Implantica AG (IMPASDB) Earnings Call Transcript & Summary

Welcome to the Implantica Q4 2023 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Peter Forsell; CFO, Andreas Öhrnberg; and IR, Nicole Pehrsson. Please go ahead.

Thank you. This is Peter Forsell speaking. I hope you all see the slides. And as you know, Implantica is all about bringing advanced technology into the body. And for eventual new listeners, I'm surgeon and also the inventor of most of the products we have in this company and I've invested lots of money in Implantica as well based on the previous gastric band business we sold to Johnson and Johnson. So I will start to give you a little bit overview of Implantica shortly, and then we'll go to the business update. So Implantica has developed an eHealth and wireless energizing platform. And that is something that will build a platform for many different smart medical implants. So you will be able to communicate with the implant and the doctor can sit at the hospital and look how it's going with the treatment. And the key here, change treatment on distance. So the doctor could adjust the treatment without the doctor visiting the hospitals all the time, which open up the possibility to much nicer, very sophisticated implants. And to do that, you need more power, and therefore, we have developed this by this energizing platform. And with this platforms, we will save cost for society. It's not needed to be as much going to the hospital all the time. And the patient will then be able to power their implant at home, maybe they take 5 minutes per day and power their implant for the future, so to say. And based on that, we have made many inventions. We have actually nearly 2,000 patent cases, and we have more than 300 inventions. We have been selected 40 of them after market analysis, product analysis and prototyping. So if we get going with RefluxStop, we hope that we should be able to place product out the product on the market in the future. So our vision is to become the world leader in smart medical implants. Our main product called RefluxStop is what we hope to say a jackpot product. And RefluxStop as the name says is to treat acid reflux. And it's actually a very, very large treatment area, it's 1 billion people who has acid reflux. And it's 1 billion people who take drug treatment every year. Here, you see the little device and the introduction instrument. And it's not so easy to find treatment fields where you have 1 billion sufferers and it's not only that, it actually 40% of the sufferers are not well treated by drugs. They are simply not independent that the drugs have lots of side effects and that it's dangerous to eat the drugs for the rest of your life, still 40% are not treated. So that means you have 400 million untreated patients, which is huge, huge treatment area. So existing treatments today, they have been focusing on to avoid acid coming up from the stomach into esophagus that you try to compress the food passageway. You simply try to support the closing to keep it close. So everything in the stomach stays in the stomach. The problem is that this, of course, cause problems with your food passage way. You get swallowing problems, you can't belch, you can't vomit, you get gas bloating. And this is among other side effects you get with these surgeries. And the patients and the medical doctors are not particularly fond of this type of surgeries and therefore, surgery has gone down over the years. And RefluxStop instead treats the cause of acid reflux. We find out why you get acid reflux. And the answer to simplify is that the muscle sphincter that closed between the stomach and esophagus is called lower esophagus sphincter or LES that is not weak. You don't need to support it at all. It's all about the position of the sphincter. The sphincter is coming close to the diaphragm, where it's leaking out pressure for your breathing. You can imagine you're breathing in and out, in and out, it's coming and going, pressure coming and going. And this terrorized your poor little sphincter, your LES. So it can't close anymore. But if you just get it far down away from the diaphragm, suddenly, you have no problem anymore and people are treated. And here, you can see a little bit how it looks like in real life. So to the left, you have an x-ray where you see the device sitting close to the diaphragm. And it's sort of bringing down your stomach and it's sitting way down in abdomen and you see on the right how it's sitting here on the inside when you take a view with the gastroscope, endoscope after surgery. And it works fantastically well. And why is now this so important to suddenly find a treatment that actually helps, a treatment without all the side effects. And the answer is that people get cancer. When you have this acid coming up in your lower esophagus, it's terrorising tissue. The acid is like burning, you've got small ulcers, you get red inflammation in your lower esophagus. And this happens over and over and over again. 48,000 people die in esophageal adenocarcinoma only in Europe or United States. 48,000 people. If you look how they treat breast cancer, for example, [indiscernible] is made to find and save breast cancer lives. Here, we let 48,000 people just die. This has to change. Now we have a treatment. These people don't need to die, it needs to change, and it will change. So that's the background. Let's continue with the business update. So as I've showed you before, it's 3 pillars we are working on to try to create success with RefluxStop. And we are working very hard on all areas. And let's start a little bit with the easy 1 near patient demand and market growth. We are trying to raise the awareness, of course, about this product. And here, you can see nice picture from my perspective, it's nearly 2,000 surgeons who saw a live surgery with RefluxStop. And it was streamed by more than 100,000 people online and nearly 90,000 international viewers saw Professor Bona performing a RefluxStop surgery, and it was moderated by Professor Bonavina, who is the President of European Forward Society. He is the most well-respected surgeon in Europe, maybe as the Chief of the organization for this disease. And we also have some good news that we have won the first ever public tender for RefluxStop in Italy. So this means that the public hospital Ospedale Santa Croce, I don't know. I'm not so good in this pronunciation, so sorry for that. But anyhow, Dr. Gabriele Pozzo has won a 3-year public tender, but the public healthcare system will pay full list price, EUR 5,900 for the RefluxStop device. And this is maybe not the hugest tender. It was only 30 products, but this is a key milestone because this will pave the way for wider reimbursement approvals, both in Italy and also expanding to other countries. This paves the way that the healthcare, public healthcare system is starting to accept that RefluxStop is something that needs to be paid for. So this is actually a great, great achievement here and it's the starting point. And we have 9 centers added since beginning of Q4. So we have now 24 centers of excellence performing RefluxStop surgery in total. We are only focusing on absolutely top class centers, really focusing on this treatment because we need fantastic results. We need professional surgeons and that's what we are selecting step by step here. So here you see another center in Italy. It's actually the center who won this tender, who has started to operate in Italy. And we have another center here in Italy from Dr. Maurizio Pavanello and they have also started to operate in Italy. We have started in Sweden, Ersta Hospital, Professor Bengt Håkansson. They started to do 3 surgeries as well, and this is going really well, really well. Surgery is done. We have in Norway, Dr. Lars Eftang and Dr. Robin Gaupset, actually both surgeons has been trained, so both surgeons performed a number of surgeries. And they have also already joined our study, the register study we have in Norway, and we are very enthusiastic and positive to the new treatment. We have in Germany, another hospital in Berlin, Dr. Björn Siemssen. He is actually one of the top surgeons in Germany as well. We also have in Munich, Professor, Thomas Mussack. And they have also started to perform surgeries with RefluxStop. We have in Spain, Dr. Pablo Priego, who also has performed new surgeries. We have another center in Spain, Dr. Carlos Moreno. And you see all these nice pictures here, folk is very focused. And we have another center in Spain, in Madrid, Dr. Daniel Sanchez. And it's spreading both in Italy and Spain, good [ remorse ] about RefluxStop everywhere, and it's talking point. And in total, we have now operated more than 650 patients, and we have up to 6 years experience today. And here, you see a little bit the countries we are working in. So we have most of the key European markets getting started. And we are also making more marketing campaigns. So for example, in U.K., where we now, as you know, we're launching 2 NHS hospitals. We have done a marketing campaign, and we have been able to get really good press from Sky News, SAGA, Daily Mirror, Daily Express and Reader's Digest and especially Sky News, they were visiting a procedure, recording and it was really a big event. So it's Professor Ahmed Ahmed, who presented a procedure, and it was an interview with him and the patient, and it was the one very professional. So we are really creating interest, which makes it easier for the surgeons to put pressure on NHS. As you know, NHS today are being -- are doing and what you call it like our research for RefluxStop to see if they should pay you what they should do with RefluxStop here. So we are under the investigation by NHS for the moment. And of course, the more news and patient pressure we can get the better it is. So also, we have training of U.S. surgeons. So we are doing a Cadaver Usability study in Chicago, so it's 15 to 20 U.S. surgeons that should do this Cadaver study and they need to be trained according to our standardized training program, and that's what is happening right now. And this is actually end of February, we will have this. We are flying over 4 proctors from Europe, and we are having 4 days event with U.S. surgeon to train them, which, of course, is not -- of course, it's for FDA's requirement because they require that we made this, but it's also very good for us because that means we will have 20 trained centers where we're very quickly can get started with our procedure when we finally get our U.S. approval. So let's go on to superior clinical evidence, which is the other of the three key pillars. You really need to show that clinically RefluxStop works really well. You need to have more articles, more research, and we have submitted now our Nissen RCT as our randomized protocol for the new study we are starting, and it will be spread to Switzerland, Germany, Italy, Spain and U.K., which means you basically use the lottery to decide, should people get RefluxStop or should get Nissen fundoplication. And based on the lottery principle, you can very carefully compare and see that RefluxStop is superior. We had our annual RefluxStop user meeting, which actually was this quarter, although we already presented it at the end of last quarter. We had more than 50 participants coming to learn about RefluxStop, meet other users, exchange experience and it was a fantastic event made in combination with the European Foregut Society Annual Meeting. Here, you can see that in this EFS meeting, we had a major success with RefluxStop. In this case, you see here, this is a panel discussing RefluxStop during the meeting, and they are showing their different results. And it was led by -- moderated by University, Professor Dr. Schoppmann from Vienna. And fantastic meeting for RefluxStop. And it's also lots of articles publishing. It's one of them is an article, but large hernia repair because large hernia is a bit more tricky. People who have larger hernia or [ mag bråck ] in Swedish, they have less good results today. They could have up to 30% to 50% failure rate. And that's why RefluxStop is so important for this group, which was showed very successfully here in this study, which means we can have an increased amount of these kind of patients operated with RefluxStop. It's around 1/3 of the patients have these large hernia. And here, you can see a little bit how we are working. We have a complete team of 7 people doing nothing else than supporting statistical analysis, support writing, preparing abstracts as it's lots of effort behind 45 conference abstracts submitted in 1 year. We have 29 oral and poster presentations and we have 11 accepted abstracts in leading conferences. We have 15 manuscripts published or under submission. We are working really hard. This is like a snowball standing at the top of the mountain. We are expanding the clinical evidence exponentially. And we are also doing these studies that we have, the registry studies, the RCT studies, and lots of centers are joining. IIT studies as own studies, they do at their center. Everything to really show that RefluxStop is the best. And to show you really how successful we are, there is a congress called SAGES. This actually is the world-leading congress. It's 2,500 visitors, approximately from more than 100 countries. And we have 7 scientific data presentations and abstracts accepted for RefluxStop at this Congress. So it's going really well for us to show that RefluxStop is good choice here. Then we come to the last pillar to really convince the surgical societies, insurance companies so that they should really pay for this product because when we finally get someone to pay, you will see a substantial takeoff of this business. And this is now the cost effectiveness. In today's climate, everybody holds on to their money, and it's really important to show that we have -- it's more benefit per money with RefluxStop with -- than with anything else. And this, we have actually been able to prove, is research done by University of York's Health Economic Consortium, and they are specialists in health economics. They have developed fantastic formula. I'm not a specialist in this, but it's very sophisticated in many, many parameters. And they have been doing a validation of all treatment of acid reflux in terms of fundoplication, LINX, the magnetic band and PPI use. And they found that the most cost-effective treatment of them all is RefluxStop. And this article has been published in one of the most leading journal of medical economics, Journal of Medical Economics is the name. And this is really a landmark. This is what the payers will look like and see, okay, we save money by operating with the RefluxStop. And we are doing the same. This was a U.K. study. We are doing in all these different countries. You see the dice flags here to show in country-by-country that RefluxStop is the most effective treatment you can get. And I can show you here that our cost-effective analysis in Sweden which was presented at ISPOR. This is the one of the absolute largest congresses for payers, for healthcare bodies, for insurance companies. They go to this congress, and we presented the Swedish cost effective this data. And we were selected in the category top 5% poster category because of the high scientific quality. We talk about top, top class research, and this is what we get acknowledged for here. So we have several studies well published and upcoming and it's not only that we are most cost-effective. You also analyze the budget impact. So let's say, you have the best treatment, most cost effective. You will -- long term, you will be the cheapest alternative operator RefluxStop because we have much less complications, but they also looked at the budget impact. What will it cost society to operate? And the conclusion is that it has a marginal effect also on the budget because it's -- you save so much cost in terms of complications. This has also been published. I think this is for U.K. now published in Journal of Health Economics. So then we come to capital market and finances, and it will be a pleasure to give the world to our CFO, Andreas Öhrnberg.

Many thanks, Peter. Good afternoon or good morning also from my side. Let me share the financial review for Q4 2023. And we should now be on the profit and loss slide. We reported net sales of EUR 508,000 for Q4, corresponding to an increase of 110% compared to the same period last year. As discussed in earlier earnings calls, we're currently only partnering with key opinion leaders to build a strong reimbursement platform. Adjusted gross margin for Q4 amounted to 92%, a decrease from 96% same period last year. Period-to-period gross margin fluctuations are anticipated. This provided the subscale operations. We expect RefluxStop to continue to deliver exceptional gross margins, thanks to the simplicity of the product, best-in-class patient outcomes and strong IP. Our Q4 operating loss amounted to EUR 6.9 million, which is 36% higher than the same period last year. The significant year-on-year movement reflects 3 drivers: significant investments in the resourcing and finalizing tests related to the PMA submission, incremental investments into market access activities and an increased ratio of total R&D costs being expensed in the period rather than capitalized. Now let's move to the next slide, please. We have a solid financial position. End of 2023, we held approximately EUR 88 million of cash. Over 2023, we had a net cash outflow of EUR 21 million, also considering FX movements. We do not carry any interest-bearing debt on our books. The strong balance sheet allows us to remain focused on building the reimbursement platform to enable profitable growth and provide the best treatment to patients. Now let's move to the next slide, please. In addition to management colleagues, including our founder and main shareholder, Dr. Peter Forsell, our investor base is dominated by Swedish and Swiss high-quality institutions. And we are very grateful for the trust and support our investors provide us to address a huge unmet patient need. Let me hand it back to you, Peter.

Thank you. So in summary, you can say that it goes extremely well for RefluxStop. We have basically been able to convince the surgical society that RefluxStop is the best treatment. And that RefluxStop will be the upcoming, yes, call it standard of care treatment in this area. So it's going extremely well. We are building step-by-step all that documentation you need to convince the payers to also pay or reimburse the device. And you can see that we have the first successful tender win in Italy, where actually the public healthcare system is paying for the product with full price. So we are very optimistic for the moment. It's going very well. And it's just to conclude that reimbursement processes is time consuming. And maybe it's a little bit more time-consuming today when it was yesterday. But that's just to that and working hard and step-by-step convenience, more and more payers to pay for this device. So then we come to questions and answers.

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

So a few questions from my side. So I can see from this quarter, your operating cost increased quite a bit, mainly due to the increased market access and preparation for U.S. submission. Can we expect the cost to increase further in the upcoming quarters? Or do you rather have estimated at the same level?

So it's been lots of extra costs related to the filing in U.S. And we have prepared a new tool to produce the product in U.S. and lots of activities relating to that. That's more like onetime costs. So we hope there will be a little bit delay, of course, here with cost. So the coming quarter, maybe will still continue to increase, but then we hope that we should get the opposite and try to reduce the cost. We have some extra costs also with these studies. So the [ RCP ] studies will cost a little bit of money that will -- and we will try to balance that extra cost with overall cost savings.

Okay. And the next question, so you report -- so Q4 650 patients are operated with RefluxStop, but in Q3, it's 600 patients, but assuming like there's only 50 more operations you have performed in Q4? And what's the reason? Is it because of the Christmas season?

Yes, of course, people are not so happy to get operated just before Christmas. So normally, in December, surgeries go down. That's little bit standard. So you have to compare quarter by quarter, so to say, to see. And you saw it had increased 110% if you compare the same quarter before. But as you know, we have many centers today. We have [indiscernible] and they do 300 surgeries in reflux, we have Frankfurt they do 250. But they can't do this with RefluxStop because they don't get paid. They take all the resources they could find to give RefluxStop to their patients, but they maybe do 1/6 of their patients or so, they can do RefluxStop because it's not paid yet. But -- so the potential only these 25 centers we have will create a substantial increase as soon as we get paid. That's -- so this is what we are working on now. All our focus is the U.S. approval and get reimbursed. That's the main target. And we could sell a lot to many areas, but we are not -- we are focusing for the moment only on centers of excellence. FDA, for example, they want us to present all the data we have worldwide. We need to have top class data, we cannot risk doing anything else than only selling to centers of excellence. So revenue is not what you should count the company on right now. That's not the right parameter. It's other parameters. How is it going with our reimbursement process, how it's going to build the clinical evidence. However, we're convincing the surgical society. How do we show that we have the most health economic successful product. This is the kind of things that you should measure on because that will build a platform for a substantial growth of this business when we get reimbursed.

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

Yes. So maybe we can answer some. We have got a few written questions here as well. And of course, many ask about the FDA application when it will be filed, when it will be approved and so on. And we have actually written to FDA and asked them if we can file in the first module of the FDA application in March. So we are asking for timing 3 modules at 3 different time points. And we asked if we can file the first module then in March, and we are waiting for FDA's response. It could be that they don't like this modular approach. We don't know. But -- for the moment, we are just waiting to see if they accept that approach. And as you know, FDA is handling time, it's no one could say because it depends. If we have the most well-prepared fantastic application that we hope we have, then the handling time will, of course, go quicker if they find weaknesses, maybe things need to be repaired, things need to be rewritten, test need to be redone. You can't absolutely not say. The only we could say is that it used to be 10 to 12 months average handling time for full PMA application. But there is just guidelines. It's not anything that has any value in the individual case. The only thing you can say is that we are filing with a Swedish study of 50 patients. And normally, you do 100 patients based on a U.S. study, and that means that if they likely has understood how superior this treatment is. They have seen the fantastic results. And hopefully, they are positive to this product to reaching the U.S. market as early as possible. This is all hopes. What do we more have for questions here. The 5-year study day, someone asked here, and yes, we are going to present the 5-year results that will be presented in the press release, but I can already now say that the 5-year results is absolutely remarkable. It is going very, very well for our patient. And there is no treatment that comes even close to the results we present. So absolutely fantastic. And what else do we have here in the question, what does it say here is so small everything here? That was also about the FDA. FDA is a popular question, FDA -- 4 FDA questions. What is the current largest competing technology? So the competing technology in terms of implants, that's this magnetic band, the LINX sell by Johnson & Johnson. This is our main device competitor. But the main competitor otherwise is something called fundoplication. You use no implants, you just suture the stomach through esophagus. Then we have -- how will you roll out the sales in U.S.? Yes, that's a really good question, and that's what we are working on right now to prepare and set the strategy and so on. And it's -- I can't say for the moment. But of course, that's one of our main focuses right now is the U.S. market. Then someone asking about other markets, Japan, Canada, France. In France, we have the meeting with HAS, they are called in France to try to get them to pay for our randomized trial. We had a very successful meeting with Professor Bona, and we will file there to see if they would be willing to join and pay for this study, is something called [Foreign Language] where you basically advance technology, they support economically. So that's under process, and we will soon file in France for that. Someone is asking about the selling price for RefluxStop in U.S. And you can say, generally, the price is much higher in U.S. It will be the same in our case. It's not 100% defined the price yet. How many more reflux surgeries planned in Sweden. We have to talk to Ersta about this, I can't answer that question, but they have started to make their first 3 surgeries and everything is going well, and they were really excellent surgeons there in Sweden. How many failed surgeries? It's very few failed surgeries. I would say maybe we have the magnitude of 1% reoperations or something like that. And this is mainly because the surgery is not top of the line done, so to say. People make mistakes sometimes in the learning curve in the beginning. I think that I have answered all questions if I have seen them all, they are quite small texts, I'm sorry for that. But yes, we thank you very, very much for listening, and I can assure you that it's going well for us, and thank you for taking the time, and thank you for supporting us, and have a really good day.