Implantica AG (IMPASDB) Earnings Call Transcript & Summary

Welcome to the Implantica Q3 2024 Earnings Call. [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.

Good afternoon, everybody. This is Peter Forsell speaking. And I will try to give you a little bit update. Of what is going on in Implantica. I will start with company overview. It's for the new listeners and it may be a little bit boring those who have heard this before. But I will go quickly through. So myself, I'm a surgeon and I'm also inventor of most of the devices we have in Implantica. And this is the second business journey. We also developed a business with the adjustable gastric band where we took 28% of the obesity market outside U.S. And Implantica has a very interesting developed eHealth platform. And this is a platform where you'll be able to treat people from distance and the focus will be from inside the body. So we will have a very nice miniaturized technology where you can control and replace different bodily functions of different kinds and everything could be controlled from the hospitals, and you can change the treatment from distance. And that's absolutely key here, which then will enable us to replace and do many nice things in the body. So we have been sitting 3 years and gone through how could we now improve health care. And here you see 40 selected products that we believe we can do and improve and make health care better going forward. And this will save lots of cost for society and as well as it will be making more advanced treatments for the patients. I have one example. People who has a stoma bag, they have a plastic bag, collect the fecal matter because they maybe have taken away their large intestine for some reason, some disease like ulcer colitis or cancer or other things. And it's not so nice. You have 2 to 3-liter floating substance coming out in this bag and you need to change it, self-adhesive on the skin all the time, makes it ready irritated. It's very burdensome. And this is the product we get most requests from patients every day. Basically, we have a request about this product. And in this case, we are then replacing this stoma bag and we are collecting the intestine down to anus. And we can create the reservoir open and close function and people could get more to a more normal life, that's the intention with this product. We also have a product, for example, now for people who can't urinate, there maybe paraplegic kind of accident of some kind or multiples sclerosis disease. And they put in a catheter every time they should urinate, they put in a catheter in their own bladder, let's say, 5 per day. And that's quite burdensome life. We have a solution for that, so you can instead urinate with the remote control. This is just examples to show you that Implantica has a fantastic portfolio going forward. However, it's needed lots of resources for that, and we need to get going with the RefluxStop to be able to continue with all these different nice products. But we have a very shy vision in this company. We should become the world leader of smart medical implants. And actually, we have the products, we have the patents, we have the competence. It's just about execution and funding. And it's interesting, fascinating journey, I can promise you. Just a few words about RefluxStop before we go over to the business update. So existing treatment for people who has acid coming up from the stomach into esophagus, in the stomach has a special inner layer that you can tolerate the acid, but not the esophagus. And therefore, you burn an esophagus, you get small mini ulcers and it's very painful burdensome disease. And the normal surgical treatment so far has been focusing on that you should close -- support the closing of the sphincter here between the stomach and esophagus and the reason that people believe this was weak this sphincter. However, this is your food passage way, and that means if you try to compress here, you get swallowing problems. You can't get anything up, you can't belch or vomit and you get all the gas, you swallow with your saliva, and so on, it's accumulated and it you get swollen and [indiscernible] and so on. People are not so happy with this type of surgery. So we instead find out that there's nothing wrong with sphincter. This sphincter is perfect. It's all about how you create the correct anatomy in this [ region ]. So you need to restore the position, original position and keep it in that position and you restore something called angle of His, that's the angle between the esophagus and the stomach. And our device is then sitting on the outside of the stomach to enable that you get the normal functional anatomy again. And basically, we treat all the 3 components of the anti-reflux barrier with this disease -- this -- not disease with this device. And here, you see how it looks, the instrument and the little device we use 2.5 centimeter large at the end here. And this works astonishingly well, as you will see from this presentation here. And why is it now so important to treat this disease? The answer is you get cancer. So 48,000 people die from esophageal adenocarcinoma and according to the literature, most of them is coming from acid reflux. And you can compare to breast cancer, they do anything to find a breast cancer. They do all these mammographies and programs and anything here, 48,000 people just die. And no one is doing anything. It's disastrous situation, and we believe we have the treatment that could in the long run, change this. And it's 20% of the population we talk about. It's 17% of the population in Europe and 20% in the United States, they have acid reflux. And if I took gastroscope and endoscope and I just put down in the stomach of anyone who has this disease, I will find that 10% to 20% has precancerous changes. That's instead of 1% to 2% if I do it in the normal population. So this is not to play with this disease. Finally, business update. So, so far, we have done more than 1,000 surgeries in Europe. We have more than 35 hospitals, and it's going very well for Implantica actually extremely well. And we have submitted our second module in our PMA to FDA to get approval for selling also in U.S. This is the most important of the 3 modules we are supplying because it includes all the clinical trial, all the effort we have done, all the results of all the hospitals doing these thousand surgeries, everything, all the complications, everything is submitted to FDA. And I will give you a little short recap of the 5-year clinical results, which is the one who has then been submitted to FDA. And you can see here that everybody took drugs before surgery, there is a drug called PPI, who reduced the acid in your stomach. The problem with this drug is it has nasty complications long term. So it's not pleasant to take this drug for the rest of your life. And if you compare before and after surgery, you can see we had one patient out of 50 who took PPI after surgery. At 4-year follow-up, we had 44 patients left because we had 2 people died from COVID, 1 disabled with long COVID bed bound and so on. But anyhow, one single patient taking -- needing to take drugs. That's an absolutely extraordinary results. There is no literature, no treatment whatsoever who even come close to this type of treatment. And here, you can see when we compare to standard of care, this is 5-year results, and there is published a very, very comprehensive literature review of standard of care Nissen Fundoplication. And it's from Karolinska Institutet. It's very, very seriously done. They have looked at all the randomized articles, the high-quality articles. They fund 63 randomized articles and here, you see the results of that, and then you see in comparisons our 5-year results. So this is like an indirect comparison, which is not super accepted when you do research and so on that in this case, because it's such an extensive literature review, you can see this as the platform for this treatment Nissen here. And you can see this is like night and day. It's sort of no comparison in outcome here. And you see like 40% have difficulties to belch and vomit, for example, or 29% has swallowing difficulties after the other Nissen Fundoplication, for example. And if you compare to our main device competitor, this is now LINX, device who is on the market since a long time since 2012. It's a magnetic band that you place around, esophagus. And here, you can see how we compare the FDA trial with our CE mark trial at 1 year. Because this is the most serious research done on LINX is their FDA trial because that's rigorously controlled and so on. And you can see it's again like night and day, if you compare pH, so you measure pH in lower esophagus over 24 hours, which is the most objective measurement we have for this disease, you see that 36% still fail this test with our competitor. And you see that 68% had swallowing difficulty called dysphagia. So it's -- again, we are presenting a revolution in the treatment of acid reflux. We are then starting to do some market entry preparation in United States because we hope that it will not be too far away until we can enter the U.S. market. And here, you're still a bit -- we have already have a great interest from surgeons. We go to exhibitions. We have had cadaver training in U.S., so we had 10, 20 centers and we have already a fantastic interest in United States. We have more or less done all our marketing we need to do to select 20, 30 leading centers in U.S. to start directly after launch, which is also fantastic. And we have actually decided to develop United States in 6 regions. We are preparing for how we should do this. If we now get the FDA approval, you need to be very careful what you say here because FDA really don't want us to talk about any commercial activities before we actually are approved. But here, you can see the comparison, I have Great Britain and Germany here as sizes just to compare how huge actually -- the market is here in United States. And we have also very heavily investigated how our medical devices have succeeded in United States, how they have done it, how it has gone for them. And if we take our main device competitor, they have so far sold 50,000 devices of their device. We have another device here. It's inspired. It's a device for snoring. It's like a little mini pacemaker you put in, so you stimulate so you don't snore anymore. And here, you can see how they are developed. It took quite some time. They were a small company. It took some time, but they have expanded like crazy. They have today a market value of USD 8 billion. So it's really going well for them even if it took some time in this case. Here, we have another example. This is Axonics, another device. And here, you see the expansion went much faster, and we, of course, studied very carefully how they have done their market launch. And you see that they sold for USD 100 million within 2 years. Third year, and they have today a market value of USD 3.6 billion in the United States. This is the examples of success stories. And I'm not telling you, of course, that we will become such a success story that's beyond my right to do, but I'm just showing you how it could go if you are successful in United States. We are also doing lots of other activities in the United States. Here, you see the American Foregut Society. So Foregut stands for this region where you have reflux, and it's a meeting with like 600,000, 700,000 doctors from United States at is meeting. And here, you see some people listening to the RefluxStop session here. And we have a fantastic -- it's incredible interest from the U.S. surgeons, and that's, of course, picked handling on these fantastic results because it's not only these results from the CE study have been made available for the public. It's also lots of different centers from Europe are presenting the result one after another and this create -- they have the same fantastic results, basically, every center, and that's why the U.S., they are eagerly, eagerly waiting for this product. Here, you can see our user meeting, the third global annual RefluxStop user meeting. And here, you can see it's more than 100 surgeons are spending 1 day extra for us. They come and spend 1 day, they get a full day of training, all the different centers present the results. There is lots of discussion, interaction and of course, a nice dinner. And this day, they spend here with us just because they are so eagerly interested in this device. We also have -- you see on the slide before -- sorry, on this slide, you see here also to the right, we have developed a new very advanced training program, and this is Professor Zehetner who is presenting a little bit the lock on bottom suture we are making here in this end. I just wanted to show you how we then have developed a really advanced training program. So we are really prepared for training all these surgeons. So this is -- will be an online system and lots of videos and other interesting stuff for this audience. So I talked about the other clinical data, and that's also what is making it so fantastic with RefluxStop that it's not only the very controlled CE or FDA study, it's also all the other centers who present. And we are then visiting all the big congresses and the different surgeons are presenting the results. And we have so far this year, 75 conference abstracts presented at these congresses. We have more than 15 published manuscripts. So -- and lots of things in the pipeline, it's like a snowball effect. You put a little snowball on top of the mountain and it's warm weather, that's the little bit the effect we have here with all the research, all the articles coming up for this product and it's all fantastic results. We have published our 4-year results, of course, -- the 5-year is so far only supplied to FDA, but is presented at the congresses. So if you're interested, you can win and read about the 4-year results in endoscopic and the surgery, we -- this has been published. And it's lots of very, very high renowned magazines, high reputation -- sorry for my English. It's very highly regarded magazines. So you have Swiss Medical Weekly, for example, that where Dr. Nissen published his results 1956. Could you imagine this magazine has been since 1956, and it's very regarded magazine. Nature, the same. The Scientific Reports have very high-ranked article and so on. So it's lots of stuff coming up, all from independent hospital centers who present their own results, independent from Implantica. We also have our studies ongoing. So we are doing our randomized trials. We have a Pan-American -- pan European registry study we are doing and we have the committee supplied and approved in many, many different countries now. And it's all -- we are step-by-step, so to say, working in one direction to prove this is by far the best you can get. So the randomized trial between Nissen and RefluxStop will, of course, be very, very interesting because if we can, in a randomized trial could prove that we are the better treatment. That, of course, will open many doors for payers and reimbursement and so on. So this is Professor Schoppmann in Vienna who is doing this study. It's the central hospital. And then is, of course, many other hospitals joining. So -- if we then look at cost effective today's world economy is also very important. Also here, we have been extremely successful. So we have made individual analysis of the cost benefit in all these different countries, you see the map here, and we have published it and it got published in highly respected magazines as well. So we have proven now that we are -- we save so much reoperation and so much complications, so it's worthwhile to invest in RefluxStop treatment, that's basically what you can say. It's even more cost effective than drugs, although the drugs cost very little money because it's so much side effects with the drugs. And that's, of course, very, very important. Then we talk about the market expansion. I will give you some example how fantastic the interest for this product is. So we started 1.5 years ago in Italy, and we invited people to come to use a meeting and take 1 day off and only spend it with us. and 21 surgeons came to this meeting. We have in Spain, 23 surgeons from 17 hospitals, 1.5 years after launch, and they spent 2 days with us. Friday and Saturday. And Saturday, it was live surgeries going on and they could see the operation live, incredible. So it's absolutely incredible interest for this new treatment. Also, we -- as I showed you last time, we have made really some nice marketing campaigns in U.K., in Italy. Here is an example from Spain, Madrid, and it's 1 out of 5 persons have this disease. Imagine 1 out of 5. So when you manage like this to get press and radio and magazines and all these things writing about this, it's so many patients who contact the hospitals. It's just incredible. And so it's -- you can imagine, 1 out of 5 have this disease. So the conclusion of all this is that RefluxStop is unstoppable. And I will then give the word to Andreas, our CFO.

Many thanks, Peter. Good morning. Could we go to the next slide, Peter. We reported net sales of EUR 344,000 for the third quarter 2024, an increase of 41% compared to the same period last year. We currently only market our lead product, RefluxStop, to European key opinion leaders to build a strong reimbursement platform. The business consistently delivers exceptional gross margins. As discussed in earlier calls, this being explained by a combination of a simple product, delivering best-in-class patient outcomes. As highlighted by the 5-year CE trial data that Peter outlined earlier in the call and being protected by a significant moat, thanks to its strong IP. Adjusted gross margin for the third quarter amounted to 97%, up from 94% in the same period last year. Our third quarter operating loss amounted to EUR 5.3 million, a 7% year-on-year decrease. For the 9 months, we experienced a 23% increase in our operating loss, primarily driven by costs related to the preparations of the FDA submission, including a usability trial. Costs relating to the eHealth platform development has been managed down in a significant way over the year. Let's turn to the next slide. We have a solid financial position. End of September, we held EUR 69.3 million cash and cash equivalents. We do not carry any interest-bearing debt on our books. The quarterly operating cash outflow amounted to EUR 4.8 million, Total net cash outflow for the period also equaled EUR 4.8 million. Let us turn to the next slide. In addition to our CEO and main shareholder, Dr. Peter Forsell and other senior leaders in the organization, our investor base is dominated by Swedish and Swiss high-quality institutions. We are grateful for the trust and the support we are receiving to build the commercial platform to address a massive unmet patient need. Back to you, Peter.

Thank you very much. Then I think it's time to go to the question-and-answer section.

[Operator Instructions]. The next question comes from Chien-Hsun Lee from Pareto Securities.

Thanks for the update. I see there is a dip in revenues compared to Q2. I guess it's because of summer months, but since you have shown great 5-year study result and you seem to get more and more traction among the top European surgeons. Just trying to understand, is there a potential [ hold ] or you see switching from Nissen Fundoplication to RefluxStop. And in other words, what do you plan to do as a next step in order to further accelerate the sales uptake in Europe?

Yes, so the answer to this is very simple. For the surgeons to do a larger number of our device, they need to get paid. And today, it's -- we are starting to get reimbursement in some hospitals in Italy and Spain, and we have some part reimbursement in U.K., and we have an own code and the registration of the operations in Germany, but very limited money given. So that's what it's all about at the hospitals, they -- most of these who do this now, they would only do RefluxStop, if it would be paid like a normal part of the health care system. And that's why we are doing all this research, all these studies, all these things, that's all to prove we should be part of the health care system and be fully paid for. And when we achieve that, it's likely that RefluxStop will be dominating the whole market, and it will be a dramatic increase in sales. Now we are building more and more centers, more and more centers that want to do this. So when that reimbursement situation comes and people get paid, suddenly, they can do much more per center.

Okay. And maybe a follow-up question. So since we are doing all this campaign and studies. So what is a critical factor you're seeing for -- in order to get the reimbursement from these countries?

The most critical is the research we are doing, the studies, or more and more articles from more and more centers and our own high-quality studies, the 5-year study. All this, of course, is very important. Then, of course, the pressure from the patient also affects if you suddenly have in NHS, for example, the 20 hospitals doing this type of surgery, they need to reconsider. So this is -- it's many aspects that you work on in parallel here. But the problem to do too much marketing with patients is that it gets like costs. The -- as I said, in Italy, for example, they made a campaign who -- I think it was 9 million Italians that got this message basically. And in the whole south of Italy, they are calling into this poor hospital here in Napoli, and they need to employ a full-time person just to handle all the requests. So it's so many patients that you need to be a bit careful. So you need to balance it. So we are building this step by step by step. And after COVID, it takes a little bit longer time, but it's just a matter of time. It's a bureaucratic process. It takes time. Normally, of course, in the perfect working system, we would already be approved. Everybody should understand that this new treatment is needed and should be paid, but that's not how bureaucracy works. It's an effort we need to do, but be sure it's just a matter of time.

Okay. And I guess this randomized control trials will be part of -- it will be critical. So now you are expecting first patient to be enrolled in Q1 '25? What is the reason of this delay. And as how many patients do plan to enroll in total? And when can you expect the top line results?

We are involving 200 patients, 100 with Nissen and 100 with RefluxStop. And it's hard to say exactly how long time they enroll that will be. They will be followed. The first results will come half a year after everybody is enrolled. And if that takes half a year, then it's 1 year, if it takes 1 year to enroll them, it's 1.5 years, but it's not that far away. And that, of course, will be a heavy study.

[Operator Instructions]

I also have some nice written question here, depending if no one else is calling.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions.

Yes. So maybe I can start to look at some questions here. Someone is asking here how it's going for RefluxStop in Sweden? And the answer is, quite well. So in Ersta, in Stockholm, they have operated 3 first patients. And they are now trying to get resources so they can continue to operate. And the interest among the surgeons is high. They want to do this. It's just an economical questions. We have to wait how the -- it's the administrative part who will decide how it goes. But hopefully, they will soon start to operate more regularly, and it will be more hostel centers in Sweden who will follow. We have already a few more centers lined up to start. Then someone ask can you go from a Nissen to RefluxStop? And the answer is yes. You can redo a Nissen and place a RefluxStop. It's always when you do a second surgery, a little bit more risk or side effects, but overall, it's many procedures done, and it has worked well. How big is the market in U.S. once you get reimbursement? Yes. So the answer to that is that the number of surgeries today is not enormous. However, the market is enormous. And that's because when you have something that has worked so well and people go through a lot of side effects, they don't operate. So the medical doctor doesn't send the patient for surgery. If you send a patient, then it comes back and have so much swallowing problems that it's worse than the reflux before they made the surgery, when you get 5 such patients back, you don't send more patients. And that's a little bit the situation. So the market itself is extremely large to answer that question. So how many RefluxStop surgeries can of surgeons do per week. And the answer to that is that the larger centers, they do like 400 per year may be realistic -- so something like in U.S., many centers to like 400 surgeries per year. Let me see what do we have more for question here. How is biggest assurances of the FDA approval? That's a dangerous question to answer. I mean, I if I put it this way, I would be extremely surprised if now FDA has allowed us to submit this study here in Europe as in our PMA and the results is over any expectations. I think the chances must be seen as very, very large. And what we have more here. Regarding the U.S. PMA, when do you think Module 3 will be sent in 3 months later? Or can you send it in -- okay. So the timing schedule is 3 months, as you say here. And then, of course, it could differ a little bit plus and minus. But I don't think we will supply the answer to Module 2 together with Module 3. It depends if it's very easy to do that answer, but it took a little bit long to perform the answers here we had now this time. So it's a little bit depends. But hopefully, we talk about the magnitude of these 3 months, but it depends a bit the strategy we select when we get the answer of Module 2. What yes, that's another question on Module 3. Are there any long-term plans for large medical technology company, to acquire a stake in Implantica? No such plans or we have no such plans. We are trying to be that large company to answer your question. We should be a new large med tech company. No sound. That's above my competence to answer, good what are we hear here. That's the same question about the Module 3. We have several such questions. I think I've answered them all now. I missed something. How big is -- how is it going in France? I have a question here also. Yes. So in France, they have a little bit strange system. So to get reimbursement, you need to do another trial in U.S. So we are trying to integrate that together with our randomized trial to see how we can get investment in France. We have a few centers who have started in France and the interest is high. It's just how they get paid because they have a very rigorous DRG system, so they have no extra money or anything like they have in Spain and Italy, where it's a little bit more flexible. I think thereby, if I have not missed anything, I hope I answer them all. And I thank you very, very much for listening. Sorry, it took a little bit of time this time. But -- it's a very exciting period now for Implantica actually. It's going really well, and we are really excited. Thank you very much. Bye-bye.