients that present with a stable chest pain, as you saw in the picture, decisions should be doing a history, physical examine, an EKG and then the CADScor system. And anyone then that has a CADScor system below 20 can be ruled out. Anyone above, it doesn't nearly say that they have coronary artery disease, but we cannot rule them out with the CADScor system and they should follow that blue track, diagnostic track that I just showed you. The exception are patients that are over 70, multiple comorbidities or risk factors, here, it doesn't really make sense to do the CADScor system, but it will be -- because there will be a low chance of us ruling it out. But having the ACC work with us on this has given us a very strong support for a first-line diagnostic aid positioning in the workflow of chest pain patients. So then if we look commercially, when the company started going commercial, we started in Europe with the CE marking. We have sales in Germany. We've had some sales in Switzerland, Austria, some in the Nordics, and we're working in the U.K., but we don't yet have reimbursement. So that means that we have to work in the private market but we learned a lot and we validated our business model. And then when we had the FDA de novo clearance, the CPT 3 code and recognizing the need in the U.S., the large opportunity that we have there, we decided end of last year that we need to really focus on the U.S. and not get too distracted with all the opportunities we see around the world. Our business model is quite simple, actually. We sell the system and the CADScor system that you see here, the device. And then for each assessment, a patch is attached, and these are single-use patches. And so a physician would either buy or lease the CADScor system and then they buy on an ongoing basis, patches. So coming into the U.S., then, of course, we knew the business model, we pressure tested the business model. But the medical need was actually greater than we thought. So there are a lot of chest pain patients, as I mentioned earlier in the U.S. It's expected to be around 18 million and trying to manage this high work load, the American College of Cardiology together with American Heart Association, 2 large organization came out with new chest pain guidelines at the end of 2021. They didn't know about the CADScor then at that point. But they did say that low-risk patients need to be identified and ruled out. And that's where the CADScor system sort of beautifully slots in between need and the recommendation to identify and rule out low-risk patients. So just taking you back through what we've been talking about, I said in my introduction that we've been putting important building blocks in place. 2002 (sic) [ 2022 ] was really about building up a subsidiary here in the U.S. It took us about 3, 4 months to have a subsidiary and product in the warehouse and being able to take orders. We started building up our U.S. management team. We had a very first sale, which was early in Q1. Then our reimbursement code that came back active here at -- in the middle of last summer. And then we've been working with the ACC, we've been working through our sales channel, and we're really starting now to see momentum. We still have a way to go to really lift off, but a lot of the important building blocks were put in place. So a few words about our geographic footprint. I think you all know that building a sales organization can be very expensive. So we have decided on a hybrid sales model with few select sales representatives, but then also partnership with commission-based sales agents. April last year, we didn't have a coverage. We started recruiting. We did a lot of discussions of who do we want to work with around the country. So by December, we covered 13 states. And then we realized we've got to go faster, and we've identified a large group of sales representatives, which gave us access to an additional 40 representatives. And now we're covering 43 states. And I'm happy to report that as of July, we have full coverage now in the U.S., and now we're starting to think about how can we regionally start to structure this to work even more effectively. We cover clinics. We go to hospitals. IDN is a large hospital networks. Then there's also networks of primary care organizations and urgent care that we're starting to have discussions with and an important customer for us is really the military health care, the Veterans Health Administration, where we've had some nice progress, and I'm going to talk about that. But obviously, we talk to cardiologists, emergency departments, urgent care and primary care. I want to say a few words about reimbursement codes. We did have our reimbursement code become effective last year, but that doesn't mean that it's automated. We really have to work state by state, insurance company by insurance company, almost clinic by clinic, patient by patient to make sure that doctors and clinics get reimbursed from these insurance companies when they do a CADScor test. Today, we are tracking at about $160 per assessment, but there are payments up to $500 from some major payers. Given that they pay $75 for a patch, this is kind of an attractive business model for the physicians. We track claims submissions. We want to see increases. And of course, we don't see all of them. But so far, during March to June, we saw a 26% increase, which means that doctors are filing claims, and we're working through this, and I expect this now to continue to increase. And we do work very closely with the clinics. But at the end of the day, they need to do the work, and they need to make sure that they get paid from the insurance companies. I just wanted to give an example of a U.S. clinic. So our business model, again, we sell systems, we sell patches. How quickly we get into different sales channels varies greatly. In the clinic, it can take 3 to 6 months. But if we're looking at large health care systems, it could take 12 to 24 months. So the way we think about it is that we need to deliver sales in the short term, and we need to build for the long term. But what's really interesting is to see the patch utilization in now among American or U.S.-based doctors. This is a recent customer. I actually just met with this customer earlier this week. They're tracking at about 100 patches per month, which is significantly higher than we've seen in Europe earlier. And the value to us is about SEK 1 million per year, but they also make about similar in profit. So it's a real win-win situation for them to be using the CADScor system. So there's a financial incentive, but there's also a clinical incentive to rule out low-risk patients. But the U.S. does represent clinics with higher patient volume, increased patch per day use. And then, of course, we also have higher pricing versus Europe as most life science companies. I want to say a few words about the VA. This is an important customer and the more we learn, the greater of an interest we have in this -- in the VA. Our initial discussions began last summer, and then usually, the VA takes its time. It can take up to 2 years to get adopted. But they saw a very clear need for the CADScor system there. And it worked quite quickly. In February, we received the first order from Louisiana, and that was one order valued at SEK 1 million without repeat patches. So that was your system and initial patches. Since then, we've been working with them on incorporating CADScor system into routine news. As I mentioned earlier, we really want to see the CADScor system used early, similar to an EKG, and we're making really good progress, and I hope very soon we can announce that we have got sign-offs on this. But we're also talking to multiple VAs. We're already in discussions with twice as many as we were earlier in the year. And of course, our overall objective is to get a national contract. But it's not only important from a financial point of view, this gives us a lot of credibility. In order to sell into the U.S. government, we had to go through quite a rigorous due diligence process. We cleared it. And as we're talking outside now, we do -- it does get recognition when we say that we've been able to secure the VA as a customer. I talked a little bit about where we're heading. In 2021, we issued guidance. And this looks like maybe a bold guidance, but we're very much working towards this, and we're tracking on that. Our goal is to hit 3,000 CADScor systems installed by the end of 2024 with revenue of SEK 200 million and the gross margin of 80%. We're already above the target for the gross margin, but we're working to reach the others as well. Our focus is on the U.S. market, managing these different sales cycles, managing the reimbursement, we did step back in Europe to allow ourselves to focus efficiently on the U.S., but we are already now starting to think about reimbursement approvals in Europe as well. And of course, on an ongoing basis for a company of ours at the stage that we are in financing is really important. But we are matching the market trends you see in the U.S. So we will continue to drive a strong focus on the U.S. We have a good team. I mentioned it earlier, 5 of us are based here in the U.S. We have our CFO, Christian. He's based in Malmo in Sweden and Thomas and Claus, they are leading our operations and also R&D functions, and they're based in Denmark. Our Board, we work very closely with them. We have a recent addition of a Board member and Mikael Thoren, he was appointed at the annual meeting here in May. So a very strong team working together and having the expertise we really need to be successful in the U.S. So to conclude, I hope I've given you a picture of our technology. It is truly unique. There is no other technology like ours on the U.S. market or anywhere else combining acoustics stability to listen to the body and combining that with AI and then using that in diagnostics. And our R&D team has done a phenomenal job, document in the technology. So that has led to our regulatory approvals. Getting into the U.S. is exciting, but it does mean that we also have to keep a realistic view on how long does it take for this to really take off. But our metrics are really compelling, and I'm really, really happy with the team that I get to work with every single day to make this happen. So with that, I really thank you for your attention, and I'm happy to take any questions at this time. And I think that we're switching over to Swedish now, right?

That's correct, Helen. [Foreign Language]

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