Implantica AG (IMPASDB) Earnings Call Transcript & Summary

Welcome to the Implantica Q2 2023 Earnings Call. [Operator Instructions]. Now I will hand the conference over to the speakers CEO, Peter Forsell; CFO, Andreas Öhrnberg; and IR, Nicole Pehrsson.

Good afternoon. This is Peter Forsell speaking. And the Implantica, as you know, are bringing advanced technology into the body. And we -- our previous business, the gastric band business, we were actually able to give our investor jackpot ticket for the investment, and we hope to be able to do the same with Implantica. And to give you a little short introduction, if we have any new listeners our business and strategic priorities for 2023 is first of all, to do the MDR update, and that has been filed, and we are in a process to get the documentation that everything is fine. And regarding FDA, we have worked with FDA back and forth, and we have got some last feedback in August. So we are now updating the last issues to be able to file. And in terms of market access, I will go through that further down in the presentation. And we are also starting studies both registry and RCT studies, and of course, we are continuing with our eHealth platform and R&D development. And eHealth is, of course, the main focus for Implantica because we have developed our nice eHealth strategy. And with this platform, we'll be able to sell -- save cost for society, and you will be able to treat people on distance. They didn't need to come to the hospital all the time. And that will be a fantastic improvement of health care, I would say, revolution of health care. And what we have been doing lately is that we have been integrating our new stimulation system in our eHealth platform. And I will come to the stimulation system a little bit later, but that will be used in several of our products. So it's a great achievement that is an ongoing work for the moment. Also, I cannot avoid, although everybody probably has seen this slide many times before, but just to show you that we have many patents. We have a huge pipeline of products. We actually have gone through more than 300 invention and have more than 40 selected inventions pipeline products. So that's a platform you get when you invest in Implantica. And then we have RefluxStop who actually treats the cause of acid reflux. And if you go to Slide 10, you will then be able to see have RefluxStop actually treats the course of acid reflux. So in the past, everybody has believed that if you have lots of stomach fluid in your stomach and that should not come up into esophagus and causing heartburn, you need to close the opening. So these previous methods like LINX system and Fundoplication, they all try to close the food passage way. But the problem is that here you should eat and then you get swallowing problems, you can't get nothing up, you can't belch, you can't vomit, you get to called gas bloating because with your saliva, you swallow add all the time and that can't come up anymore and you get distended and bloated in your stomach. So RefluxStop, we find out that we could actually on Slide 14, I am too here now. I think it's a little bit misorder here that with RefluxStop, we can treat acid reflux without affecting the full passage way at all. We avoid all these side effects relating to compressed food passageway. And we do that by just restoring and maintaining the sphincter in its normal position. And then the body treats acid reflux itself. So if I now jump back on Slide 14 again to Slide 11. The biggest problem here with acid reflux is not only that people get pain and it's a burdensome disease as such. But also this acid that comes up in lower sulfur growth that sterilized tissue, and it cause cancer. So we know that 48,000 people die from esophageal adenocarcinoma only in Europe and United States alone. And their drugs doesn't protect you from that cancer risk. It doesn't matter that you take drugs, which solves the symptoms maybe in some cases, but it doesn't solve the cancer risk. And also the drugs have lots of serious complications and long-term complication. They damage your kidney and so on and so on. It's not a nice drug to take for the rest of your life. So that's why we feel that RefluxStop is very, very well suited to enter this marketplace. And actually, RefluxStop is a very safe and very ingenious device, and it has a very, very special market potential. Because it's 1 billion sufferers, now I am at Slide 13, I should be more careful to mention the slide number here. Slide 13, 1 billion people have acid reflux. 1 billion people take PPI every year. And the highest prevalence is in United States with 22% in Europe, 17%. It's an absolutely enormous marketplace. It is just hard to understand how many people we talk about. It's huge, simply. So if we then go to Slide 15, we jump over 14, I talked about before. Then we can say this now all these pipeline and eHealth platforms and so on, and RefluxStop together. That's why we have the vision to become the world leader in smart medical implants. And we strongly, in Implantica, believe that this actually will happen. And I wanted to give you a bit business update, and I will start with the RefluxStop clinical results. And we have 4-year results. And here, you see a questionnaire you used to validate people satisfaction. It's called GERD-HRQL questionnaire. It's a quality of life questionnaire. And you can see then that the score before surgery and at 4 years, has improved from 29.5 to 3.0 median value. That's a fantastic 90% improvement of quality of life. And it's basically standing the same over 4 years. And if you look here, we have a slide for regurgitation in our CE Mark study. And you can see there a little bit stronger blue means completely treated non regurgitation of acid whatsoever. And you see it's absolutely incredible results. And I will give you a little bit update because we are focusing mainly on market access. We don't care so much about anything else. We need to get our product to reach the market and be paid for. That's what it's all about. And I will go back to our nice 3 pillars that we use as our strategy for reimbursement to unlock commercial success. And I will start with superior health economics. That's the first pillar we are talking about here. So in this respect, we have been, I would say, extremely successful. University of York has done their health economic consortium, has done an analysis of RefluxStop and compared it with existing treatments. We have been compared with the standard of care and Nissen Fundoplication of the LINX, epinephrine and PPI drugs. And the conclusion is that RefluxStop provides a better cost benefit. We are -- have a superior cost effectiveness compared to all these other treatments. And this analyzes has been published in maybe the leading paper for this kind of health economics called Journal of Medical Economics, JME. And that really tells you that this is a strong paper we have created here. It's a really strong analysis, and that's absolutely key for RefluxStop going forward and trying to become the new standard of care, a new treatment that everybody should have in this treatment fleet. And we have completed this cost-effectiveness study also in Sweden, Norway, Switzerland, and we have executed manage trips. And also for these countries, we will publish new articles, one for every country. And we have also budget impact analysis and ongoing in Italy and Spain. So this is extremely successful, I would say. Then we have the next pillar, the clinical evidence. Now I am on Slide 23. I need to be improved here to tell you which slide I am. So clinical evidence generation here, Slide 23. And this is then the second important pillar. We need to provide evidence, clinical data that RefluxStop is safe, that it's superior than anything else, and we need to do that at multiple centers, multiple studies all over the world. And so far, we have created a fantastic team for the clinical evidence support. And we have 4 medical doctors in that team, among others and is led by Dr. Sarowar Golam. And so far, we have created 27 abstracts that have been submitted. And 15 have been presented so far. We have 6 articles under peer review. We have another 5 articles on the preparation for this year, and we are strongly and with high speed building the clinical evidence we need. An Ethics Committee has approved our registered study. We have this world European, pan-European study called RESTORE, where we are doing centers all over Europe, and so far, we have got yet the committee approval in Switzerland, Sweden, Germany and Italy. And I will show you a little bit, for example, some of the centers. Here, you have centers that they will join in Switzerland, different timing here. I mean in Inselspital and Hirslanden, they are already ongoing with the process, others are coming on and so on. So it's different states, but all had said they will join or have joined the study here. And we have in Germany, the same and other 4 centers. We have in Sweden, another few centers. We have in Norway, a center where we just now got the Ethic approval as well. We have Austria, U.K. and in U.K., it will be a special expansion. I will show you a little bit later. We have -- I will give you a few examples of both U.K. and Italy going forward. So Italy and Spain as well, we have centers. So it's quite -- will be an impressive study. We are targeting several thousand patients in this study. Here, I just wanted to show you all the activities as is ongoing. This is from April. And you see we have already gone to 12 congresses since April of different importance. Here, you see some of the most important speeches that was told, so called the impact podium presentations also since April going on, different surgeons, different countries, it's burning of activities. Here, you can see Professor Zehetner presenting in Chicago, his results. You can see Borbély presenting in Canada, in SAGES, Big Congress, you can see here, Borbély presented in Switzerland, Zurich, I think it represented a large hernia patients, a special group who has Nogo treatment today. And we have also their overall results they presented at this Congress. So then we move to the last pillar we are working on here, and that's market expansion. So in terms of market expansion, we are, of course, working for Japan, Canada and France, as you know, to try to get forward with reimbursement. Today, I wanted to focus on 2 countries, it's U.K. and U.S. So I will go through those a little bit more detail. And first of all, in U.K., we are now starting up with evaluation process by NHS. So they have something called IPAC, which is an advisory committee that support chanting that called IPAC that is working for NICE, the National Health Service there, to approve and evaluate and give there okay for new technologies. And so far, 6 NHS hospitals have said they wanted to start with RefluxStop. And therefore, NICE now has to do this total approval process. And this is quite influential. U.K. can influence many other countries. So it's quite important that this process gets it right. And you can see here, this is taken from the home page of NICE that they even call it for say RefluxStop procedure here, sounds very nice, actually. So this is already on NICE homepage now and indicating this evaluation process. And here is a little bit what has happened so far. So we have been a meeting with NICE IPAC senior experts and support NHS KOLs to notified NICE about this that they will start, that is done. And we are supporting NICE review team with all the regulatory and quality information. We will train and support the hospitals now who want to start, and we will also support the NICE review team with experience from the KOLs, clinical and economic data, for example, that I've showed you before. And this is now an ongoing process, which will allow us to enter also the NHS hospital. So far, 50% of health care in U.K. is in the prior market, and we have already been in the private market in U.K., but we are now entering also there, the public side, which is another 50%. So if we then move over to FDA, we had the final meeting with FDA in August. We have got answers on our questions. And as you know, the European data has been okay for doing a PMA in U.S. And we are now fulfilling the requirement regarding -- based on the answers we got from FDA in August. We are now working to finalize the application. So we finally could go and file for the PMA. And here is a little bit what we have done to prepare for the launch in U.S. So of course, we are now updating the PMA submission. We have made a clear strategic plan, what needs to be do. And as you know, we have a strong financial strength, and we have a very experienced team. So we will now very quickly bring this forward so we can file finally for approval in U.S. But we have also done several other activities, initiated several market development activities. We are focused on market access and reimbursement. We go to several big conferences in U.S. We build up our network. We are identifying the best-in-class surgeons and RefluxStop centers, and we are doing a lot of other marketing activities, social media and so on. And I dare say that RefluxStop has all the attributes to become the new standard of care. And compared to when we entered the -- we were listed, I would say, we have been able to show that RefluxStop is really a powerful product. And if you want to join the journey, we are preparing the rocket here. So for us, it's looking very, very promising. I will show you some expansions with RefluxStop that we have made so far and here, you see a list of countries we are selling to, and I wanted to focus a little bit on Italy here. So in Italy, we have -- in a very, very short period of time, we've been able to launch our first hospitals in Napoli, our second hospital in Milan and our third hospitals in Milan, our fourth hospitals in Puglia. And now we have hospital 5, 6 and 7, who also wants to start. So which will happen now after holiday season is over. So this is just an example of our successful market. Introduction could go on, although we are only focusing on the top-class centers, the centers of excellence. We are not selling to anyone who is mediocre or half good or we are just selling to the top class centers for the moment because FDA will go through our results worldwide, check everything. We could not afford any kind of problems or not good data. We are using centers of excellence. Our goal is to get paid for the product in the important European markets and in United States. And then I will tell you, you will see an expansion. We also have a center in Germany in Friedrichshafen, who is worth mentioning because he has done 120 RefluxStop in 1 single center, and he is really a believer of our device. And we will have a Capital Market Day in Sweden, the September 26, between 14 and onwards. At least 3, 4 hours, we will go on, and this is at [indiscernible] in Stockholm, we will have this. And Professor Lehmann will come to this meeting for us, and we will have a doctor from [indiscernible] will come as well. So this will be quite exciting Capital Market Day on the 26th of September. So please reserve that day. Also a little bit update on the pipeline is, of course, going on a lot. I mean we are working like crazy on all the different products, and it's so many things. It's just that we don't want to spread around everything to our competitors. And we have a lower profile, but I just wanted to tell you that you heard maybe about RefluxStop 2, where we could be able to use similar product as RefluxStop as an elongated version to treat both obesity and reflux. That's going very well. That will be fast track to the market, and it looks promising, this project. Also, we are working on an electrical stimulation model. So what we are doing right now is that we are integrating the electrical stimulation model into our eHealth platform. And when this is done, this would be fantastic because we can integrate it in several of our products who can use this electrical stimulation system into both the eHealth system, and everything is just an integrated system. And for example, UriRestore patients, who cannot urinate will be used, StomaRestore patients, stoma bags we will use this system. So this is quite exciting and ongoing work. And I can just say that this is an example. Then StomaRestore, I don't know if you remember, but we have a special closure of the intestine for these Stoma patients where we use electrical stimulation. So when you put the closure outside an intestine, it's a very muscular wall in the intestine because it should transport food up and out. And what happens then is that when immobilize it, all the muscle disappears. It's like you put plaster on a broken arm, all your muscles disappear. And when you take the plaster away, you have lots of less muscles. And in this case, we train the muscular wall here with the electrical stimulation system. So we may make a peristaltic way in the opposite of flow, and we train several times per day. And that's a really key feature to build a long-term, well-working device when people get rid of the stoma bag. There is $3 billion spent on plastic bags. I said, $3 billion. I don't know how many money it is. It's just enormous amount of money spent on plastic bags for these poor patients. It's around 1 million procedures every year. So it's a huge shipment field also this. So just to mention a few of the awards we have been receiving. So actually, Medtop Award we received and they selected RefluxStop as the most innovative medical device of all. They have so many medical device products to select from, but they selected RefluxStop, very simple device comparable as the most breakthrough innovative medical device. Quite achieving. And also, myself and Implantica has won an award for 2023 of the 10 best CEOs to watch. I guess they have not looked at the share price, but we have a fantastic portfolio in Implantica, as you know. And we have a clear vision, clear strategy and everything is going very well for us. So finally, then we reached the capital market and finances, and I think it's time for our CFO, Andreas Öhrnberg to take over.

Thank you very much, Peter. Good afternoon, or good morning. Let's go through some selected financial highlights for the quarter, starting with the P&L on Page 61. We reported net sales of EUR 349,000 for the second quarter 2023, an increase of 69% compared to the same period last year. Growth is driven by both new hospitals and by increased penetration of existing hospitals. As a reminder, we are currently sold only marketing our lead product RefluxStop, and only, as Peter mentioned, selectively partnering with key opinion leaders to build a strong reimbursement platform. The business continues to deliver exceptional gross margins. We just discussed in earlier calls is being explained by the combination of a simple product, which delivers best-in-class patient outcomes and is protected by a large moat, thanks to the IP. Adjusted gross margin for the second quarter 2023 amounted to 94%, 3 points lower than the same period last year. Given the current subscale nature of the operation, we expect to continue to see period-to-period margin volatility. Our second quarter operating loss decreased to EUR 4.3 million, which is 2% lower than Q2 2022. The operating loss reflects investment into building commercial capabilities in line with plan with a focus on market access as well as continued investments in our disruptive product pipeline. We are committed to continue to invest in the commercial platform, which will allow us to address the reflux treatment gap at scale. Let's turn to Slide 62. We are fortunate to have a very solid financial position. End of June 2023, we had EUR 98 million of cash. We do not carry any interest in bearing debt on our books. The strong balance sheet allows us to remain focused on building the reimbursement platform to enable profitable growth and continue to invest in our disruptive product pipeline. Let's turn to Slide 63. 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 are receiving to build the commercial organization to address a huge unmet patient need. With that, I would like to hand it back to you, Peter.

Thank you. So I guess we have reached question and answers.

[Operator Instructions] The next question comes from Christian Lee from Pareto Securities.

You disclosed in the report that over 500 patients in Europe have been treated with RefluxStop by the end of Q2, and could you please give us a sense of how many of those have been treated during the first 6 months of this year?

Let's very quickly answer that question. I don't have it just in my head, but see -- was it 145, was that this quarter? Was it...

Yes, yes, 145.

I think it was 145 the last quarter. So it's 145 last half year, okay? Yes, 145 in the first half year.

Okay. Great. It was also good to hear that you are actively preparing the U.S. market introduction and you are currently updating your PMA submission based on the feedback you received from the latest meeting with the FDA. Would it be possible to discuss what kind of feedback you have received and if you feel confident about solving these issues before year-end?

So we have basically asked questions in many different areas because we don't want any surprises that the FDA puts up and are not happy with what we have done. So we have asked them about everything from the usability study. And there, they were completely happy what we are preparing, and they're okay, bit about the clinical side. They were happy with what we said about the clinical side. We have asked about all the testing, biocompatibility testing and FDA wanted us to complete a few more of these tests, which we will do. And we asked them about -- yes, I mean in reality, we went through everything. We asked them if they would be okay with the large hernia patients that we'll be able to operate here in Europe now and so on. And many different aspects. But all in all, you can say FDA's answers created some work, and that, of course, we need to start now. But it's -- we don't see any main hurdles, and we still see that we should be able to file before year-end.

Again, that's great. And my final question before we jump back to the queue. I know that the EMR clinical trial is sufficient to file the PMA, but do you see any need to make a randomized trial in the U.S. to facilitate the higher reimbursement level?

We will, of course, as soon as we reach the U.S. market, we will do trials also in U.S. that just increase our power and strength, so to say. So yes, we will start. But of course, we sell in parallel, and we build up the sales in parallel. And as you know, in the United States, it's a little bit easier to build up sales although you not have full reimbursement everywhere yet. In Europe, it is more strict and it's more complicated to create sales before the health care bodies, insurance companies on before they pay for the product. So it's a strange system where you are allowed to sell, we can sell everywhere, but they don't pay. And that's, of course, creating a problem for the hospitals because they need to get their money from either insurance companies or health care organization in each country, and if they don't get paid, they can't do the procedure. So that's why we are doing all these things. That's why you see the 3 pillars, how we are working with the clinical evidence, and we're working with health economics, that's all about convincing in every country, the health care bodies that this product should, of course, be paid for. And then it's like night and day. It's -- yes.

[Operator Instructions] There are no more questions on the teleconference at this time. So I hand the conference back to the speakers for any closing comments.

Okay. So yes, I just wanted to say thank you very much for everybody listening, and looking forward to see on the Capital Market Day when we more in detail, we'll go through what we are doing, and how well it's going for us. Thank you very much. Have a good day.