Carmat SA (ALCAR) Earnings Call Transcript & Summary

Thank you, Stephane, and good evening. This slide is very important because it allows us to explain the route to implants. And each restart is never off/on process. It implies certain steps. And each step can have a different duration according to the country, the hospital where we want to achieve implants. The first step is communication to customers about the availability of the product. Then hospitals start the screening process, which may be a little complex as it requires consensus on a particular patient from the heart team. So as you know, every patient is discussed nowadays in our teams. And only if everyone agrees on the potential -- let's say, on the fact that a patient could benefit from a certain therapy, then the patient is referred to that therapy. So once the patient is referred, our experts together with the clinicians evaluate the patients, and only when it is confirmed that the actual implant planning phase starts. So what we did since June is the following, and it's important to highlight that we started really the -- our implant -- the generation process in June when we had, let's say, enough level of stocks at manufacturing. So since June, the field has started engaging customers to generate demand. Hospitals have started the screening process, which resulted in a backlog of patients. Some of these patients have been confirmed for implants. So they have been discussed by our experts and the clinicians at the other hospitals. And then the implants -- already said that the implant phase -- planning phase has started. So from June until now, CARMAT has been pursuing its efforts in terms of training of medical teams, has been supporting hospitals for therapy funding and has taken advantage of the first part of the year to [ range ] for the 50. And I'm referring to the surgical proctors, the field therapy specialists as well as the commercial team. So what does this mean in terms of numbers? So we have received since June, once again, more than 50 patients. So this 50 patients -- more than 50 patients have been referred to us. We have collected [ 25 C ] discounts. And as you know, they are important to assess the eligibility of the patients for the implants. And we have approved 20 patients for implants. So some of these patients have been implanted. Some of them are in the implanting phase. And to give you some figures about what is about to happen, what is happening here lately. So we have 2 cases planned this week. We are working with some of our customers to plan cases next week on already identified individuals. And we already have a patient planned in 2 weeks. So this is the momentum that we have been experiencing. So we are really, let's say, seeing all the results of work that started in summer. And so we have 25 hospitals trained for commercial implants. We have a brand new experienced CARMAT team in place. So we have everything which is needed now in order to achieve our sales objectives by the end of the year. Sales momentum will be further supported by hospitals' activation. So we have the 25 hospitals already trained. But the goal that we gave to ourselves at the beginning of the year was 30. So we have 4 hospitals already booked for trainings in Q4. We are planning some other initial trainings. So we are pretty confident about, let's say, achieving these results. And we have been also working on market expansion. As you know, we are active in Germany and Italy. But we are also now in the phase of activating some other countries. So we are talking about Greece, Switzerland, Austria, Israel, for example, where the product is already approved. So we believe that we have here, let's say, the right platform in order to achieve our results -- our sales results short term but also long term. So now it's time for the finance update. So I will hand it over to Pascale. Thank you.

Yes. So in terms of finance, let's have a look at the P&L first. As you would expect, the P&L reflects our activity in the first half of the year. So we had, as Francesco said, limited sales. 3 devices were sold in the period because we started engaging the customer quite late because we didn't have enough devices on shelf. Meanwhile, we've tried to control expenses very tightly. And you see that the level of expenses was pretty similar in '23 than in '22 for the first part of the year. As you would know now, we do have some interest associated with bank loans. We've got 2 loans: one we took back in '18, the EIB -- from the EIB, EUR 30 million; and we also have 2 additional step granting loans, EUR 10 million in total, that we picked during the COVID period. At the same time, we continue a strong investment in R&D, and most of the R&D activity is based in France. So we do benefit from a research tax credit of EUR 1 million in the period. So net-net, we had a loss of about EUR 26 million, which is broadly similar to the loss we had last year for the same period. Obviously, what's even more important for a company like ours is cash. You see that the cash burn from operations and investments was pretty stable versus last year, about EUR 5 million, EUR 5.5 million a month. We -- you will know that CapEx has picked up a little bit, and this is obviously connected to the manufacturing expansion that we are currently doing. That's -- so that's all the business, so to speak. And in terms of financing, during the period, we got a blended financing from the French state under the so-called [indiscernible] or 2030 health care plan. That's a total financing of EUR 13 million, which is split into 4 tranches, and we go to the first tranche in the first half of 2023. So out of the EUR 4.7 million financing that you see on the screen, I mean EUR 3.3 million come from this financing that we got from the French state. All the financing we got during the period is not dilutive. So we ended up the period with a cash position of EUR 24 million, giving us a cash runway until end of October this year. And the net debt was EUR 33 million as well. So in terms of financial strategy, I think it's -- we are at a crucial time where we do expect a strong sales momentum going forward, so starting Q4. We combine that with a very drastic cost reduction, which is really important to sort of get some traction in terms of financing. And in parallel, the second pillar of the financial architecture, if you will, is really financial discipline. So we'll be very strict in terms of resource allocation and operational excellence so that every sort of penny which is spent and invested in the business is worth spending and directed towards value creation for the company. So with these 2 pillars, we will definitely get goal towards profitable growth as quickly as we can. Now obviously, with the cash run rate of -- until October, you'd expect that we will have to identify some funding. And we are working very actively to extend that -- this cash run rate in the very short term. So you should expect something here very shortly. And going forward, because we still need to raise money for a few -- for a couple of years, we look at both dilutive and non-dilutive financing, as we said back in January. And now I will hand over to Stephane again. I will just say before that we get very strong support from our shareholders. So the main shareholders are Matra Airbus groups, Matra Defense and 3 family offices which are very loyal and have been supporting us for quite a while, and we continue to -- we'll continue to do so. So Stephane?

Thank you, Pascale. So before we move to Q&A section, I will just finish with the outlook. So just as a reminder, while the market population -- addressable market is pretty big, as you know, our technology supply is one of the most promising and the development. And obviously, manufacturing scale-up is really what will be one of our main focus for the future because we anticipate strong demand. So we are set for growth. So I think from a product standpoint, well, clinical results were quite impressive so far. And it looks like we've been working quite well on quality, and we didn't experience any bad results so far. Manufacturing is ramping up. Obviously, we should not forget we are a new company, so it takes time. But we believe now the level of process is very satisfying, obviously. We started manufacturing -- we built the facility in 2018. Opening, we should remind that and having that incredible progress we've been able to make over the last 5 years. And now we are commercial-ready and we are -- as usual, when you launch a new implant where we are learning and clearly, times have changed. And it's pretty slow to introduce a new therapy, which is so disruptive as our product in hospitals nowadays. So sales forecast, well, we'll do our best to meet at least the 4 million. And we expect, as Francesco said, a strong momentum in Q4. Well, the certain road maps and the midterm objectives, our goal is to prepare for 1,000 devices per annum by 2027. As I showed earlier, the facility is there, so just about tracking sales progress and at the right time. It is about hiring the right amount of people and buy the machines and build a larger clean room. We'll keep on working on financing reimbursement in key geographies. Obviously, the price is what it is, and we don't expect price increase or price decrease. So our way to breakeven will be a drastic reduction of cost of good sold. That will pass through the strengthening of manufacturing supplier. And we are still aiming for a PMA submission by 2026. Long-term objectives. Well, our goal is still to be a frontline treatment for heart replacement. Obviously, we will work actively to make sure we can evolve and move the indication from bridge to transplant to destination. Our vision is to have CARMAT as a mainstream treatment like it is the case for CRT today. And obviously, that means that we need to change the technology over time on calls device scaling, one of the major progress we could bring to the market. Maybe earlier, as you know, we really generate 1 billion of data points every week. And today, the only way to get access to it is really to retrieve the SD card in the controller. And the solution is already ready. It's about financing, but we want to have real-time data monitoring to optimize special treatment. And we want to increase the worldwide footprint to build a multibillion market cap company. So the ultimate objective is to become the first artificial heart approved for destination therapy. So thank you very much, and I will answer a few question, if there are some in the queue.

So I have a question from the U.S., so a couple of question. So the pricing is very transparent. The price in Europe is one, and it's really what we applied when I was at Abbott with Mitraclip, so it's one price. So it's EUR 205,000 across Europe. And so one of the 7 of the restart, that's the [indiscernible] in Q4? Yes, it's right. If H2 implants are 15, 25 range, what could be 2024? That's a pretty good question. So obviously, we are waiting for the end of the year to build the forecast for next year. Even if we already have a plan in mind, but we need to use the actual Q4 to build a more precise plan if possible. Because as you know, when you launch a new technology, it's exponential, and it's very hard to predict. And to be honest, I never worked on a new technology which we managed to predict precisely. So what I know based on my experience is that it takes always longer to get to the inflection point. But on the other side of the coin is when you passed an inflection point, it's usually growing faster than you expect. So I think the real question is when do you think you'll get to the inflection point. And I believe we are getting closer to the inflection point as we speak. So numbers for 2024, 50,100, 150 implants. As we speak, we would think much more about 100-plus implants, but more to say in January. On the -- sorry, it's another analyst. When do you expect the FDA to resume early feasibility study? So well, it's been very long discussions. And I will pause there and I won't give personal point of view. But I think that as we speak, we are a tiny company. And as we said and as Pascale said, what we will do right now is to move from a growth financing strategy to a quick path to profitability. Things are longer than expected. The harsh reality over the last 10 to 15 years is that the world has changed. Doctors are not as, I would say, engaged as they used to be. I mean, honestly speaking, it would take a longer today to have a stent on the market. It would take longer to have valves. It is what it is. Things have changed, people have changed. It's true for competent authorities. So that's the reason why we decided to be more real and to use the money to build a path to profitability before thinking about a huge expansion. So what does it mean concretely? It means that we will do what we need to do to resume EFS. So I mean we won't resume EFS this year probably. We were not pushing with centers. I think we want to respect the FDA timing. So we expect to restart next year. We will build more evidence. And EFICAS, so EFICAS is starting now. So we have 6 centers. We will extend to 10 centers, and we will treat 2 patient this week. So it looks like the momentum with EFICAS is starting now. We really restarted, as we tried to explain, hopefully, to be understood. We've been able to start to build inventory in June only because of supply. So we've been starting to promote the restart of EFICAS and commercial-ready this summer. And I'm happy to see that the patient are coming now. So the status of EFICAS is that our goal is to complete the enrollment still May 2025. You have the read of the data end of 2025, probably 2026. The change in strategy is that instead of building a lot of evidence in the U.S., we'll try to discuss with the FDA to piggyback on the huge European experience that we have built in the meantime. How much time does it take from searching a patient to implanting Aeson? That's probably something we underestimate, estimating when we started -- restarted. It takes, I would say, between 3 to 4 months to start the center, identify a patient and find room in the planning of the implanting center. It's -- you know we have a patient tomorrow. We have a patient the day after tomorrow. I need more than 1 month to get them from selection to the OR. So obviously, there are many different reasons for this. You need to convince all the team. And once you get it there, everybody says needs to confirm, and then they need to find room in the planning. So I would say between 3 to 4 months. And we hope and we believe that once we break the ice with the first patient in the center, we can treat new patient quicker. Which are the barriers you will face that prevent you from selling 500 hearts in 2024? Well, I think that's simply the -- what I call the market. So it's not us. Even if I don't think that we're able to get suppliers to help us to go to 500 by the end of next year. But I think it's really about the time it takes to get all the centers that are treating more patient in a year. So now from a math standpoint, if we have 10 centers next year in France, we restart in EFS, and we have 30 centers commercially. But let's focus now on France and commercial. So let's assume we have 40 centers at the end of the year. So 40 centers, it would mean to get to 500, 1 patient [ amount ] per center, which is unrealistic [ next year ]. I think back-of-the-envelope calculation for next year, we would think much more about between 2 to 4 patient a center. So if you run the math, 2 to 4 a center, so it's at least 100-plus to potentially 150 a bit more. So that's the time it takes to get a therapy full speed. When can you activate the program in Lebanon? So that's a good question. We are a pretty small company, and we've been working with the distributor there. [indiscernible]. We are as well, so we need to pick up -- or choose our battles. And I'm thrilled that we can activate the program very soon. So the distributor, if you come with a patient, we'll do all that we can to treat it as soon as we can. But the word is made of promises, right? And we can't afford any more to pull all promises, and we got promised with a lot of patient everywhere starting in France and Germany and Italy. So we'll focus on main countries today. And -- but Lebanon, Israel, other countries, if we have a patient which is real, we'll make all what we can to do it as quick as we can because we need to treat patients, but we are with them. Are you quite behind in announcing financing, if you have only cash from way about announce? Well, I don't know where you are there. You're probably based out of France. Unfortunately, it's a matter of the fact that in health care, the company in France are really waiting for the last minute to gather as much money as they can to find companies. And I have a start-up in California as well, and it's what I'm doing with my start-up. So you know what we are doing basically is to gather as much information as we can to build around which is as big as we can. So that's what -- that's the way it is nowadays and -- but all that I can say as of now is that we know for sure we can count on our existing shareholders to be the next one, obviously, as we speak, where we're a clear win. Do you think it's reasonable to assume you will need EUR 200 million from here to October 2027 to get to breakeven? So I think if you run the math and if you see our burn, I think, yes, that's a good assumption. And hopefully, it will be less as well. So if you think that this company raised in excess of around EUR 500 million since inception, I believe we raised more than 2/3 of what we needed. So I think from a financing standpoint, in the history of the company, we made the hard work. So hopefully, now we are able to show data reassuring people and helping us to get there. But I think, [ Filippo ], your assumption is hopefully the right one. You talk about searching for new fundings and say that we should expect something soon. Are you close to signing a deal? When are you expecting the new funding? Well, if you follow the company, we've been working on this for the last 2 years. It's not unusual. Unfortunately, in France, it's pretty hard to get people around the table. So I think with what we have in our hands now, we are able to close a new round, and you should expect news very soon. Are you considering a business continuity plan? Yes. I mean when you work in a start-up, and it's true for all companies because you never know. So as a manager, you need to plan for the worst. And I've been doing that for the last 7 years. So every time we prepare for a race, we have a continuity plan as well. So it's nothing new under the sale. And I was watching my TV last night, and I was following Elon Musk. And you know Tesla died nearly 10 times. That's the start-up life. Has the supply issue been completely solved now? So if I would say, yes, I would be a liar, and I don't want to lie to people. What we said is we stabilized the supply chain, and we improved it to get to 10 products [ beyond the month ]. So clearly, there are still tiny open issues. We are solving -- new ones will come, and we are solving older ones. But as we speak, clearly, we have better grasp on the supply chain. That's no question. It's improving every day. And we are very confident, by the end of the year, we can ramp up in a easier way, if you will. So there are no other question, if I'm not wrong. So thanks for your time, and thanks for your support and your trust. And see you very soon for additional news. Thank you very much. Good evening. Bye.