Nyxoah SA (NYXH) Earnings Call Transcript & Summary

Good morning, everyone. This is Suraj Kalia. I'm the senior medical device analyst at Oppenheimer. Pleased to have all of you join us this morning, the second day of the Oppenheimer Annual Healthcare Conference. I am truly pleased to have a unique company start off the day on our side, which is Nyxoah. They are doing some very interesting stuff in obstructive sleep apnea, and I'll let the company talk about it. Presenting this morning are Olivier Taelman, CEO. Olivier, it's a pleasure to have you. I'll let you take the floor from here.

Okay. Thank you, Suraj, and thank you to the Oppenheimer team for having us and allowing us to share the Nyxoah story. So -- sorry we are -- so maybe I should start with a brief introduction of myself and also Fabian Suarez, our CFO. So I'm Olivier Taelman, I'm born and raised in Belgium. I spent more than 20 years in the med tech industry, of which almost 10 years with Medtronic, always active in the field of neuromodulation. After Medtronic and also joining Stryker in the neurovascular field, I moved away from the corporate world into the start-up environment by joining Nevro. I think you all know Nevro, another neuromodulation company, active in spinal cord simulation. Within Nevro, my responsibility was to transform the European team from the clinical into the commercial phase, and I was also part of the management team that did the NASDAQ IPO. I joined Nyxoah in 2019 as Chief Operating Officer and Commercial Officer. And after a couple of months, I had the opportunity to become the CEO of the company. I studied biology and also hold an MBA from the Wharton University. Fabian?

So good morning, I'm Fabian Suarez, I'm a physicist and actuary by training. I start my professional career in the financial industry. In 2008, I moved to the private equity sector, and I joined Nyxoah in 2014 as a CFO.

Now when we talk about Nyxoah, the company was founded in 2009 by Mr. Robert Taub. Today, we have 4 subsidiaries. We are having the headquarter in Belgium. We have a large subsidiary in Israel, Tel Aviv, where we manufacture and where the R&D department is. Next, we have a more clinical-focused subsidiary in Australia. And since last year, we also have a U.S. subsidiary that was the consequence of having the IDE study that we are launching in the U.S. When we go and we talk a little bit about the obstructive sleep apnea market and more specific about the hypoglossal nerve stimulation opportunity, we see that worldwide, we have more than 900 million of people suffering from some kind of obstructive sleep apnea form. When we drill down and we look from a prevalence perspective worldwide on the people that would be -- or the OSA patients that suffer from moderate to severe OSA, we see that the market stays huge, with more than 400 million of patients who would be eligible or would be requiring therapy. Today, it's still a highly underdiagnosed indication, with only 15% of OSA patients who have received the diagnose. When we jump from the overall prevalence data into the incidence data and we look at the hypoglossal nerve stimulation market, we see that in the U.S. alone, we have already annually 500,000 eligible-to-treat patients. If we look at the other focus geographic areas for Nyxoah, being Europe and Australia and New Zealand, it's a comparable number. So we're talking about roughly 1 million yearly eligible-to-treat patients. So far, approximately 13,000 patients have received hypoglossal nerve stimulation treatment The key reason behind is the fact that it's a novel technology. The first CE Mark approval was obtained in 2010, first FDA approval in 2014. As a consequence, there is still a lot of work to do on increasing the awareness of offering neurostimulation as an OSA solution. And of course, there was also a lot of heavy lifting that took place, and that was mainly done by one competitor, being Inspire Medical, on having reimbursement or payer coverage in the U.S. This resulted in a very strong compound annual growth, being more than 60% in the last 4 years. And I think even more important, it's also clearly indicating the endorsement by the global sleep and ENT medical community, the acceptance by payers in Europe, but more specific in the U.S. and of course, the embracement by the patient associations. Now if we look a little bit and we dig in even one step deeper and to answer the question, why should an obstructive sleep apnea patient deserve treatment? And the answer is very simple. It's not because of the snoring, but it's because of the increased risk of mortality. If we see that untreated OSA can be deadly, 5x more risk for cardiovascular mortality, it's doubling the risk for stroke, this is the key reason why those patients should and will and deserve, in fact, treatment. If you look at the sleep apnea market from a therapeutic or diagnostic perspective, we see that in 2020, there was already more than $10 billion of revenue coming in all the combined therapeutic and diagnostic options. Staying with the therapeutic field where Nyxoah is present in, we see that there are 2 key players, ResMed, who is the #1, closely followed by Philips. They are offering the first-line solution, being the CPAP or the positive airway pressure masks. And then, of course, there is Inspire Medical that is holding the monopoly currently by offering neurostimulation solution where Nyxoah positions itself. So that brings us to the fact, how do we position the company in the market? So when the company was founded in 2009 from a blank sheet of paper, we were confronted with 2 key challenges. One was how could we develop a technology that would be as performing or even stronger performing than competition. And the second challenge was how could we develop a technology that would put the patient really centric in the technology. The answer that we have today is that we created at Nyxoah the Genio system, and it's offering a disruptive, patient-centered solution. Now what does it mean? It means that we have a minimally invasive procedure. It's a single-incision procedure, but I will come back and I will show you also in the next slides a comparison with competition. But the takeaway is that it's a single incision compared to 3 or 2 incisions. This is resulting in a really shortened surgery time, being 60 minutes skin to skin. We have no leads. We have an external battery. So instead of having an implantable pulse generator, or IPG, we have an EPG, an external pulse generator. There is bilateral stimulation, and this will come back when we go through the clinical data. But if you are a little bit familiar with the anatomy of the hypoglossal nerve, you know that there is a split in 2 branches, left and right. We are the only company that is offering a technology that is stimulating both the left and right branch compared to competition, which is stimulating unilateral. And then, of course, there is the fact that we have a scalable health care technology platform because of the simple reason that also the software is outside of the body. It's not implanted. And therefore, a patient can even get an upgrade of software without even practically or physically visiting the hospital. And then most important and something that makes me really very proud and is an illustration of the patient-centered approach, we managed to obtain FDA approval and also European notified body approval to have a full body 1.5 and 3 tesla MRI compatibility, and that makes us really unique. Now that is what we offer today. But in our vision, we believe that an obstructive sleep apnea patient should not feel disabled. He should not be able or she should not be able to see, to feel or to touch the implantable device. There should be no need to press a button to activate technology. There should be nothing attached to the skin, but we should further invest in developing an intelligent health tech solution that can automatically detect and adjust to optimize stimulation parameters based on patient needs. Now being concrete, what does it mean? It means that currently, the R&D department of Nyxoah is already pretty far in the development of the second-generation implantable pulse generator, that is one thing. The next thing where we are focusing on within the R&D is in fact, including sensing technology. Sensing technology that when a patient would fall asleep, the device automatically detect this and start stimulating. Next, sleep position, the flow that is -- that the patient is having. So that we would automatically be able to detect this, and based on these detections, making sure that we can offer always the optimal stimulation parameters. Now in going forward, we are monitoring an old data on a data platform, which is cloud-based. And once we start scaling up, this information will be very useful on one hand to better learn and to continue learning and offering strong solutions to patients. And on the other hand, it will also help us in reaching out to health care authorities with more health economic data. So today, the solution is present. Tomorrow, we are already investing in the next generation, and we keep investing in creating and integrating diagnostics monitoring in an intelligent health care or health tech solution. Continuing, and I think that the key takeaway of this one is that there is a difference when you have your airway that is blocked, it can be completely or partially blocked. When it's completely blocked, we call it an apnea. When it's partly blocked it's a hypopnea. Now when we look at the patient journey map, here, the takeaways are that most of the patients, the diagnosis set by the general -- by the GP, then they are referred to a sleep physician and undergo a polysomnography sleep exam. First-line treatment is the CPAP or the CPAP airway pressure masks. The moment a patient becomes refractory for this first-line therapy because he refused the therapy or the therapy is not working or the compliance is low, then the patient becomes eligible for a neurostimulation solution. So when we look at our Genio system a little bit more in detail, in fact, you can see that there are one implantable stimulator, that is the part that will be implanted by the ENT surgeon. It is an incision that is made of approximately 3 to 4 centimeters, and then the device is smoothly positioned with the 2 panel leads on top, touching the hypoglossal nerve. The implantable stimulator is a passive device, which will be activated by the activation chip that is contained in the battery, so the power source, but also the software. This goes on a disposable patch, which is put under the chin of the patient before they go to bed. When they wake up in the morning, the disposable patch is removed, and the activation chip is put in the charging unit so the patient is ready to go the next evening. If we look a little bit more on the dimensions of the device, our implantable stimulator is less -- would weigh just less than 3 grams. You have a left paddle electrode and a right one. Each time, 2 electrodes and those electrodes are put in contact with the hypoglossal nerve. When you look at the activation chip, the weight is 12 grams, and we try to visualize it a little bit the -- if you compare it with a quarter coin, if you put 3 coins on top of each other, you have practically the size of the Genio activation chip. Now maybe a little bit more going from the different stakeholders that are using our technology, and starting with the physician, addressing a clear unmet need. So if you look to the technology through the eyes of a physician, what do you want when you do a surgery? You want to have a minimum invasive procedure, a procedure that goes fast where there is the lowest risk for infections. So Nyxoah is offering one single incision, not 2 or not 3 incisions. And of course, by only having one incision, we're also reducing the surgery time significantly. The next thing you want as a surgeon is no issues on the long term with leads that could break or that will dislocate. We know from neuromodulation and from literature that percutaneous lead, that they tend to failure. We see failure rates up to 25%. With Nyxoah, there is no lead, we don't have this. Then we talk about an external power source. The big advantage is that if you need to replace a battery as a surgeon, you do not need to put a patient under another surgery. You can just do it because it's an external power source. You can even ship it to the patient even without seeing him. And then last but not least, is the bilateral stimulation aspect. As I touched upon already, what we are seeing is by stimulating the left and the right branch of the nerve, we also see a much more concentric and a very powerful muscle contraction that is resulting in a very strong airway opening. If you compare this with the unilateral stimulation, what we are seeing in our clinical data is that we are able not only to help non-CCC -- or non-complete concentric collapse patients, but we're also investigating in a clinical study in how this would help the complete concentric collapse patients who are currently contraindicated. But more of those data to come in the near future. Now looking at this from a patient perspective. As a patient, you are looking for an elegant solution. One single incision, a scar very discrete in the chin fold is making -- is not showing this one -- hide to other people. Another aspect is the efficient stimulation. I touched already on bilateral, but from a patient perspective, if we are working with neurostimulation, we're also creating paresthesia. Now the amount of paresthesia that is creating discomfort is directly linked to, in fact, the amount of energy that is used in order to have an effective therapy. Now since we stimulate bilateral, we are able to have a very strong contraction using less energy. And less energy means less paresthesia, less paresthesia means more comfort. Now another important aspect is the external power source for the patient. I think it's very important that if there is an innovation that is coming out and you need to upgrade your technology, that you can do this by having the patient just logging in the activation chip to a platform, to a digital platform, physician does the same, and we can transfer the upgrades. And then, of course, last but not least, is the MRI compatibility. I already told in the beginning, but this is something that clearly differentiates us, knowing also that a high number or a high percentage of all OSA patients one day are confounded and have to undergo an MRI scan. From an IP perspective, what Mr. Taub and the team did when they launched the company was filing a lot of IP from patent rights in different jurisdictions all the way to design rights, even to trademark rights. So that gives us a very robust portfolio, with more than 170 different patent rights that we have in total. Now jumping away from the technology into the clinical studies. As for each medical device company, it is really important that you do the things in the right order. So at Nyxoah, we started by launching the BLAST OSA study. It was a study with 27 patients, and the study was designed, in fact, to obtain CE Mark approval in Europe. There were 2 publications, one is in the European Respiratory Journal, and the result of the study was leading to CE Mark approval in 2019. So based on this study, the European notified bodies were confirming that the technology is safe and that it is performing or effective. Now what we see, and I will jump to this in the U.S. Once we have obtained the IDE study approval, I think also FDA is confirming that we have a safe technology. And now, of course, we are building more U.S.-specific clinical data on performance, on safety, resulting into a commercialization, if we manage to obtain the primary end points. Now besides the first BLAST OSA study, immediately, we realized that, of course, we have to have a larger patient cohort than 27 patients, and we need to show long-term safety and efficacy data, which we do in the EliSA trial, 110 patients, 20 sites, 5 different countries, 5-year follow-up. This study is ongoing, and we will be able to show the client to close the enrollment of the 110 patients by the end of Q2 in 2022. Now jumping away from the EliSA. We go to BETTER SLEEP. BETTER SLEEP, it's a very special study since -- because -- I have over a couple of reasons. First of all, we believe at Nyxoah that by offering the bilateral stimulation, we will be able to treat more patients than currently are benefiting from hypoglossal nerve stimulation treatment. And when we say more patients, the study is focused on the complete concentric collapse patients, which are representing, sorry, roughly 30% of all OSA patients. We are conducting the study in Australia. We have 9 different sites participating, and we have closed the enrollment last year in November. Now we already have a first CCC case study published. There is a next study -- there is a next cohort of 5 patients that is not submitted for publication, and then I hope that I can show you the results shortly, somewhere end of 5 -- beginning mid-April. And then, of course, we will be showing the entire study outcome with 6 months results by the end of May. If we demonstrate strong results in this study, that should lead to a therapy indication expansion, that is one thing. And as a spin-off of this, it should also remove a current DISE examination. And DISE stands for drug-induced sleep endoscopy. It's an examination that the physician needs to do today in order to exclude CCC patients for implant. As you can understand, if we can also remove this examination, it will also take away another hurdle for OSA patients to receive hypoglossal nerve stimulation treatment. And then, of course, last, there is the FDA approval to launch the IDE trial. We have obtained this in July last year. But I will have more detailed slides on how the study is designed. This one, I will skip, EliSA, we talked about. BETTER SLEEP, you know that we finished the enrollment. We will show you 6-month data in May. And then, of course, we go to and we will focus a little bit more on the DREAM study in the U.S. Now to keep it very straightforward, the DREAM study and the requirements from FDA was to have a study that is comparable to the STAR trial of Inspire. Now what does it mean? It means that the population and the inclusion criteria are the same, a BMI not higher than 32. If you look at the patient cohort, 134, which is comparable to the 126 in the STAR trial. But more important, the primary end points. So these are also exactly identical as in the STAR trial, meaning that we have to show an AHI reduction of 50%, bringing the patient's AHI below 20. And there is also a co-primary end point, which is an ODI reduction of 25%. The patient follow-up or the patient monitoring is 12 months, also comparable to the STAR trial. Now what we have learned at Nyxoah is that if you want to have a shortened surgical learning curve, it's easier to work with surgeons that are already having build experience with hypoglossal nerve stimulation. They find the way to reach the hypoglossal nerve much faster, and we see that it's resulting in a shorter learning curve. So all sites that are participating in the DREAM study are sites who are experienced with hypoglossal nerve stim or Inspire sites. It's a mix of high-volume and academical sites in the U.S. And on top of this, we included 7 non-U.S. sites, 5 in Australia, 1 in Germany, 1 in Belgium, where we have our most experienced surgeons where we already have patients lined up. And this, in fact, to also speed up the enrollment time in the study. The learning curve, we touched on. The 12-month follow-up that is required for the IDE study, this analysis is done based on STAR trial data. And what -- the simple thing that I want to show in this slide is that, in fact, the optimal effect of neurostimulation for OSA patients is achieved after 12 months. After 6 months, you see that there is a first effect. So you can imagine, if we can show strong results after 6 months in line with, for example, AHI reduction percentages that you see in the STAR trial after 12 months, this is really derisking or giving a lot of confidence in hitting also the primary end points in the STAR trial. Next to the study, of course, we are already working with the FDA on the regulatory part. There are 2 options: we become a Class III device, meaning that we have to do a PMA; or we become a Class II device, meaning that we can qualify for the de novo approach. At this moment, we are planning further interactions and further discussions with the FDA. But by the end -- before summer this year, we should have more clarity whether we qualify for a de novo or for a PMA. What we believe, but once again, this is an assumption, we think that we will make a good chance to have a de novo, which will help us in a later stage also when we are bringing upgrades or where we are adding features to our technology to go pretty fast. When it comes to the time lines. So we want to close the study enrollment by the end of Q2 this year. Then there is the 12-month follow-up period, brings us to the end of Q2 2022. 3 months data analysis, further negotiation and discussion with the FDA on the regulatory aspect and then, of course, also the first commercialization. So we believe that it's feasible to be commercially available in the U.S. somewhere around summer in 2023. We also already are working close with U.S. reimbursement of payer experts. So if you look at Inspire Medical, once again, I -- they hold the monopoly. They did a great job. They did all the heavy lifting when it comes from a -- from getting the therapy reimbursed or paid for in the U.S., but also in other countries in Europe. So a lot of respect from our side for the work and the heavy lifting they did. They are currently using a CPT coding, an existing one, for neuromodulation or neurostimulation being the vagus nerve coding. The total procedure fee is $29,000. The physician fee is approximately $700. If we would be, today, reimbursed of -- in the U.S., we would also use an existing CPT code for neuromodulation, but the one for cranial stimulation. Procedure fee would be comparable to Inspire. We also see this, for example, in Germany, where we also have the same coding and where we have the same price point. The physician fee would be slightly higher, but I think the big -- how shall I say, benefit for the physician is the reduced surgery time. So they could do 2, maybe 3x more patients in the same time frame than today to do 1 Inspire implant. We learned that there is a new specific coding as of 2021, so this is also something that we are further exploring. But it's a little bit too premature to further comment on this at this point. And that brings us to commercial leadership outside of the U.S., going to Europe. So in fact, I -- we believe and -- that commercial strategy should be very straightforward, should be very execution-focused. So therefore, we have defined success as going deep. We will not go wide. We will focus on center of excellence or the high-volume Inspire sites, and we will go and have a proof of commercial concept in the market where there is reimbursement. And in Europe, the largest market is Germany for our competition at this moment. So when we have obtained CE Mark in 2019, in less than 12 months, we were able to also manage to get reimbursed in Germany using the same coding and having the same identical price point, being EUR 20,000, as our competitor. That was 2020. It was under a kind of NUB to be very specific. As of this year, this coding moved, and when the market is totally opened up, and it goes into a DRG code. Now how do we define our proof of concept this year? So in 12 months from now, we would like to be able to say that in the Tier 1 accounts, and there are roughly 9 to 10 accounts in Germany, we are market leader or we have overtaken the market leadership position from competition. And in the following 12 months, we would like to be able to show overall leadership in Germany. That would bring us in a very comfortable situation because we will also be much closer to the U.S. commercialization, and it would be really nice and showing already commercial success in Germany. Next, besides this, we also are talking about showing leadership in reimbursement in Europe. We have identified Spain. Spain is a very specific country. It's not the easiest country to have access. So therefore, we believe that combining and collaborating with a strong distribution partner in Spain, that we can be successful. We already have secured some hospital budget, and we are now just waiting until the travel restrictions are lifted to start training the surgeons and to start treating patients and, of course, generating our first revenue in Spain as well. And that brings me almost to the last slide. Despite the fact that 2020 was really, really an awful year due to COVID-19, for Nyxoah, it was a very successful year. It's started by onboarding ResMed as an investor, all the way through German reimbursement, implant #50, FDA approval in June. And I think another milestone I did not touch on, but we became a public company listed on Euronext, in September 18 to be precise. It was a very successful introduction for Euronext terms. We were multiple times oversubscribed. We raised EUR 100 million. We onboarded in the IPO some strong U.S. investors. In November, we had the BETTER SLEEP study enrollment completed. And of course, we already did in 2020, our first U.S. patient in the DREAM study. Now the last slide. 2021 in Europe, it's all about gaining and ramping up revenue in Germany and proof of commercial concept. It's about showing BETTER SLEEP data, leading to a therapy indication expansion. And also from an operational perspective, we are scaling up, and we have opened a second independent manufacturing site in Belgium. In the U.S., it's all about IDE pivotal study enrollment completion. Very straightforward. In '22, it will continue in Europe about ramping up revenue, open new markets. And in the U.S., it will be about doing a close patient follow-up, resulting in reaching the primary end points in the IDE study. And as of '23, that should become the year where we can say now we're also available commercially in the U.S. and we can help and offer our solution to U.S. patients. So thank you for listening. And if there are questions, I'm more than happy to answer them.

So Olivier, this is very a shortened time, just a couple of minutes remaining. I'd love to get your perspective, Olivier, as you see in the marketplace -- one of the things that we pick up in the field is just that the patient acquisition for hypoglossal nerve stim is a daunting task, at least currently. How does Nyxoah mitigate some of these issues? And the second part of the equation I'd love to understand from you is, do you not see pain as an issue in the field with current hypoglossal nerve stims? Does bilateral stim offer better? Or it's -- you think pretty much everyone is going to be plus or minus in the same bucket?

So I may be starting with the last question. We strongly believe that bilateral stimulation will, in fact, expand the hypoglossal nerve stimulation to patients that are today not responding well to the unilateral hypoglossal nerve stimulation. But once again, I need to be very modest when I answer this because we are developing clinical evidence. Unfortunately, I cannot share the clinical evidence today. But we are feeling very comfortable that we will show the effect of bilateral stimulation compared to unilateral, and that it will result very concrete and offering solution for the CCC patients, so that is one thing. The other question, if I understood it correct, is also like, how can we in fact increase the awareness? How can we make sure that the solution is offered to more patients than it is today? And I think that is also one of the reasons why it's so important that there are new companies entering the field and are breaking the monopoly that there is currently because it's such a huge market. There are so much -- so many patients that would deserve and need treatment that it would make sense to have 2 or even 3 companies increasing this awareness, talking about this technology and offer them -- and offering solutions for those patients.

Got it. Perfect. Gentlemen, we're up on time. Fascinating to learn more. We really look forward to your data in May, and I do appreciate you coming this morning. And to -- I see there are a ton of people on the call this morning. I hope you found the story as intriguing as we did. We appreciate you joining us this morning. Thank you, everyone.

Thank you again for the invitation. Thank you.