Lifecare ASA (LIFE) Earnings Call Transcript & Summary

Welcome to the Q3 report from Lifecare. My name is Joacim Holter. I'm the CEO of Lifecare. We're starting off today with a picture of our implant. It shows, of course, a big picture of a very small implant that we have developed and look forward to also proceeding to put into the market within not too long. This is the setup for today's meeting. We will go through the operational highlights, review the operations, provide a financial review, and wrap it up with an outlook summary and Q&A at the end. Lifecare is working within implantable CGMs. And as many of you already know, CGMs have become the de facto standard of care for diabetes management. However, we believe and we have good reason to believe that the future is within the inject and forget segment where we can put a CGM under the skin where it stays for quite a long time, which will be quite an improvement from today's solution where you have body-worn CGMs and not to mention the old pinpicking blood glucose monitoring technology that has been around for about 34 years. We expect that implantable CGMs will be the fastest-growing segment within the CGM technology going forward. This is the area where we will see the innovations and also the market increase. Based on our predictions, we expect that the implantable CGM market size, being a subsegment of the CGM market as a whole, will increase significantly in the years to come, when we see and calculate the market opportunity in Europe and North America by 2035 of approximately USD 5 billion. Lifecare has a focused and capital-efficient path towards our commercialization. And to date, we have been able to confirm our efficiency of the sensor in numerous in vitro tests in our premises in Germany. In addition to this, we've also confirmed the accuracy of our sensor in a human study that was finalized in 2023, where we gained a MARD of 9.6%, which is a very good number. MARD is an industry definition of when the CGM is good enough compared to blood glucose monitoring. The aim of the MARD is to be below 10%. So our first human study already confirmed an accuracy within the field of less than 10%, which also would be in the regulatory accepted field. In addition to this, we have an ongoing biocompatibility and longevity study with a CGM reference validation. I will come back to this a bit later. As of now, we are working to prepare our pre-CE study. The first-in-human study will hopefully be approved this year so that we can execute it in early 2026. We also look forward to being able to continue our longevity study so that we can do an initial launch in the veterinary market in early 2026, before we move on to a full launch for the veterinary side and a CE mark within 2026 on the human side. This will prepare us to do a European launch in 2027 and also to prepare for a U.S. launch starting in 2027. The highlights from the third quarter of 2025 are, first and foremost, the fact that we have secured NOK 80 million in funding that will support our next development and our regulatory milestones. We've also finalized our product design and our production setup, which positions us for a near-term veterinary market entry, and we have entered a final regulatory review phase for the first-in-human clinical approval. We plan to perform an underwritten rights issue in January 2026, where we expect to raise up to NOK 100 million. Of this NOK 100 million, NOK 80 million is already underwritten based on our existing shareholders and external funds. In addition to this, we plan to exercise 2 warrant periods in the first half of 2026. In the short term, we have secured bridge financing for our operations of NOK 50 million until the end of January 2026. The planned financing round in January 2026 is expected to secure our runway until early Q2 2026. And on this basis, we will be able to continue our veterinary longevity study, complete our first-in-human study, and file for our pivotal CE study by the end of the second quarter of 2022. If we are able to raise the full NOK 100 million, this will extend our runway to late Q2 2026 and also allow some accelerated preparations for our CE study. In our product development progress, we have evolved our technology into a product, meaning that we've gone from a laboratory innovation to a fully integrated CGM prototype, which is based on a finalized design. We have also, in the quarter, been able to achieve key compliance milestones for the electronics embedded in the implant. As of now and in the weeks behind us, we have ongoing adjustments and fine-tuning on the product and production base, and this will, of course, also continue. However, due to the financial challenges that we had in the third quarter, we've also experienced a temporary slowdown in our work streams into the fourth quarter, which affects our progress on the longevity study. We also disclosed information on key learnings from our longevity trial to date. And it's important for us to first say that the early trial results provide very valuable insights for system optimization. What we see is an excellent biocompatibility. We see safety as expected. And we also see reliable end-to-end signal transmission consistent with interstitial glucose changes. The next generation of implants has been upgraded in material stability, antenna design, and firmware based on the key learnings from our longevity trial to date. And we now expect a new batch for implementation in dogs in December. It's also important to underline the fact that this trial is not only a medical trial, not only a veterinary trial. It's a very, very important product development trial. So one thing is that we're able to see signal transmission consistent with interstitial glucose changes. That is, of course, important for us, but it's important for us to underline that we have already confirmed our sensitivity of the sensor, both in vitro and in vivo in human trials previously. So, in view of our product development, the fact that we're able to have a reliable end-to-end signal transmission, the fact that we have biocompatibility and safety that is excellent, is just as important as being able to provide good glucose results. In our regulatory progress and our preparations for upcoming CE trials, we have progressed on key regulatory preparations towards the first in-human trial. We have initiated formal CE marking for the complete CGM system, and we have continued our work on a comprehensive regulatory preparation and documentation. This basis has, as we already communicated in the second quarter presentation, this has led us into this quarter, which has been quite capital-intensive. Our CFO, Renete Kaarvik, will provide more insights on the financials. And I will be done with the first-in-human trial readiness. Apologies for that. We are as of now preparing for the first-in-human trials, and we have received ethics approval from the regional Ethics Committee in Norway. And we are now awaiting a regulatory approval from the Norwegian Medicines Agency that is expected to be ready around mid-December. It might be prolonged up to 20 days. So end of December should at least be the date when we get the result from NOMA. This study will assess implant safety, tolerability, and glucose measurement accuracy. We have, as previously communicated, appointed both principal investigators and clinical sites for the trial. With that, I'll leave the word to Renete Kaarvik, Lifecare CFO.

Thank you, Joacim. Good morning, everyone. So let's move on to the financials with a focus on the profit and loss and the cash flow. The third quarter has been a period of high activity, as Joacim mentioned, with related high costs. Revenue and other income relate to grants and came to NOK 0.5 million. Grants are lower this year compared to last year, as some projects have been completed. Employee benefits expenses are relatively stable at NOK 9.1 million. Depreciation and amortization amounted to NOK 2.6 million, reflecting investments in machinery and equipment. Other operating expenses came to NOK 54.7 million in the quarter, and this significant increase is driven by a focus on product development, continued work on quality documentation, regulatory compliance, and preparations for clinical trials. We also had costs related to our new production facility in Mines, Germany, where we are relocating to in December. So in total, the operating expenses this quarter came to NOK 66.4 million with an operating loss of NOK 65.9 million. Turning to the cash flow. We started the quarter with NOK 32 million in cash. R&D spending was the main driver with NOK 60 million. Other OpEx was stable at NOK 4 million, reflecting a lean setup. Due to timing effects, the payable increased by NOK 41 million. We had investments of NOK 3 million related to our new production facility in mines, and we closed the quarter with NOK 6 million in cash. So in total, the net cash outflow was NOK 26 million, which is in line with the previous quarter. Looking ahead, we expect our capital use through 2027 to stay broadly in line with what we have communicated previously, close to NOK 300 million, mainly to complete product development, clinical trials, and CE mark activities. As Joacim mentioned, we are planning a rights issue of at least NOK 80 million in January 2026, followed by two warrant periods. We have secured bridge loan facilities, which provide funding until the rights issue has been completed. In total, the planned financing is expected to secure a runway at least through the first half of 2026. And in addition to equity funding, we are also exploring strategic and grant-based sources. Revenue contributions are expected from 2027, aligned with our commercial timeline. That concludes the financials. I will give the word back to Joacim.

Thank you very much, Renete. And then going into the outlook and summary. We have, as mentioned a couple of times now, already secured SEK 80 million and prepared for the partly underwritten rights issue in January 2026 with subsequent warrant periods in Q1 and Q2 of the same year. Bridge funding is in place, meaning that we have secured operations until the rights issue. As of now, we have a state-of-the-art implant where we have incorporated the improvements from our longevity study, and we expect to do a market launch in the first half of 2026 in the veterinary market. We also expect to receive regulatory approval for the first-in-human trial within a short time and then start the trial in Q1 2026, where we will continue this and expect to commercial the pivotal human trials mid-2026 to prepare for a human market launch to be expected in 2027. I think that this is already covered, that we have secured the funding, and we are looking forward to receiving our new implants, and we will also provide some more information around in the upcoming week. Our regulatory process and CE preparation continue, as do the longevity trial, and we look forward to being able to both do some readouts from the longevity trial in dogs and also to commercialize in the first-in-human trial in the first quarter of 2026. So on the basis of the funding that has been secured based on the underwriting from existing shareholders and also some external funds, we are well positioned to provide and drive our development towards a finished product forward, more or less aligned with our planning, and we look forward to be able to report on the progress and in this project, both ongoing throughout the fourth quarter and also throughout the first quarter until our next quarterly presentation. I go from there and tell you all, of course, that the full Q3 report is available for download as usual, and I'm opening up for any questions you might have.

There seems to be no questions in the chat. So we're going to give it some time, and then please write in if you have any questions.

Then we have a couple of questions already. Is the wet market launch dependent on the results from the longevity study? What are the criteria requirements for this launch? Is the production capacity currently sufficient for this launch?

I'll answer the last question first. The production capacity is not a problem to do a limited launch, and we also have firm plans for how to update our production capacities so that we will also be able to do a bigger launch in due time. To put some numbers on that, I believe that we have -- I don't believe I know that we have plans to build up our production capacity to be around 130,000 implants annually, and that is calculated to be sufficient until 2029, where we expect to increase our production capacity based on extra production lines. The veterinary launch is, to some extent, planned to be done after new results in our veterinary study, not because it's directly necessary, but because we want to have full confidence in the performance of our sensors before we do the first launch. So, while we have a very good insight into our sensitivity, the glucose sensitivity in vitro from humans, and also to some extent, also from the initial part of the veterinary study, we need to ensure and copy the results to put it that way, also in sense of the product and the product duration, et cetera. So, the answer is, yes, to some extent, it depends on the ongoing longevity study. However, that is from a kind of safety and not an effective efficiency point of view.

Then we have 5 questions from one of the spectators. I think we will divide them a little bit up. You currently have a cash runway extending into Q2 2026. Which key milestones do you expect to achieve within this period?

Within this period, we expect to be able to do important communication around results from the veterinary study from the longevity study. We expect to have finalized our first-in-human study and at least be able to provide some data from that study. Whether we complete, we might not be done with all of the data calculations at the start of the second quarter next year. But to execute and to have data readouts, we will be able to have them within that timeline.

NOMA approval is expected between early December and early January, potentially plus 20 days if extended communication occurs. How do you access these risks for this timeline?

Obviously, we have a belief that we will get the approval when we have now done the application, and the application is validated so that it's actually been handled by NOMA. So, to date, we have no feedback from them that indicates anything else that they will provide us an answer by mid-December. That might, as pointed out, be prolonged. There is also a risk that if they have questions, they might stop the counting of this until we then reply to any questions that they might have. To the extent, we don't have a significant risk connected to this. And that we will basically just wait and see what they come back with. We expect this to be approved.

Next, ahead of the CE pre-CE first-in-human study, what preparations are currently underway? And what additional steps remain for study initiation?

Well, of course, first of all, we have agreed on our principal investigator and also on the sites where we want to do the CE study. The steps that we need to finalize are, first of all, to proceed with the veterinary study in terms of data from that point on. Second thing is that we will have to execute our first in-human study and get the data from that study. We are preparing in the sense that we already have a framework, of course, for the application and for the setup of how we want to structure the study. And we also would, of course, engage with an external CRO to assist us in the application process and also in the study process to ensure that we are prepared to gain the CE mark as planned by the end of 2026.

Next, looking ahead to the pivotal CE study planned for late 2026, what further preparations are required to ensure a smooth transition from the first in-human trial.

I believe I already answered that. We will have to await the results from the first-in-human trial, and that will, of course, also be used as part of the documentation basis for the pivotal study.

Besides the Norwegian site, which hosts the research unit for the Health survey in Bergen, which additional clinical sites are involved?

We have one clinical site in Sweden in Uppsala. We have one site in Aarhus in Denmark, and also one site in Mines, Germany.

Operating expenses were high in Q3, largely driven by product development. Could you provide more detail on what specific activities or deliverables these costs relate to?

Yes, they relate to the transformation of our implant into a finalized product. So, based on the product design, the design freeze. There is still, of course, preparation to do in terms of getting the parts of the implant to the stage of optimization, and also the preparation for the production itself. On top of that, we also have the documents needed to be prepared in a regulatory context. It might be worth comparing this with any ball game, I would say, being football ramble or basketball in that case. We are at all times looking for the best process. Sometimes we miss, and we get the ball back. At the end of the day, we're able to complete our attack and put the ball in the goal. But it's not as easy as that we are able to put the ball in the goal from anywhere in the field at any time. So it's a complex venture to take the technology into product, and it's also not uncommon to underestimate the costs related to the finalization of the product, and we are in the middle of that phase where we, as already projected and communicated on previous quarterly reports, we are in the middle of a capital-intensive period to be able to proceed to the production that we need to be able to execute on our upcoming studies and market launches.