Carmat SA (ALCAR) Earnings Call Transcript & Summary

[Audio Gap] [indiscernible] Carmelo Milano from Duke University. The agenda is as follows: So 2021 review, quality-hold update and strategy and outlook. So 2021 at a glance. So 2021 has been a year rich in events. So we started the commercial launch of our product called Aeson in 7 patients. We started the first cohort of the U.S. early feasibility study, which we completed in August with 3 patients. We continue to enroll in our pivotal study to reach the number of 17 implants to date. We ramped up the manufacturing to 4 prostheses a week in December. And following that ramp-up, we got some quality issues, and we'll come back to it, and we voluntary suspended our implants due to these quality issues. So an update on the quality-hold that we had in December of last year. So the situation. So we have to report 3 [ service ] adverse events, of which 2 that's related to device malfunction. Following the first [ SA, ] we decided to suspend as quick as we could the implant on December 2. That was the day before an implant program and we had many other implants programmed in the following weeks. Following that suspension, we started to work actively on the identification of the quality defects, which we saw on 2 different components, 1 coming from the electronic part of our device and the second coming from the mechanic part of the Aeson heart, the bank. We worked on the identification of the root cause of the defects. We've been able in the 3 cases, which we think are isolated to identify the root causes and to reproduce the root causes. So as soon as we managed to identify the root causes, we started to work on the definition of corrective actions, and we are now in the course of implementing this definite -- these corrective actions. So we took swift and responsible actions to take through the whole process. So what are the next steps? So first, obviously, we still have 4 patients on Aeson as we speak today. So we put in place the action necessary to make sure that we could mitigate the risk. As I said, we do believe following our analysis that these cases were isolated. So we are monitoring closely the sortation of which 3 are on waiting-list for transplants. One of them is a therapy -- is a destination patient. In terms of supply, so we've been working the last 2 months to understand if we were a bold, yes or no, to use the products on the shelf. As of today, we are not able to say if the products on the shelf are safe enough to be used on patients. So that's the reason why we decided for time being, to work on new products to be manufactured with corrective actions and these products should be available in October this year. Obviously, once we resume the manufacturing with new products, we will have to deal with notified bodies and competent authorities to get the green light to restart implants, both commercially or clinically. So we have ongoing dialogue with DEKRA, which is our notified body in Europe for commercial implants; and the ANSM, which is a competent authority in France for the French study called EFICAS; and the FDA to potentially restart the [indiscernible] of our EFS. So the current expectation is to resume all implants in October 2022, pending the authorization of DEKRA, the ANSM and the FDA. Now obviously, we are working actively on resuming the full manufacturing and obviously, to get the authorization of the competent authorities, and we are working very actively as well to project the company into the future. So now we'll speak about strategy and outlook. So our vision remains the same, and we firmly believe in the fact that Aeson will become the primary alternative to heart transplant. Not only in terms of device, but as well in front of our transplants, we'll speak to it later on, but we believe that if we are able to have a device which does what Aeson does today, which is durable and comfortable for patients, we believe we could become the first-line treatment for transplant. What are the learnings from clinical and commercial experience. First, out of more than 30 patients, the product design may have eye strokes, GI bleeding, on-cable infection and like other mechanical [ sectary ] support technologies. The service provided by Carmat in terms of implantation patients' product is highly appreciated by physicians. And now that we are offering a new therapeutic solution, the patient flow is starting to build up. So as of today, the demand for Aeson is very high. And that's the reason why we are working very hard to resume implants. We get every week, many requests to restart. There are a lot of patients waiting for treatment. And in Europe as well, our competitor SynCardia is on hold as well. So I will hand over to our Chief Medical Officer, Piet Jansen to speak about the voice of the customer. Piet?

Yes. Thank you, Stephane. And as you may have heard, the Aeson device has 3 distinctive features that brings it very close to physiological heart replacement therapy. First of all, we have the biological blood [ competitive ] services and the blood flowing through the device, which is brought into motion by a hybrid membrane. Together, this provides for a blood-friendly system that minimizes shear stress. And because of that, there is a fairly low need for anti-coagulation treatment; secondly, the Aeson devices biventricular provides full post outflow and it's electrohydraulically activated, which means it is a silent operation with physiological flow. And last but not least, the Aeson is the only device in the industry that possesses the ability to self-regulate blood flow based on the patient's needs. If we look at the comparison with the existing devices and the competitive pathologies or system, in this table, you can see the devices that are currently on the market, the thematic-driven artificial hearts, BiVADs, [indiscernible], the LVADs with temporary RVADs and the LVADs alone. And if you look at the essential features to provide physiological flow, it's clear that the Aeson device has the potential to stand out in this case. Although, the -- most of the devices can provide biventricular support, it's only the existing artificial heart and the Aeson device that provide true positivity. The [indiscernible] regulation and the high biventricular compatibility, however, are true distinctive features from the Aeson device that are not occurring in any of the other existing systems. Now if you look at the data that is published, at 6 months support and compared it to our own experience on 15 patients, it is clear that the device stands out again. In the early experience, we did have some [indiscernible] for surgical bleeding, which is normal in this type of cardiac surgical procedures. But if we look at the safety profile, the Aeson device stands out, thanks to its [indiscernible] service and performance. In our experience, we found 15 patients, we've had no strokes, no gastrointestinal bleedings, which are regularly observed with LVAD systems, and we have also had no [ pipeline ] exercise infection so far. All these features attest to the hemo-compatible profile of the Aeson device. Now If we summarize this and if we look what was important for Aeson, as Stephane mentioned, to become the first-line treatment for end-stage heart failure as potential an alternative to heart transplant. It's not only safety and effectiveness, but it's also to provide a reliable durable system, a mechanical solution that still mimics the function of a natural heart without the negative side effects on our other systems and notably without any impact on the immune and defense system that is seen with the use of donor organs. So if you look at the features of our device, it is human compatibility. We use a minimal anti-coagulation requirement, which internal practice means that there is a lower risk for stroke and gastrointestinal lesions with physiological flow, which is true [indiscernible] allows for the patient to have a quick recovery after the procedure and also in-patient mobilizes and is discharged home with the device is an ultimate response to the need of the patient when he exercises or he takes rest. We have already alluded to the biocompatible services of device, but simply said, it means that there is no rejection of the system, and there's also no need for immunosuppressants, which means the risk for infections is limited and the detrimental effects of the use of long-term immune suppression do not occur with the mechanical support system as the Aeson is. In terms of long-term reliability and durability, this has to be established with a standard clinical experience, and that will be done during our studies as well as our commercial use. However, in our limited experience, we already have proven that the device has a support duration well over 2 years in a patient that received a device as the destination therapy, but he ultimately died because of medical reasons. Then last but not least, if you ask the clinicians, they all want to have a fully implantable device. The Aeson device currently needs power supply from the outside, but that's the only thing that we need from the outside. Everything else, like the brain of the system and the centers, et cetera, they're all embedded in the device itself. So the only thing it needs from outside is a power supply. And we're confident that within the future developments of battery and energy providers, we are able to make this device fully [indiscernible] at some point. Now we would -- I would like to hand over the microphone to Dr. Carmelo Milano, who will share with us his experience with the Aeson device. Carmelo?

Yes. Thank you, Piet. I'm one of the cardiothoracic surgeons here at Duke. I'm actually the Chief of the Section of Adult Cardiac Surgery. I've worked here for more than 20 years and have been very involved in heart transplantation and in mechanical circuitry support. Duke has an extensive experience of mechanical circuitry support, all types, perhaps our most common support device is the implantable LVAD, and this is predominantly used in our patient population as a destination therapy. We have been a leader with regards to a variety of different trials of newer devices, particularly the HeartMate 3 device, and we have seen improving survival outcomes where, on average, patients are living about 6 years as a destination therapy with implantable LVAD, and we have some patients out to 13 years. However, there are many limitations to univentricular support, and we encounter these on a daily basis. First of all, of course, and perhaps most commonly is an important fraction of patients have very limiting biventricular dysfunction and the echo image illustrates a classic situation where the left ventricle is decompressed with the LVAD but the interventricular septum is pulled to the left side. The right ventricle remains fully loaded or overloaded and there's inefficiency in the tricuspid valve and these patients continue to suffer with heart failure symptoms. Sometimes they're able to be discharged, but a lot of times, they may need continuous inotropes for the right side and higher doses of diuretics just to continue to treat the right-sided heart failure. In addition to this scenario, we have patients who have restrictive cardiomyopathy, where the conventional LVAD cannulation is not feasible because the ventricular chambers are very thickened or small. We have an important subset of patients, who might be anatomically suitable for LVAD but do not have a stable heart rate and that may have a current tachycardia ventricular fibrillation. And so again, they do not maintain good right-sided function when they're in these ventricular dysrhythmias. And finally, there's a growing population of patients with congenital heart conditions. These patients commonly have cycled through different types of corrective procedures, but it's still gone on to experience progression in heart failure. And frequently, they will require biventricular support or need biventricular mechanical support because of a variety of issues on the right side of circulation. So LVAD has progressed, and we support many patients with LVADs, close to 100 patients a year, and our institution are maintained on LVADs, but we also have an important subset of patients that we -- that it's clear that the LVAD is inadequate support and these patients are in need of durable biventricular replacement. Doctor DeVries actually was a resident here at Duke before he went to Utah, where he treated Barney Clark with the first total artificial heart implant, the Jarvik pump. But unfortunately, the technology has not -- this is in the 1980s and here we are many decades later in the current approved of total artificial heart technology has a variety of limitations. Durability is questioned. Thromboembolism and biocompatibility are huge issues, and we hope that the Carmat device is able to address all these deficiencies of the current total artificial heart strategies. Balancing the circulation is very important. When we have -- when we do biventricular mechanical replacement over circulation of the lungs and abnormal pressures in the lung circulation have commonly created situations of lung injury, sometimes devastating lung injury. And lastly, we need systems that are exercise responses so that the patient can increase their output when they become more active. So there have been a variety of different total artificial heart strategies, but those strategies have a variety of limitations as they currently exist. So what that's forced us to do is it's forced us to actually utilize LVADs probably more than we would want to. So we continue to put LVADs in patients that have biventricular failures, some patients who have been treated for tachycardia, et cetera, because the current total artificial heart replacements are -- have their own set of limitations. But again, we hope that the Carmat represents an advance, and we were very pleased with our first U.S. implant. The patient was a 39-year-old, male patient from South Carolina, 1 state below us. This patient had known ischemic heart disease despite being very young and suffered a heart attack with associated heart failure and was transferred here. After arriving at our facility, he destabilized further with another cardiac arrest and actually required support with VA-ECMO as well as Impella. So this is a very, very ill patient. And I would say from a state of being on temporary support with VA-ECMO or Impella, your survival is probably 10% or 20% at 1 or 2 months. So this patient was in dire straits, requiring temporary support and being a very large patient really was not suitable for immediate transplant options. In addition, the patient had recurrent ventricular tachycardia. So it was a combination of poor biventricular function as well as ventricular tachycardia that really warranted biventricular replacement. The sizing of the Carmat device is very important, and you can see axial and scapula CT imaging with overlay of the device size. And so we were very careful and the Carmat team was very careful in making certain that we had an adequate anteroposterior dimension in this patient as well as an adequate dimension from -- in terms of the pulmonary artery to diaphragm. But after careful sizing or using this computer modeling, we felt that the device would fit suitably and we proceeded with the implant, transitioning the patient from Impella support to Abiomed. And this shown here is the operative team, Dr. Schroder and myself with the surgeon, but we were heavily supported by Carmat and an experienced European surgeon that had done implants. This was a reoperation in the sense that the patient had prior sternotomy for central VA cannulation. So it was a reoperation, which was somewhat more involved. But in general, the implant went smoothly. And really, there wasn't -- there was some coagulopathy, which we addressed initially, but there was no real immediate complications, including a very minimal issue with bleeding. This slide is to remind me that while we commonly will approach patients like this with LVAD support, we end up with suboptimal hemodynamics. But this is very much not the case following the Carmat device implant. And you can see that we have substantial cardiac output with right and left-sided flow rates exceeding 6 liters, 6.4 and 6.6 liters of proper minute recorded there. And we have a post circulation as shown on the right panel. So very normal flow rates, very normal central venous pressure in pulsatility. So in essence, we really have recapitulated the normal characteristics of this patient circulation, which I would argue would not have been achieved with LVAD support alone. We have supported patiocyclis with LVAD. But typically, we end up with 4 or 5 liters per minute of blood flow. We're oftentimes limited by the right side that is not supported. We have high central venous pressure. And obviously, we don't have pulsatile flow with monitoring LVAD devices. So the Carmat really restored normal hemodynamics for this patient. Shown here is the patient after discharge with his family. And fortunately, he not only was able to be discharged into the community, but he did well and a donor organ became available, and we were able to safely explant and transplant him, and he now has been discharged after his transplant, but he was supported for 4.5 months. And 1 thing that I have not asked him, but it's an important question is when I see patients who have been supported on an LVAD and undergo transplant, they will invariably report feeling better with the transplant than they did with the LVAD. And I think that's largely because we don't achieve normalization of hemodynamics with the LVAD. But this patient really had a greater cardiac output with the Aeson device compared to what he probably is getting now with a transplant at heart. So he may actually be experiencing hemodynamics that are a little bit less optimal compared to what he had when he was on the total artificial heart product. And I would -- I'm sure that he is happy to be without the battery pack, but on the other hand, is resting hemodynamics and even his response to exercise, those hemodynamics probably are no better with the transplant than what he was achieving with the Carmat device. So we were very pleased with this initial case and in all aspects. There was very little manipulation or alarms that we had to respond to, and the device really supported this large patient very well. And we are anxiously looking forward to being able to work further with the device as we continue to meet patients who have a variety of issues that make them non-ideal for LVAD support alone. I think that's the last slide, Piet. Thank you.

Yes. Thanks Carmelo for this exquisite presentation. And I now hand the microphone over to Stephane again.

Thank you very much. So I'll just say now we come back to 2022. So what are the key objectives now. So there are 4 buckets: first, manufacturing. So we are working right now on implementing corrective actions and unfortunately, well, quality overall really inherent to medical device industry when you ramp up, we are in the phase of ramping up. And it's very hard to anticipate. And so now we are working very quickly on corrective actions. Obviously, we keep on working on continuous improvement on processes, which will never stop. And we are working well to make sure we can build inventory for restart. Second thing is, obviously, we are keeping on training new centers. The demand is very high, and many centers we have planned to start and they decided to carry on with training despite the fact that we are suspended right now. This is to prepare for a strong restart and hopefully, to resume implants search in the commercial setting sales in October. Second as well is that we are hopeful we can restart the early feasibility study with cohort B as quick as we can as well in the U.S. and start probably the [Technical Difficulty] for us, and have probably in total shares with efficacy in France, which will be a very large study of 52 patients, which will help us to understand better in terms of health economics, the impact of such therapy. Last but not least, so obviously, we took a big hit because of weak sales. So we have been working on many steps while ever to maintain the cash runway until July 2022 and to prepare for the next financing for the company. So I think it's important in a way to take a look at where we are and all the achievements. So really Carmat started in 2008. In 2008, 4 of our projects started as well. 2 of them now are stopped, the German project and the U.S. project, and there are still 2 ongoing. Swedish project and a U.S. project as well. One is on animals and one is on bench test. So just to show how fast we've been getting to commercial and humans compared to other projects. What is notable as well is that, obviously, our project, our product has features that no other projects on the development have. So as Piet said and Carmelo explained, we are able to reestablish a more compatibility of the patient, which is very important. And the amount of dynamic is back to normal or sometimes even better, as we just explained. At the end of the day, it's a machine. Until the machine works is that what you require the machines to do. And I think we believe it's where in a device is durable and without any batteries as Carmelo Milano said, it could become potentially from now a first-time treatment for transplant. So things have been accelerating in the last 5 years. We started the pivotal study. We have a new manufacturing site dedicated to Carmat. We got few market last year, and we started commercial the next year. So our vision remains the same. We want to become the first biventricular device to get the destination therapy indication and all vision really needs to become a first-line treatment because we believe that if technology evolves, and if we make it better, we could even become a first-line treatment for this patient, which despite the new ARC, don't manage to get the blood flow that they need. So that's really about the update we wanted to give. As I used to say to many of you who've been following the company for many years, when I joined 5 years ago from Abbott, well, first, I said that manufacturing was probably the most important challenge we had to face, which is the case. We are handling it the right way, I believe. We are confident given the nature of the brands we had that they are probably -- we're at the end of [ adrenal ] of quality issues. We are preparing for a restart for good and we are hopeful that we can come back in October to treat all the patients we could not treat in December and January, but unfortunately, won't be able to treat. Some of them hopefully will get access to our transplant. And we are putting all the efforts necessary to be back on track as soon as we can. So I wanted to thank you very much for your time today. And we have some question answers.

I have only 1 which is, does a patient received an -- need a long-term anti-regulation? So I think that's a very interesting question. Obviously, there are still a lot of unknowns, but in respect to our transplant, maybe first, we don't have any reject and I think rejection. So that's a very important point. That's the first thing. Second thing, even if today, we didn't want to push too much the envelope in the studies. But the anticoagulation of Carmat -- our mechanical circulatory support devices is very much different, is much lower. We have 75 milligrams of aspirin a day, so it's BioPerine and low molecular Piperine. And some centers had to stop the anticoagulation quite for many days, and we never had any clot issues. And as well, some patients could not stand Piperine, and they got different type of anticoagulation -- even lighter. So we believe -- I mean, what we will do in the coming studies, especially in the first one, we will try to lower as well, even if it's very low compared to the other devices today, we could go even lower. But I will maybe hand over that question to Piet, our CMO, who will give more color to what I just said.