Implantica AG (IMPASDB) Earnings Call Transcript & Summary

Welcome to the Implantica Q1 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Peter Forsell; CFO, Andreas Öhrnberg; and Chief Corporate Affairs Officer, Nicole Pehrsson. Please go ahead.

Hello, everybody. My name is Peter Forsell, and welcome to the Q1 2025 presentation. So myself, I have invested incredible lots of money in Implantica due to my previous gastric band business and I'm also a surgeon. And I will try to start, as usual, with a little bit background, that could be a little bit boring for those who listen all the time, but I will try to make that very quickly, and then we will go to the real business update. So RefluxStop who treats, as it sounds, acid reflux is targeting a treatment field of 1 billion sufferers, an enormous treatment field. And here you see the real introduction tool and the real device who is 2.5 centimeter, 1-inch approximately in size. And existing surgery have focused on that because as it should not come up from the stomach, you need to close up to esophagus. And therefore, you -- Nissen in 1956 invented a method to wrap around the top part of the stomach to create a cuff that was putting pressure on this entry here to help it to close. And Johnson & Johnson has a more modern product, a magnetic band called LINX that do the same thing. However, the problem is that they have not understood how it works with acid reflux, and therefore, this treatment is suboptimal. And it caused also side effects because you affect your food passage where you get swallowing difficulties, you can't belch, you can't vomit and so on. And RefluxStop then is a treatment that doesn't affect the food passage way at all. You have now all the side effects that occurs after 5 years between 30% to 50%, they disappear. And we also treat acid reflux better because we have understood how you should treat acid reflux. And it actually works like this. So in the chest, you have pressure variations when you are breathing. The pressure goes in and out, in and out, up and down. And what happens then is that these pressure variations leak out in the opening in the big muscle we have called diaphragm that divides the chest from abdomen and where esophagus is passing through. And these pressure variation is leaking out and affects the sphincter. So if the sphincter comes too close to the diaphragm, it doesn't work well anymore and you get acid reflux. And if it goes all the way up into the chest, then you call it a hernia. So RefluxStop doesn't actually treat acid reflux. It's just recreate a normal functional anatomy, the 3 components of the acid reflux barrier is all restored and you keep it in that position with the device. And thereby, the body treats itself, very sophisticated. And why is it now so important to treat acid reflux. It's 2 reasons. First of all, today, around 1 billion people take a drug called PPI every year, 1 billion people take at least one cure of this drug every year. And this is a drug with lots of side effects. So in the short term, it's okay. But if you use it long term, it causes really severe side effects. And in the large study, with 157,000 U.S. veterans followed for 10 years taking PPI, 7,000 died due to this disease. So 1 out of 20 in 10 years died due to complications from this drug. So this is a very, very serious drug and it needs to be faded out. It can't be used life long anymore in my opinion. Furthermore, these sufferers, they die from cancer to a very large extent, 48,000 people die from esophageal adenocarcinoma only in Europe and United States alone. This is an incredible amount of lost lives. It can't go on like this. If you look at breast cancer, they do anything to find the breast cancer, screening everything to save lives. Here they just let 48,000 people die put, on the blinders because there has been no good treatment available. Now it exists, a good treatment. Therefore, it needs to be surgery for these patients in the future. So Implantica has a second cornerstone, not only RefluxStop who is in the market since 2018 but we also have a breakthrough eHealth platform. And this platform includes both wireless energizing systems, simulation system and ability for the surgeons to look at this patient and treat the patient from distance. And that will be a complete breakthrough for health care. When you suddenly doesn't have the patient coming to the hospital all the time, the doctor could just go in, in a safe way, look at the treatment. It can also check people's health. We can have a platform inside the body, everything focused inside the body that could control people's health, and you can be checked by your doctor on distance. You can control lots of different implants and replace lots of bodily functions. We are currently making our own chip for this new fantastic technology, and we believe we can even license this worldwide if we decide to do so. We have an enormous patent portfolio, many, many, many, patents. And we have sitting 3 years analyzing everything and selected not less than 40 implant products. We have a huge portfolio going forward. The eHealth patent filing involved 25,000 pages of patents. So that's a full wall of papers just for your understanding, how enormous this is. I will very quickly give you 2 products before I start with the update of the business here. So one is replacing people as a Stoma. They have taken away the large intestine maybe and they collect the fecal matter in a plastic bag. They don't need this anymore because we can replace, create the reservoir, open, close, everything inside the body. And that is the most common, except reflux, we get most e-mails from patients about this product because it's 1 million procedures every year. Also, people who can't urinate. They have maybe a spinal cord injury or multiple sclerosis disease, it's 1.7% of the U.S. population, they can't urinate. They have no function in the bladder anymore. They put in the catheter in their own bladder every time they should urinate 5 times per day. This is a very burdensome life. We have the solution. They need a remote control and Implantica's device. Both these products will most likely be fast tracked in the humanitarian program in United States. That's what we are targeting, quickly be on the U.S. market. So we have a very shy vision. We should become the world leader in smart medical implants. And it's not taken just from [indiscernible]. We actually have the substance to fulfill this if we do it right. Finally, we come to the business update, and let's start a little bit with the clinical outcomes. As you know, we have fantastic 5-year results in our clinical trial and the first pivotal study. And there, we are clearly superior than any standard of care. Here, you see Nissen Fundoplication in the little bit orange type of color at 5 years, and you see RefluxStop results at 5 years. And it's simply like night and day, it's a revolution of this treatment field. And now what is happening is that more and more and more surgeons and centers are publishing their own results, and they all are as fantastic as our results. So here, you have a study from Germany. It's Friedrichshafen, 79 patients. And the quality of life score, which you used to ask people questions how they really feel, improved median 100% and mean 92%, nearly 2 years after surgery. This is an incredible, incredible outcome, even better than in our CE-marked trial. Also we have another center in Frankfurt, no reoperation, patient satisfaction 96%, no swallowing difficulties. It's just astonishing that center of the center comes and published the same excellent data. So we are simply not only better in treating acid reflux. We also have much, much less side effects. And that's sort of the key to success. So any successful implant product long term is always based on a successful treatment, that sort of the platform for everything. So today, we have 26 submitted or accepted manuscripts, 21 published -- I think it's 23 published actually, time goes so quickly here. It's a lot, lots of published articles from different centers and of course, from our fantastic 5-year results and it's also coming up and fantastic article from 22 centers who has pooled their data that will come in the future here with also incredible results. At the same time, we are continuing to build the clinical evidence by so-called RCT studies. Basically, you have a lot to read to decide if you should get the old or new treatment. So you really can ensure that we really are better in a fantastic way. And these studies are starting right now and we actually have the kickoff meeting with 9 surgeons a little while ago here. It's led by Professor Schoppmann, the study towards Nissen. And there is another study in Oxford led by Professor Sheraz. And this is like half a year follow-up studies, and that will bring the total last nail in the coffin, just as I say, to really prove that we are much, much better than the competition. Here, you can see a little bit how the development have gone for this treatment area. There come lots of different treatments, Nissen, [indiscernible], LINX, [indiscernible], EndoStim coming and going, and nothing, nothing has really worked until we finally understood how it works to treat acid reflux. And this is a recently published U.S. study who is absolutely fantastic for us. It's about all our main device competitor, LINX. And here, you can see how they measure pH normalization over 24 hours. They look at the need for going down in your esophagus and do a dilatation to opening because it's too narrow and how many of these got persistent swallowing difficulties -- dysphagia swallowing difficulties. And you can see here, they have then made different sizes of their product. So they should reduce these swallowing difficulties and these dilatation need. And you can see that even if you take such a large device, so this is small and larger, larger, large device here, if you take a really large device, so you only treat 38% of the patients as most of them are not treated, still 21% need to make a dilatation to open up in their narrow esophagus and still 10% have persistent swallowing difficulties, 3% need to take the device out. This means this device doesn't work. There is no way, whatever you do. This doesn't work because it's not understanding how you actually get acid reflux and how we should treat it. Let's continue with the FDA and U.S. launch update. So as you already know, we got feedback from our module 2, who is the clinical module, and that was fantastic response. Normally, you get like 100 pages or more of feedback from the FDA, we got 3 small questions, and they were very like-like questions. We can answer them in 1 day. So it's an incredible outcome for us here and Module 1 is since before order closed. So we only now have the 90-day Module 3 left, and that will be filed in the very near term now together with the answers of the small questions for Module 2. And we already have more than 100 surgeons who want to start with RefluxStop after the U.S. approval in United States of course now. So we are selecting to start with the first Centers of Excellence, 50 centers is our target to start with. And as you may be aware of, the launch of a product like this in U.S., it's so much more favorable in Europe. It's not enough with 10x more favorable. It's maybe 100x more favorable because here, you have a completely different system. They don't expect you to sell a product for 5 years without earning a penny. Here, they pay you, and you can use other codes and other money and so on. So we have a much, much more favorable situation here in U.S., and we already have existing reimbursement codes for hospitals and surgeons to use, which makes life much, much easier. And not only that, as you may be aware of, we have made health economic analysis. It's actually University of [indiscernible], these analysis some time back and they created a big -- it's advanced work, very advanced work to do this health economic analysis. And we have then published our results in different countries, including Sweden and U.K. and so on to show that RefluxStop is more cost-effective than any other treatment. Even if you take drugs that cost you nearly nothing after 10 years, it's less cost to operate with RefluxStop because you have so many side effects with the drugs. The side effects cost society money. If you have a kidney disease and you dialysis, it cost society money. If you get cancer, it cost society money. So we are more cost effective than anything else, and we have now prepared the same for U.S. So we will soon be publishing and we'll be able to show that we -- the insurance companies in the United States will save money by switching to RefluxStop. That's a fantastic outcome I can tell you. So we are working on these 3 parameters right now. So of course, I already told you about cost benefit analysis we have done and the selection process of hospitals to select the really best hospitals. But also, we are preparing a dossier for all the payers where we show that we have fantastic better results. We are more cost effective. Please quickly ensure that you get hour on the list of things you pay for. So this is the ongoing process premarket launch for United States. We have identified the centers. And basically, we have already achieved 2 of the cornerstones for a good reimbursement, that is the superior clinical data and the superior cost effectiveness. And we are now targeting the market expansion, which will be quite exciting going forward. So I just wanted to show you an example of our product has a little bit similar magnitude of revenue like us, Axonics, and it took them some years to reach a quite astonishing value and revenue. So in -- through 2023, they had $366 million in revenue, and they were sold to Boston Scientific for $3.7 billion. There is many examples like this, both more favorable, a little bit less favorable, but fantastic many examples, what happens when you get to the U.S. market, it goes like a straight line uphill. Market update. In Europe, we have done 1,200 surgeries. We have soon 50 hospitals. And yes, this was a slide I should have shown you. Sorry, 50 -- 45 hospitals and maybe nearly 50 today actually and 1,200 surgeries. And I will give you one example. So in Europe, no one has incorporated this in the health care system except a few exceptions yet. But we are coming closer and closer. But as it is right now, the more we sell, the more loss we make. So it's not possible to sell a product when no one pays. And still, we have all these hospitals, and I will try to explain why because the systems in Europe is very, very different from country to country. So in Spain, for example, they have lack of budget system. I mean Spain is not a super rich country, but they have a normal -- what we had in the past also in Sweden, a budget system, and in such a system, there is always a little bit of headroom say if a surgeon wants to start with RefluxStop, they allow him to start. He can maybe not do tons of them. He can do some. But next year, he can say, I need to do more of RefluxStop. And then in the budget system, he gets a little bit more for his products. That's how it works. So in the budget system, it takes a few years. And I can give you an example how it has gone for us here in Spain. So we started 2 years ago in Spain. This is, by the way, one of the absolutely most denominated and largest hospitals in the world is that we have started with the University Hospital in Madrid. And we have 3 more centers this quarter. So we have 4. So in total, we have 15 centers that we have achieved in Spain in 2 years. And the reason for that is simply because they have a little bit of money so the surgeon could decide, I really want to do this, and they can do some. Next year, they will do more. And the year after, even more, and then you have a rolling ball of a number of surgeries in a country like Spain. So -- that's not so good. Sorry for that. So this is simply the reason why it goes so well in a country like Spain. That's because there is a little bit of money available to buy some products. And how is it then in the other countries? Yes, in U.K., for example, you may be aware, there is an organization called NHS, who has the public health care system. And we have then been investigated by NICE and the decision will come in September, but it could be that we get approved to operate for a special group of the reflux offers in the NICE system. They're called IEM, Ineffective Esophageal Motility, which means that the acid is damaging your muscles and nerves in your esophagus. So your transportation of food gets weaker and weaker. You have difficulty to swallow down your food. And if you then operate with the old system, even circular and esophagus moves down, you can imagine that it gets unbearable. They get really serious swallowing difficulties because they have no power anymore to put the food down. And LINX, for example, they are not approved for these kind of products. They say it's excluded to operate patients like this. And also Nissen is not recommended for these type of patients. This is 40% of all the sufferers, and that is what NICE is targeting for us because when they investigate, they only can look at published articles and they started so early. So our 23 articles was only 8 or 9 at that time. So they said that we can make a compromise because we realized that this is the best product available. And we will see if this is right or wrong. We didn't join the meeting where they made the final decision. So I'm just talking bulls*** right now, we don't know, but there is a good hope. We are waiting for the result in September. We also have realized that we need to go to the gastroenterological doctors and inform them. Now it exists a good treatment because they don't send patients anymore because the treatment is so poor. And suddenly, it exists a fantastic treatment. So here, they have gone in the forefront in U.K. So Dr. Naim Gomez, for example, from Westminster, who is a fantastic U.S. -- not in U.S., U.K. hospital, NHS Hospital. They started education of their GIs. So the gastroenterology, medical doctors and treat -- inform them of these new treatments and had a big meeting around this, very successful also in U.K. So all in all, you can say that the risk that RefluxStop will not be a fantastic success has really diminished. We are now on an exponential curve, where we are coming close to 0, where the risk perspective is really minimized. When we made the IPO, we still had shorter-term results. We didn't have all these results from the different centers all over Europe. Now we have so many centers saying the same thing. This is fantastic. This is here to stay. This will be the new standard of care most likely going forward. And it's just a question, how quickly could we now expand? Get reimbursement in Europe and at the same time, take the U.S. market. Let's move on with the Capital Markets and Finance, Andreas?

Thank you very much, Peter. Good afternoon or good morning. I will take you through the financial review, starting with revenues. Implantica had a robust start of the year. The team continued to activate new centers and deliver excellent patient outcomes, reported net sales of EUR 745,000 for the quarter, an increase of 25% compared to the same period last year. This is driven by a combination of new centers and higher activity levels at existing centers. As previously noted by Peter, we are, at this stage, only selectively partnering with key opinion leaders to build a strong reimbursement platform. Let us turn to gross margin. We continue to deliver industry-leading gross margin performance. Adjusted gross margin for the quarter amounted to 97% compared to 92% in the same period last year. Given the subscale nature of the business, period-to-period gross margin variability is expected and will continue. As we plan for a U.S. launch the low cost of goods sold will prove very helpful to navigate the evolving tariff landscape. The combination of superior gross margins and no limitations to scaling reflux of production underpins the operating leverage we can expect as the business scales and matures. Let us turn to EBIT. Our operating loss decreased by 41% to EUR 4.2 million, down from EUR 7.1 million in the same period last year. The decrease driven by R&D reflect elevated FDA preparation cost in the comparable period and a reduction in patents and product development costs. The general and admin costs remained flat year-on-year. Let us turn to the balance sheet. We have a solid financial position. End of March 2025, we held EUR 60 million of cash and short-term investment balances. Over the rolling 12 months, we consumed approximately EUR 20 million. We do not carry any interesting bearing debt on our books. 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 support we're receiving to ensure that current sufferers globally are getting access to the best available treatment at scale. Back to you, Peter.

Thank you. So then I think we have questions and answers.

[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.

Okay. Then I will continue with the written questions and see. I need just to read and speak at the same time here. So why don't you just reply on Module 2 as fast as you can? The problem with that is if we do that, the FDA takes 90 days everything you send to them. So it's better to wait with the answers until we file Module 3, which is very close now. When is the eHealth platform ready for mass production? Yes, if it would not be for COVID, maybe we already could have been there. But now we have to take the time out and focus on RefluxStop and the U.S. launch, and we can't motivate spending too much money on. We have still a little team continuing with this development, continuing to develop the system, but it's not possible at this time to continue with this. We need to focus now on the U.S. launch and then we have to take it up again. Are there any news regarding progress with FDA? I mean as I said, the response on our clinical module was -- our team who is -- specialists, we have 2 people, specialists from other FDA experience, and they say this is astonishing. No one gets a favorable feedback like we. It's very, very light feedback, and we can be very happy. So everything looks extremely promising. But we have one module left. That's the biocomparability data basically. But on the other hand, how many products have supplied the biocomparability data for a piece of silicon? That's not something special. It's just something that needs to be done. Yes. We have someone else. Nice presentation. First question, how does the availability and current usage of Ozempic impact your future appetite control? Yes. So the answer is that Ozempic is a fantastic product to reduce people's weight and could lose 10 kilo, 15 kilo. But there is hundreds of millions of people who has 50 kilo, 60 kilo, 40 kilo of overweight. So there will always be a good, really, really good size of business for surgery as well. And the problem we have, like with all these drugs, is that if you stop the drug, you are lost. You continue for the rest of your life or your weight will increase again. That's the message. And as you have heard about, it's popping up more and more, not so common, but still very serious side effects. And again, something that you need to take for your rest of your life is dangerous. So we have a good situation. Second question, how much you -- how much work is currently being done on the future product? Yes, there is a little team, of course, to continue all the development with the other products and the eHealth platform and so on, but it's smaller scale for the moment because with the climate we have right now with Trump and everything, we need to ensure that we can do this U.S. launch with priority. How much will the pricing of RefluxStop be in the U.S.? We are targeting 25%, 30% price premium, which is quite common in U.S., $7,800 is the target price but that's not cut in stone. We have just been discussing with U.S. surgeons and looked into the matter a bit initially here. Is there room to extend the patent on RefluxStop? We have currently received a patent until 2044 in U.S. So we have a fantastic U.S. patent situation. We are also extending, trying to extend up to 5 years. You can extend the existing patents on old patent, the first patent on RefluxStop, which also we are doing at the same time. Then again about other products, yes, they are still fantastic, interesting, the old products, appetite control [indiscernible] control. It will be exciting future. It's just the matter of financing who is the topic for -- to broad scale work on this. If the response in Module 2 -- okay. This, I already answered why we can't file the answer to Module 2 until we make Module 3. What would be the time frame for FDA approval? So as you know, this is in the hands of FDA mostly because we will very soon file our Module 3 and that's our part of this. And Trump changing things, cutting down. But what we have heard from FDA or from our team is that no one who approves new products, who do inspections for new products, they are not affected by any cut down. Our whole FDA team is intact. And in such a case, if we can expect a normal handling time, we could get our approval this year. Then, okay, which months, is it October, November, December, we don't know. It's impossible. We can't guarantee anything. But that's what the normal approval would be. NHS don't want Implantica, NHS. That's not correct. So NHS want Implantica. It's actually nice to do the evaluation for them, for NHS. And we actually were -- not a long time ago in a big meeting, and they really would like to find a space for RefluxStop. But you should know that LINX, for example, has been 10 years longer on the market. They got the approval from NICE just a couple of years ago. So it's a very high bar to get into the NHS system. But you will see in September, if we are lucky or not, so then they will tell you if we will get this IEM group that Chairman sort of say, indicated a little bit during the meeting, but we don't know until we see the result of this outcome of this. But for sure, we can operate at NHS, but we need to control the outcome of our patients. We need to have the results of the procedure, which we, anyhow, are collecting, need to be collected. That's the only request they will have in any circumstances. We will not -- we can always operate according to the decision already made. Yes, I think -- was that all? No. No, There's some more. Many questions. Why is Module 2 take so long? If we wait another month to file or not, that doesn't mean much in the long run. It's all about that we need to ensure that we have done everything so we get approval. And that's what we are doing. And it will be very soon be filed. How fast can you scale to 100,000 operations pending FDA approval? If you imagine, you have 50 million sufferers of reflux in United States. And you imagine that 40% of those are not treated because drugs doesn't help 40% of the patients, that's 20 million people. Imagine you just play with your fantasy that we would take 1% of that market, 1%, that's 200,000 operations. If you take 200,000 operations to a price of $7,800, you can imagine that's $1.56 billion in revenue. That sort of when you play with numbers, the potential is enormous. But of course, execution and timing is also a factor to consider in this case. How will you make money from the eHealth platform? We will sell devices that could be controlled and used for this product. And then you will have systems -- license systems, where if you want the functions of the platform, you need to pay a license. When are you submitting Module 3? So yes, weeks or months, it's closer to weeks than months. Is the RefluxStop surgical difficult for surgeons to learn? You need to be mid-trained surgeon. You can't be totally junior. You need to learn how to do surgery before you can do this. But for most surgeons, it's absolutely no problem. What's in Module 3 content? It's the so-called bench testing as a mechanical test of the product, all the biocomparability test of the product. Is there anything else? Yes. Shelf life. How long time you can have it sterilized and it still works, things like this. But it's basically built on the testing of the product. Yes. Tell me about the patent of RefluxStop. I already said how is the development RefluxStop, too. That's a very interesting product. It's going quite well with that one because it's a non active. We have just get Canada to accept -- that we can file in Canada based on the U.S. data. Japan also, we are waiting for the U.S. approval and then we will file that, and hopefully, we can avoid the study in Japan. 100-day meeting will be 100 days from the filing Module 3. Entry strategy for U.S.? I think I talked about. How long does the product last in the body? Forever. Yes, I think that's it. Many questions, long answering. But thank you very, very much for listening, and we continue the good work, and I wish you a really nice day.