Neola Medical AB (publ) (NEOLA) Earnings Call Transcript & Summary

This morning, Neola Medical has published their report for the second quarter of 2026. And joining us here in the digital studio, I have the company's CEO, Hanna Sjostrom. Welcome.

Thank you so much.

You will give a presentation of the quarter's development, and then I'll return to ask some questions. But before I do that, I would like to also remind our viewers that they can ask their questions in the live chat during this broadcast. So Hanna, go ahead.

Hello, everyone, and welcome to Neola Medical's presentation of our second quarter for 2026. I'm Hanna Sjostrom, CEO of Neola Medical, and I'm joined today by our CFO, David Folkesson. Now the second quarter represents an important step forward for Neola Medical. We have completed our first clinical pilot study in our intended patient population, preterm born babies. We have strengthened our financing and based on the clinical and preclinical evidence generated, sharpened the focus of Neola towards continuous lung monitoring with the detection of potentially life-threatening lung collapse. So today, I will first take you through the key developments in our strategic direction, and then I will conclude, together with David, with the financial perspective and take your questions. Now before we begin, I would like to remind you that today's presentation includes forward-looking statements related to our strategy, market opportunity and development plans. So these are naturally subject to risk and uncertainties, including regulatory and clinical development risks, and you can read more about these risks on our website. With that, over to our presentation for today. So there are 3 developments I would like to particularly highlight from the quarter. First, we reported positive safety results from our first clinical pilot study with Neola in preterm born babies in Sweden. And this study really confirmed a favorable safety profile and provided important clinical insights for continued development. Second, we completed the rights issue in June. It was subscribed to approximately 70% and raised approximately SEK 32.5 million in order to support our clinical, regulatory and market preparation activities. And third, we sharpened our strategic focus. So based on the clinical pilot and our preclinical work, lung collapse detection has emerged as the key clinical capability for Neola and really the key benefit for the patients. So together, these 3 milestones provide a stronger foundation for the next phase of development. Neola Medical was founded in 2016 based on advanced technology with a very strong Swedish heritage. So today, we're headquartered in Lund with an office in the U.S. and Neola Medical has been listed on NASDAQ First North Growth market since 2020. And we are developing Neola, neonatal lung analyzer as a medical device for continuous lung monitoring with an instant detection of potentially life-threatening lung collapse in the neonatal intensive care. Our ambition is to bring a completely new type of information to clinicians caring for some of the most vulnerable patients. Neola is designed to enable continuous lung monitoring and an instant detection of potentially life-threatening lung collapse, a very serious condition for these babies. The aim is to provide clinicians with information that can support a more proactive care. And ultimately, the clinical ambition is very straightforward. So it's earlier information faster intervention and the potential for improved outcomes for premature babies. And this is the value proposition that now guides our continuous product development. And this slide also illustrates the clinical problem we're addressing. So when a preterm born baby develops a serious lung complications such as pneumothorax, a lung collapse, time to action is really critical. So today, clinicians may need to rely on diagnostic methods such as chest X-ray, where there can be a suspicion of lung collapse. But it takes a very long time to get a confirmed results. So our ambition with Neola is fundamentally different. So by monitoring the lungs continuously, the clinician would receive information about a significant change within seconds rather than waiting for that intermittent examination. So that difference in time is really at heart at the clinical need that we're addressing. And moving forward to the business model. So the business model is designed around 3 revenue streams. First, you have the sales of the Neola monitoring units. Second, the recurring sales from disposable probes, which are changed daily on the baby. And then third, we have service agreements associated with the installed device base. And that disposable component is particularly important because it creates recurrent revenues as the number of installed systems, devices and monitor patients growth. Our technology is supported by an extensive intellectual property portfolio. So we currently have 8 patent families covering the major assets from the platform across the medical application, the device itself and the disposables. And the objective is not only to protect the current product, but also strengthen our competitive position and create opportunities for future innovation and potentially additional patient groups. Intellectual property, therefore, remains as a very important part of the long-term value of the Neola platform. The underlying clinical need is very substantial. So prematurity remains a major global health challenge and respiratory failure is really that leading cause of death for preterm-born babies. These are also patients that are -- where serious respiratory complications can have lifelong consequences. So for Neola Medical, this really reinforced why early detection matters. So the opportunity is not simply to introduce another monitoring device to the neonatal intensive care unit. It is really to provide information that is currently missing at a point where earlier intervention may really significantly affect clinical outcomes. So current monitoring methods, as you see here on the slide, Neola are used to assess the lungs have important roles, but also clear limitations. So chest x-ray, ultrasound and blood sampling, for example, provides different type of information. But they are intermittent, they are invasive, they're slow or they involve radiation. And pulse oximetry, which is continuously available measures oxygen saturation, but does not directly monitor what is happening inside of the lungs. So Neola is being developed to combine those several characteristics that are currently difficult to obtain together. So continuous monitoring, real-time information, noninvasive measurement and importantly, no ionizing radiation. So this is the differentiated positioning we are working to establish. And in neonatal intensive care, deterioration can happen very quickly. This is particularly true in serious complications such as the pneumothorax lung collapse. And the purpose of continuous lung monitoring is, therefore, not simply to generate more data is really to provide clinically relevant information earlier when the care team still has the opportunity to act on it. And this is why we believe that timing is so central for the clinical value of Neola. And as you can see here on the screen, mortality from lung collapse is very high, especially for the babies on mechanical ventilation. So we have a large potential addressable market worldwide, and there is a growth in preterm birth and also an increase in the number of neonatal intensive care clinics around the world. There is definitely a large medical need for better neonatal care. That also translates into a high demand for technology innovation and especially U.S. is an attractive market opportunity due to the particular high rate of preterm birth in the U.S. with now more than 35,600 beds in neonatal intensive care units in the country. And within the U.S., our commercial opportunity is highly targeted. So we're not everywhere. We are in the places that really matters. So this slide really highlights the leading children's hospital with large neonatal intensive care units that represents an attractive potential pilot and early adopter sites. So these institutions combine large patient volumes with clinical expertise and experience in evaluating new neonatal technologies. So our initial commercial focus is, therefore, not the entire U.S. hospital market, but really a focused group of leading neonatal intensive care units where the clinical need, the patient volumes and the capacity to adopt new technology are at its strongest. And clinical value is naturally the first requirement for adoption of the device, but also the economic case is very important. So based on our previous market research, potential areas of financial value include reducing manual observation time for the nurses, reducing the number of blood gas samples in chest x-ray, and also reducing length of stay in the very expensive neonatal intensive care unit. So for hospitals, even a relatively small improvement in length of stay can have meaningful economic implications because neonatal intensive care is highly resource-intensive, and our continued market work, therefore, evaluates both the clinical value proposition and the financial value Neola could create for health care providers. So bringing this back to the first half of 2026, we have progressed according to 4 important areas. So clinically, we have completed our first clinical pilot study in preterm-born babies and confirmed a favorable safety profile. Also from an IP perspective, so intellectual property wise, we received a new U.S. patent for optical noise reduction, which has also been granted in China and is pending in Europe. Strategically, we sharpened our primary application towards lung collapse detection with pneumothorax lung collapse as an important focus for us moving forward. And financially, the rights issue raised approximately SEK 32.5 million to support continued clinical validation, regulatory activities and market preparation. So these developments now lead directly into the development path ahead. And the next phase is structured around 4 major steps. So during 2026, we continue preclinical validation together with algorithm and hardware refinement for lung collapse detection. In parallel, we continue our FDA regulatory interactions during both 2026 and 2027 with the objective to align the U.S. regulatory pathway and clinical study protocol. Our current target is to start the U.S. clinical study around mid-2027. Importantly, that remains subject to regulatory feedback and final study design. So following the completion of the clinical program, the next major step would be submission to the U.S. market authorization, the FDA while commercial preparations continue in parallel. And with that development perspective, David, over to you for the financial section.

Thank you, Hanna. Start looking by with the second quarter the operating result amounted to minus SEK 3.7 million compared to minus SEK 3 million corresponding period last year. This is mainly due to investments in personnel and cost related to clinical and regulatory progression. This period's cash flow was minus SEK 5.9 million compared to minus SEK 6.2 million last year, depending on changes in the liquidity. For the first half year 2026, the operating result was minus SEK 7.3 million compared to minus SEK 5.7 billion. And as I said before, this is due to investment in both personnel and consultants working with our clinical trials and regulatory progression. Cash flow for the first 6 months amount to minus SEK 12.1 million compared to last year's SEK 7 million. The big change from the period in 2025 is that we made the share issue in March 2025, while the funds from last capital raise landed in our account in July 2026. There's liquidity coming in the third quarter. Looking at the other parameters. We can see that the monthly burn rate was around SEK 2.0 million. Last year was SEK 1.8 million and that is in line with the plan of regulatory progression and further clinical work. We do expect the burn rate to increase as the clinical program and regulatory development accelerates in the coming quarters. Looking at the equity ratio of 93%, remain free of interest-bearing debts. And overall, our financial management remains focused on supporting the key value, which is creating development activities while maintaining strict cost awareness. Looking at the next slide, you can see that before the -- on the left, you can see the shareholder data before our rights issue. And on the right, you can see the shareholder list after the rights issue. And as always, we appreciate the continued support from both existing and, as you can see on the right side, new shareholders through this round of financing. Yes, this share issue has strengthened our ability to continue executing development plan as Hanna's program said before. And with that, I will hand it back to you, Hanna.

Thank you so much, David. So let me conclude by summarizing here why we believe that Neola Medical represents an interesting opportunity. So we really address a clear unmet clinical need in the neonatal intensive care, where faster detection of those serious lung complications could really make an important difference. We also have patented technology that is designed specifically for continuous lung monitoring. And we're targeting a growing addressable market, especially within the U.S. as our primary focus. And importantly, our business model really combines that Neola device sales with recurrent disposable revenues and service agreement. So we have a very experienced team, as you can see here, making progress together in the strong clinical development or regulatory work and also a very strong international network. So during the first half year of 2026, we really strengthened that clinical foundation. We sharpened our product focus, and we secured additional financing for the next phase. So I think that overall, we're in a very good position in the company following these first 6 months of 2026. So with that, thank you so much for listening and for your continued interest in Neola Medical. We have our next report coming up here, the 18th of November, and do also welcome you all to join us for the Annual General Meeting next year, highlighting 27th of May. So with that, we open up for your questions.

Thank you very much, Hanna and David. Starting off then with the data from the clinical pilot study, you could report a positive data with favorable safety profile for Neola. Can you tell us more about these results, just how positive were they?

So I would say that it's an important transition that we made from really demonstrating that Neola can be used safely in our intended patient population, precisely where the technology can create the greatest clinical value has really been highlighted in the study as well. So the confirmed favorable safety profile has generated very important clinical learnings. And combining that with our preclinical work, we have been able to really sharpen our focus towards continuous monitoring and the detection of potentially life-threatening lung collapse. So I think that these are really strong results and learnings coming out of the clinical study. And yes, overall, we are very happy that we did the pilot study in preparation for our U.S. study.

Do you have an indication of how this data compares to peers?

Well, so in this study, safety was really the primary objective. And the outcome was very encouraging. So we demonstrated a favorable safety profile across the study population, which is very important, as we did it in very low birth weight preterm born babies, so down to 1,000 grams. And this was really the first time that we used Neola in its intended patient population, in a neonatal intensive care setting. So establishing safety at this stage was extremely important milestone for us. I would not make a direct comparison with peers because there is currently no direct comparable technology, providing the same results of continuous lung monitoring. So instead, I would say that the important point for us now is really that the results support taking Neola into the next stage of development.

And patient recruiting that finished in March, and you were able to report these results in April already. Can we expect more readouts from the data moving forward in this study specifically?

Well, the results communicated in April really represented the final headline results from this pilot study. So the value of the study now goes primarily into the next phase, which is about optimizing Neola, refining the clinical application and informing the design of our subsequent validation in our U.S. clinical work. So rather than expecting another major efficiency readout from these 10 patients, investors should really look for how the learnings from this study now translate into the next generation of clinical evidence.

And you're also sharpening Neola's focus towards detection of lung collapse. Was this an unexpected turn for you heading into this pilot study?

It was not based on one individual data point, this decision. It was really a combination of what we learned from both the clinical pilot study and the preclinical validation work that we did in parallel. So the underlying Neola technology has always been designed for continuously monitoring the changes in the lungs. But what became very clear for us is that we now have a unique ability to add a particularly high clinical value. So identifying potentially life threatening changes such as a lung collapse earlier than today's intermittent monitoring method, such as chest x-ray. So I would call this an evolution and a sharpening of our strategy rather than a change of direction. We are really building on the same core technology. It was not a surprise to us but very pleasantly development to see that we could add so much clinical value to this patient group and the product. So the next phase now for us involves a further algorithm and hardware refinement, and we're in that process right now to add this to the specific clinical detection of lung collapse.

I believe Gustav's question in the chat relates to this. Could you elaborate more on what adjustments you've made to the Neola device?

Yes. For us, it's been about sharpening the algorithm detection. So we're now in development of a specific lung collapse detection algorithm, which we believe will add a lot of value to the product. So it's mainly related to software development and algorithms sharpening.

Do you believe the narrowed focus here will also affect the regulatory and commercial path?

Yes, I think that it sharpens and really strengthens our regulatory path in a way that we now give the FDA a very clear clinical value proposition. So this is, of course, important in our ongoing conversations with the FDA that we're having for our clinical study aimed at 2027.

Could you walk us through the regulatory process where you are now to potential market approval in the United States?