Implantica AG (IMPASDB) Earnings Call Transcript & Summary

Good morning, and welcome to the Implantica First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Peter Forsell, CEO. Please go ahead.

Good afternoon, everybody. I will try to present an update on Q1 for Implantica. And as you know, Implantica is all about bringing advanced technology into the body. And myself, I'm a surgeon and have invested substantial amount of money in Implantica. Implantica has developed 2 platform technologies. To start, to give you a little bit overview here. And on eHealth platform that could treat -- take action from inside the body and controlled treatment from inside the body and a wireless energizing platform. So you can give all the energy you need to make smart active implants. And eHealth will revolutionize health care, that is guaranteed. And treatment will be brought more closer to the patient. They can use their mobile phone, look how the treatment is going. We will save costs for society because you can have less hospital visits, less hospital stay. And Implantica's eHealth platform is designed to treat on distance. On Slide 7 here, you see a schematic how we actually -- the doctor could be at the hospital and the patient can be at his or her home or wherever, and we can control treatment and we could change treatment, and that will revolutionize health care. Implantica has also gone through the whole body, basically treatment field, after treatment feed and looking at all mid-eye of these platform technologies, how could we improve health care. And we have been able to do more than 300 inventions, and we have done 3 years of market analysis, product analysis and prototyping and selected not less than 40, what we believe viable implant pipeline candidates. So that's why Implantica on Slide 9 has a very bold vision that we should become the world leader in smart medical implants. And I will try to give you a little bit business update. So first, of course, we have our products RefluxStop for treating acid reflux -- we're on slide 10 at the moment -- and RefluxStop actually has a multibillion-dollar opportunity. And that's, of course, because the market for acid reflex on Slide 12 here is huge. It's actually one -- is moving. 1 billion people have acid reflux, which is an enormous treatment field actually. And what is really sad today is that 50,000 people die from esophageal adenocarcinoma. And when you look in the literature, it's basically most of those is caused by acid reflex. And today, in society, you do anything to save cancer life. You have mammography, you do anything to find cancer and reduce the amount of cancer. And here only in Europe and United States, we have 50,000 people who actually die every year, and that's not acceptable, and this needs to change. And actually, the potential for a product like RefluxStop is maybe 10 million procedures annually when suddenly we have made a hard work to have the medical society and the public to understand the seriosity of this disease. And on Slide 14, you see the existing surgical treatments today where you try to compress the food passageway and thereby try to support the closing. The problem is however that this is people's food passageway, which means you get solving problems, you can get nothing out, belch, and vomit and so on, people get gas bloating. And these procedures have diminished and it's very low frequency today because it's too much complications. And the RefluxStop instead reach the course of acid reflux. So we find out that it was nothing wrong on Slide 15. You can see here, nothing wrong with this filter -- it's just the position of the filter. So it's in the chest, you have breathing variations, you breathe in and out and therefore, pressure is coming and going and this is leaking out through opening in diaphragm when esophagus is passing through, and this affects the muscle. So with our principle, we more or less treat everybody who is correctly operated. And American Foregut Society has written a white paper where they basically confirm the RefluxStop principle. So we have come quite far in the medical community to get them to understand the principle how this works. And it's going quite well for Implantica for the moment. We have launched in Spain. So we have in Getafe in Madrid, they have made starting with RefluxStop procedure, and we are preparing now for a public tender process. So in Spain, you need to have an official public tender but because we have really no competition, we believe that will be a quite good process. Also, we have launched in Italy. So here is in Napoli, Buon hospital Ospedale. And this is a big reflux center, very enthusiastic to do RefluxStop. We have also launched a second center in Italy, Professor Bona and Bonavina. They are really well-known people in this society of reflux surgeons. So Bonavina is actually the president of the European Foregut Society, of the organization of reflux top surgeons in Europe. He is the President. So he's a very important person that he now switched to do this procedure is, of course, very important. We also have a center in Swedish often, Professor Thorsten G. Lehmann who has actually made 100 RefluxStop procedures. We started 1.5 years ago. And during this time period, he has been able to do 100 procedures. And he will present his data. Actually, we have received for review data from quite a lot of different hospitals now, it will be many articles popping up more and more with fantastic results from several different centers. We also have started another reflux center in Germany, Klinikum Aschaffenburg, who have both decided to join the Registry Study and started to do RefluxStop. Professor Borbely from InselSpital, Switzerland's largest university hospital. He presented his 3-year results at SAGES conference in Canada just recently. And its overall conclusion was that outcomes achieved during the CE data study can be replicated in a real-world hospital setting. So in real life, our fantastic results, we have of our CMO has been able to be achieved also by this university hospital. And here, you can see some of the results he presented. So this is a question that you ask the patients how it's going, and you see that the results are really nice. And here you see the different symptoms, how they disappear. So the blue color here means they are gone or the light blue improved. You can see that the results are really excellent. So also another large reflux center is doing a RefluxStop of now it's AKH in Vienna, which is actually the largest hospital in Europe. It's a huge university. And they presented in the Finnish Gastro Days Congress in Helsinki the results. And here to the right, you can see a little picture how you see RefluxStop inside. This is now on Slide 26 here, from inside the stomach. You see how it's protruding into the stomach, a little around the wall, that's the RefluxStop device here. Slide 27. We have, since January, been at 12 congresses in different parts of the world, as you can see here. And some of these meetings, we had really impactful presentations. So these 3 presentations you see here that's really powerful presentations, that has been taking place. And we have also been able to get further on with our Registry Study on Slide 29. So the committee have approved in Switzerland and Germany, our study. So the study is up and running with several centers performing cases and the study is called ReStore, RefluxStop Registry Study. And that will involve many centers and many, many patients, and that will build a platform for proving to the world how good the RefluxStop is. we have several sites lined up. So we have 2 sites in Scandinavia, who is willing to join the study. It's Ersta Hospital and Sundsvall Sjukhus and they have also filed for at committed. We have a couple of sites in Germany who has committed in Austria, in Switzerland and also it's upcoming in Italy as well. We are also been successful in publishing our very important cost-effectiveness analysis that was made of University of York. So actually, probably the most reputed magazine for this type of information has been publishing our article. And that's, of course, extremely important because this shows that RefluxStop is more cost efficient than our competitors, both the drugs, PPI, medical treatment and the standard of care Fundoplication or other -- Fundoplication procedures and that links the, Magnetic band basically to disclose. So this is really fantastic news, and we are then continuing this hard work to be doing tailor-made analysis of cost effectiveness in every single country basically. So we are focusing now on cost-effective analysis in Sweden, Norway, Switzerland and budget impact analysis has been Italy and Spain. And this can't be underestimated how important this is because today, it's more and more about money. It's not always about having the best treatment. So we have also successfully completed now our ISO 13485 and MDSAP recertifications, and we are waiting for the final and MDR approval, which you preliminary stopped as well from his old of the clinical side left. And regarding market access, as you know, we have a complete, very high professional team working on all the 3 cornerstones to achieve reimbursement. That means someone needs to pay for the product. So when we get approved to sell in Europe, it sounds really nice. The problem is that insurance companies or if it's from the government, governmental bodies need to pay for the device as well. So you can have a small business based on private pay, but to really unlock the huge potential that RefluxStop has, we actually need to create this reimbursement process. And this is an admin process. It's not so much if you get reimbursement or not, it's more about when you will get reimbursement. And of course, the pandemic has made life for a little bit more complicated, people hold on to [indiscernible] a little bit more and NHS in U.K., for example, having health care in U.K., they are more or less bankrupt and lots of restrictions on costs and so on. And that has made this process a little bit longer than it normally should have been but we are very, very far and we are continuing with high speed with a really professional team to do this. And it's all about the cost-effectiveness analysis I talked about, which one team is doing, and it's about the clinical evidence. As you can see, it's more and more articles were coming up. It could be 10 to 20 articles already this year coming up with data from RefluxStop. And of course, we need to expand the market both new markets and within the existing markets, of course, to get more data to present. So here, you can see a little bit how it looks in the different markets. So we have started now in -- try some countries, most of the important market actually in Europe, we are focusing on. And then we are targeting to expand to France, United States, Canada and Japan. And of course, the FDA approval is key and the final FDA submission is targeted to be filed this year. And U.S. is, of course, a very, very important market. And it's also important because FDA, they look not only our clinical trial data, they want to know every single complication that has happened all over the world in any case. And that means we have been focusing our efforts on high-quality centers, centers that is sort of excellence, centers of excellence with really key opinion leaders and in the stage we are not trial, we are not selling to anyone. We select our customers very, very carefully. So we only get top class KOLs, key opinion leaders. And these is then bringing the product forward so we can get a massive number of publications and high-quality data, outstanding data, then the product could further expand to midsized hospitals and other parts of the world that we are not selling for the moment, like Middle East, for example. So this is a process. We have a very defined plan. It's a very good plan. It doesn't go in the coffee break, but the end result may be exceptional. You can see here a little bit how this process is going on Slide 38, where you basically need to develop all these KOLs, you need to train them, you need to ensure patient satisfaction and you need to reach out to the patients on social media. And you need to reach out to the doctors to send the patients as well. So they understand that [indiscernible] exists a product that actually works and then you need to get your reimbursement, you need to get someone to pay for the product. And then the business will really take off. And with 1 billion sufferers, you can imagine that when this stages reach, it will be quite a substantial business. So please, welcome to you on the journey. Implantica also have some pipeline products. We are working continuously on our pipeline products. Due to the pandemic, we moved a few of the resources to RefluxStop and we have a little bit reduced capacity for the other products, but they are still steadily going forward towards market launch. And I just wanted to mention a couple of really, really interesting products, and we are now on Slide 40. And this is a product that sort of is like humanitarian products. This is products that could be fast tracked in the U.S. based on that, there is no alternatives, and it's actually making people's life quite different. So the first thing is people who has a stoma bag. They have actually probably taking away part of the intestine. It could be some kind of disease or ulcerative colitis or cancer or something, and let's say, they take the small intestine -- the large intestine is gone, and they move a small intestine out through the abdominal wall, and they collect the fecal matter in a plastic bag. And the business just for plastic bags and the self-adhesive little plate that you place this plastic bag on is $3 billion. So we talk about enormous amount of money just for plastic bags. And these people don't need that anymore because we have developed a specific unique closing system for the intestine and we make reservoir and we make emptying of the reservoir on command. And we can connect to [indiscernible] again, people could be normal again. And that I can tell you, we get so many inquiries. It's more -- although for a moment, investors like to write to us because the share price has not been so optimal but this is the top of the line e-mail we get is about this product. And I mean everyone who has such a stoma would like to have such a product. So this is something we are really working on. We also have a similar humanitarian type of device for people who can't urinate. They maybe have a spinal cord injury, it could be some kind of accident or could have a multiple sclerosis disease. So their bladder doesn't function, and they put in a catheter in their own bladder, 5x per day. Every time they need to urinate they put in a catheter that you can see on Slide 41 here. And this is a burdensome life. I mean, Stephan Siegenthaler and myself, we visit the hospital here in Switzerland, is a hospital who is only for young people with spinal cord injury. And it's enormous hospital. So it's 100 million people worldwide, we talk about here. And we have then created a system so we can empty the bladder from inside the body. You can have a remote control and empty your bladder and every single one of these patients would do anything on us to get such a device. And I'm sure we can get a very fast track approval on this device in U.S. here. So we have a few really top-top interesting product. And it's just we had a little [indiscernible] between who has delayed as a bit. Implantica has a potential that it's hard to beat, I would say. So then I wanted to give the word over to our CFO, Andreas Ohrnberg to talk a bit about the finances.

Thank you very much, Peter. Good afternoon or good morning. We should now be on Slide 43. Figures on this slide are expressed in euro thousands. We reported net sales of EUR 307,000 for the quarter, an increase of 55% compared to Q1 2022. We are currently solely marketing our lead product RefluxStop, and only selectively engaging with key opinion leaders to build a strong reimbursement platform, this to lay the foundation for a broad commercial scale-up. Moving to gross margin. The gross margin levels we see the business delivering are highly attractive. The high gross margin can be explained by the RefluxStop characteristics. We produce a very simple product where we sell best-in-class patient outcomes. Adjusted gross margin for the quarter amounted to 95%, which is flat year-on-year. The combination of an exceptional gross margin, no limitation to scaling RefluxStop production, underpins the opportunity to generate future long-term profitable growth and free cash flows. Our quarterly operating loss expanded to EUR 4.9 million, up from EUR 4.4 million Q1 2022. The year-on-year OpEx increase reflects the continued investment into building commercial capabilities with a focus on market access. We are committed to invest in the commercial platform that will allow us to address the reflux treatment gap at scale. Please turn to Slide 44. We are fortunate to have a very solid financial position. End of March, we held EUR 102 million of cash, and we do not carry any interest-bearing debt on our books. Let us turn to Slide 45. In addition to our CEO, founder, and main shareholder, Dr. Peter Forsell, our investor base is dominated by Swedish and Swiss high-quality institutions. We are grateful for the trust and support we're receiving to build the commercial organization to address a huge unmet patient need. Back to you, Peter.

Thank you. Yes. Basically, this was the end of the slide presentation, I just wanted to show you that Implantica has been selected as 1 of the 50 Most Admired Companies to watch for 2023 by CIO Bulletin. And with that, I give over for any questions.

[Operator Instructions] Our first question will come from Christian Lee with Pareto Securities. You may now go ahead.

I have a couple of questions, please. Could you please give us an update regarding your discussions with the FDA. Are there any further supplements acquired? And what are the data points they are looking for? And do you still believe you could file the PMA submission before the year-end?

Yes, I believe we should file for year-end. More people need to understand that an application to FDA, that's like a roll of paper if it would have been in the good old days. Now everything is digital, but it's still quite substantial work and therefore, you can't -- for 100% predict exact day, you will be able to do this. But we would be very disappointed if we can't file this year. And that's absolutely what we are working for. And with the FDA, we could have probably maybe filed earlier for FDA, but we also, when you do this big application, you want to clear questions with FDA. So if you have done your package or by a comparability in a certain way, you asked them in advance in the pre-submission supplement and say, do you think our comorbidity test is good here or we have then this bench testing here, this package of bench testing, do you think this is okay. And by doing that and getting this answer in advance, if it's something that is then not correct, you have the chance to redo some test or correct or do take some kind of action. And therefore, our consultant judge that you gain time, even if FDA takes 3 months to answer, it's still valid to do that route to clear all the different issues. And that's what we have been doing. But it looks very good. And as you know, that the FDA, accept our European trial is an absolutely unique decision. I mean it's -- that they accept 50 patients operated in Europe when they want 100 patients operated in U.S. that's totally unique. And for example, I can mention we were at an American Congress here in Chicago, just recently now. And then one of the FDA people come up to the booth and talk to Juanita, our marketing responsible person, and she said, oh reflux, Peter Forsell, I remember, this was a fantastic product. We have been waiting for your application. And so FDA is really positive to our device.

Okay. Great. And the latest round of discussions with FDA, did they request for any more clearance of any issues?

So we are waiting now for the last questions from FDA. So it will take still some time before we know the final outcome if we need to do anything more or not.

Okay. Excellent. And on the theme of the U.S. market launch, have you started to work with the KOLs in the U.S. beside those you are already working with in Europe as part of your market access strategy.

Absolutely. Because we have quite a few U.S. employees by now. We have [indiscernible] market access expert. We have Juanita, the payer advocacy expert. So we are -- we have been running around and this has been key European doctors, holding speeches in U.S. at different conferences. And we have been doing quite a good market in Europe overall. So [indiscernible] Professor Lipham who is maybe the most respected surgeon in this treatment area in the world, so a fantastic experienced surgeon, he was the President of the American Foregut Society, the association who handles this type of surgeries in United States. And so he says to us, I have every week, people coming wanting RefluxStop to my center. And this already, we have just started, so to say, has been an explosion in knowledge about RefluxStop. Every seems to understand that this is the new upcoming treatment, and both patients and surgeons realize this and the surgeons are eagerly waiting that we should be able to launch this in United States.

And my third question, you -- I know that you're planning to start a randomized control trial in the summer, just to access front. How many patients do you hope to include in this trial? And when do you think you can publish the data?

This is, of course, a very good question, however, not fully so easy to answer. So when you do a randomized trial, it's all about showing statistical significance. So when you compare with the standard care of treatment, we must be able to select so many patients that is needed to show that we statistically are a superior product. And that's what we have been working on -- otherwise, we are ready to launch actually maybe even 2 randomized trials. So that will happen in the near term. And I would guess the first data collection point will be 8 months where you sort of compare the 2 products. And then the study maybe will go on, let's say, to 2 years as a randomized trial to compare again. And then, of course, the study will go on for longer and maybe up to 5 years. But the randomized trial will be -- the endpoint will be the 6 months and the 2 years and 1 year.