Nyxoah SA (NYXH) Earnings Call Transcript & Summary

Excellent. Thank you, everyone, for joining us. Before we begin, I'll give the standard disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that, thanks, everyone, for joining us. We are here with the CEO of Nyxoah. Thanks for being with us here, Olivier.

Yes. So first of all, thank you for having us and giving us the opportunity to interact and meet with investors, highly appreciate it.

Yes, absolutely. So maybe to kick it off, for those in the audience unfamiliar with Nyxoah, could you please provide a brief overview of how Nyxoah is changing the obstructive sleep apnea landscape?

Yes. No, no, definitely. So with Nyxoah, we are offering an innovative next-generation neuromodulation solution, more specific hypoglossal nerve stimulation to treat moderate-to-severe OSA patients. I do think we can say we have a totally differentiated technology driven by bilateral stimulation, single-incision implant. Next to the bilateral stimulation and single incision, it's also clear that we go with full body MRI compatibility from the beginning for the simple reason that we do not have an implantable battery. When we look at the wearable component, so the piece that the patient will wear when he's or she is sleeping, the wearable component is containing the battery, but also the software of the system. And one of the big advantages when you do not have an implantable battery is that there is no need for resurgery when the battery is depleted, but there is also no need for resurgery when, for example, we have an upgrade in software that we want to push through that like that your iPhone, we can do this even without seeing the patient in the hospital. If you combine all of these things, I do think we can conclude that we are very differentiated to what is currently out there, which is a base metric platform technology that we are looking forward to launch in the U.S. as it is happening today.

Yes, absolutely. We'll definitely hit on that. Before we touch on the launch, maybe could you talk a little bit about your DREAM study? You showed some pretty differentiated data. Could you give us the highlights and why they matter so much to patients and physicians?

Yes. So I think it's truly important that you have robust clinical evidence. So when you look at the study protocol of DREAM, so we had a primary endpoint, a reduction of Apnea-Hypopnea Index. So we had to reduce the number of events or obstructions with at least 50%, and we had to bring the overall number of events below 20. So those are the so-called Sher criteria. Next, there is also the oxygen desaturation expressed in an oxygen desaturation index, where we also had to show a significant relief in the oxygen desaturation index. I'm pleased, first of all, that we met all primary and secondary endpoints. I think that's an important one. Next, if you drill a little bit deeper and you look also what is important for the patient, but also for the physician and the selection coming from clinical evidence, I think -- and this is also supporting our vision in making sleep simple, a physician, he wants to have a safe product. So from a severe adverse events percentage, we had 8.7%. If you compare and put it a little bit in perspective also towards competition, it was close to 20%. I do think we have a safe product, and it's also driven by the single incision compared to multiple incisions. If you go a little bit further in the efficacy perspective, there, I think it's important to see that, first, you can reduce, of course, the number of events, but also looking at the median reduction, important for the physician knowing what to expect regardless what the stages of events like if you have someone with extreme severe OSA, 60 events an hour or someone with more moderate OSA, 20 events an hour, what can you expect from a median reduction and there we showed 70%. More important, we even showed 82% of people that we were able to bring back an AHI below 15%. And 15% is a little bit a magic number because below 15%, you're officially not in need for treatment. Once you go above 15, you become eligible for treatment. So 82% of all our participants, we were able to bring down to below 15, and that is great. Then another one being ease of use for the physician is positional OSA. Very short, when you go in a supine position of sleeping on your back, the number of AHI can double and it can also -- and it will definitely significantly increase. We are probably the only company with proven clinical evidence that we maintain the same area opening as when you were in a non-supine position. That is also reflected in our label. And I do think for a physician and for the patient, important in their decision-making of what therapy they would like to have. So those are more or less the big things that are coming out of the study, safe positional OSA, reduction of about 80% below 15%, and we hope that this is resonating well with the clinical audiences.

Yes, absolutely. And I think you mentioned your label. That obviously came fairly recently. We just got approval in the U.S. Can you maybe talk about the specifics of the approval and what it means for patients wanting alternative OSA treatment?

Yes. No, no, definitely. So we got approval on August 8, we'll never forget a Friday. We have been working quite long in order to get the PMA approved, and I'm extremely pleased that the team and the team integrated in achieving this. Now when we look at our label, we see the position of OSA reflected in the label, but there is also another specific patient population with extremely difficult away openings to treat, and those are the patients suffering from complete concentric collapse. It's contraindicated for current HGNS technology, but we already were able to show positive data in our Australian study. In Europe, we already had the notified body accepting this and adding to our label. And we see in the U.S. that we did not receive a contraindication. And that's already, I think, an important sign from FDA that they are trusting the data that we showed. And we are specifically also doing a clinical study related on CCC patients in the U.S. where we hope them to be able to further expand our label in the near future. So those are, I think, 2 major differentiation points when you compare the Genio label compared with competitive labels. Next, what do we expect? I think nobody likes a monopoly to be very straightforward. When we talk to physicians, they like to be given an alternative, patients like to have an option to choose, and we are the ones who are breaking the current monopoly in HGNS. And I think that's very positively perceived because you have patients and it's measured up to 15% saying, I do not want to have a battery in my body. I refused simply to have this. So far, there was no alternative, no, there is. So I think that's a good thing. We learned, and I think we can maybe talk a little bit more about this later, but also in our German experience that once you break the monopoly of 2 companies talking and positioning their technology in HGNS that you also see the overall therapy penetration increasing. And I think also that is very important.

Yes, absolutely. We'll definitely hit. I think you hit a lot of super interesting points. ACCCESS, we definitely want to talk a bit about that later. I'll definitely ask you about some of the German experience. But maybe now that you have the approval in hand, how are you planning on prosecuting the U.S. launch to make it as impactful as possible?

Yes. So we obtained on a Friday, the approval and on Monday morning, the sales team was launching. I think we took a little bit gamble by hiring already last year December, our commercial team. We currently have 50, 55 people to be precise in the commercial team. We have 25 different territory managers. We focus on high-volume HGNS implanting accounts and then the people are doing great. We are now more or less 3 weeks after the FDA approval. We already have strong results in our leading indicators, number of surgeons trained, for example. We also went to the value analysis committees already with a high number of sites. We see the first approvals coming in. Next, we are working with preauthorizations for PI for commercial payers also there, we have close to 20 already after 10 days of launch of preauthorizations that are submitted. We see the positive reactions with surgeons. So there's a lot of positive energy and people are excited.

Great. I think one of the things that we've heard in the way that you've set up your commercial strategy is that you're targeting primarily sleep physicians as opposed to ENTs, which maybe some people would say that should be the target. So why do you think that's the right strategy? Why target the sleep physician?

So first of all, I would like to highlight we have a two-pronged launch strategy where the ENT surgeons are playing an important role. On the other hand, we believe that a sleep provider or sleep physician is really central in the management of the obstructive sleep apnea patients. Very simple. They are the ones identifying in PSGs like how severe is the condition. They are the ones also working with CPAP as gold standard. But they are also the ones that are seeing CPAP patients coming back saying, I'm looking for an alternative. I don't tolerate my CPAP, I'm about to quit, I want something else. So therefore, I do think it's a role in educating those physicians one on how to position, what is the correct phenotyping for successful Genio treatment. But also second, and I think this is so crucial, what is their role in patient management post surgery. Because today, sometimes you see that they're a little bit confused, not knowing exactly what to accept and how to -- what to expect, sorry, and how to contribute. So by educating and training them in how to stimulate patients, how to adapt stimulation, also how to gather data by working, for example, with home sleep test, seeing and evaluating the kind of technology and how well their patients are doing, will give them the option, first of all, to see themselves, what it can do to help also getting better in defining what is the correct and the best patient phenotype, but also to provide us with data that we can learn from and that we can also develop over time health economic data. So for us, the sleep doctor has a crucial role and a central role in the patient management. The ENT doctor has more of a technical role in doing high-quality implants and making sure that we can do a lot of implants and doesn't need to worry in post-surgery management of patients that this is done by other experts. And that's how we see the future of HGNS significantly increasing.

Fair enough. So I think you said you've had the approval for a couple of weeks now. Pre-approval, we have heard that there is a lot of pent-up enthusiasm for Genio. As you look forward over the coming months, what are some of the key leading indicators you're focused on to sort of measure the enthusiasm translating into commercial success?

Yes. No, no, an excellent question. So first of all, we focused on the high-volume sites. If you look in the U.S., you have roughly 400 implanting sites that are representing around 80% of the total volume. So we want to reach those 400 as soon as possible. With our current sales force, we can already reach 125. We will be scaling up every quarter. We are adding more sales reps. We were opening more territories. So from a leading indicator perspective, it starts with surgeons trained. Then we have the value analysis committees approving and accepting our technology, and there are the preauthorizations. And then, of course, we call it a full active site where the surgeon is trained, where the VACs have approved, where we have patients identified. And that's all the leading indicators before we will start generating revenue and also start communicating on and giving projections on revenue and on plan is done.

Right. And I guess you mentioned the 400 high-volume accounts. How are you identifying those? And what would success look like at one of those accounts once you're in?

So how do we identify them and allow me to make a little joke, but sometimes it's nice to be second. I mean we have -- our competitor has done great work in developing and introducing HGNS and getting it covered. And sometimes when you come in as a smart follower, they have paved the way, and it's relatively straightforward to identify those accounts. But there, you took an advantage. On the other hand, how does success look like? So I think successful in those accounts will be expressed in market share and market share gain. We started in Germany. We did get a commercial proof of concept. We were able to capture 25% market share in 2 years' time. Not saying we will do the same thing in the U.S., but I do think it is an illustration that there is an acceptance for that there is a need for an alternative, and we hope to see this also in the U.S. So we will be having high-volume accounts and measure of success in revenue and in market share gain.

Fair enough. Maybe pivoting a bit to reimbursement. We know that can be for many medtechs, a hurdle early in their commercial life cycle. How are you managing your reimbursement progress and sort of how do you make sure that patients get the treatment they need?

So what we did is we looked at both the scientific and the medical organization in our case, the American Association of Otolaryngologists, the AAO. We worked very close with them and also educating them on what our technology is doing, listening to demo they are seeing the place. They are interacting with AMA. So that was one aspect. The second aspect during the FDA process, we were also support of the early payer program that gave us the opportunity to present Genio in front of all the major commercial payers in the U.S., but there was also quite some educational work done. We know that there initially was a CPT code, 64568 that was used by, I will call them name by Inspire. They moved out of this code, but now they are coming back to the same coding because the latest technology innovation. We just received the news from Medicare that this code is now also officially accepted as an HGNS code. We do the same mechanism of action. We have the same stimulation parameters. So next to the reimbursement, we, Genio will tap out to the same coding. So that will be step one. With commercial payers, we will use with preauthorizations with the government payers, I can say, Medicare, we know that we already have several MACs that have accepted this coding and we already covered 1/3 of covered lives. So that's, I think, a good start. And the rest we will see when the preauthorizations going back.

Right. And I guess as we look forward, how will you measure success with payers? Is there a certain cadence of covered lives you're looking for? Are there certain milestones that we should be looking out for in terms of reimbursement?

So first of all, every time that we will have a preauthorization submitted and that is approved by a payer, that will help us scaling up, and we can then also start talking about covered lives. Again, also here, I think we can benefit a little bit from being the second mover because there was a lot of work done. And today, it is -- it was a nerve stimulation that has a coach and it's not a specific technology that has one. And that's why we think we will be able to scale up fast.

Yes. Fair enough. Maybe you mentioned Germany as a proof-of-concept market for commercialization. Maybe can you talk a bit about that experience and how you would think that translates to the U.S.? And maybe what parts you don't think are going to translate?

So first of all, I mean, outside of the U.S., Germany is one of the largest markets for hypoglossal nerve stimulation, but it stays underpenetrated and it is an extremely small market compared to the U.S. It was also not so intensively commercialized by competition. That being said, there are similarities, and it's caused by reimbursement. So the first thing we wanted to prove is can we obtain a similar reimbursement to our competitor. So the answer was yes. We have exactly the same criteria. Second thing we wanted to show is if we go to high-volume centers, are we able to bring the monopoly to bring the relationship and to gain significant market share. The answer was 25% in 2 years' time. The next thing is how can we drive sleep levels? So also there, we looked at sleep physicians. We saw that we were struggling a little bit because the sleep physician in Germany is totally not well educated when it comes to HGNS, and they were seeing us as a novel therapy. That's how large the lack of awareness was. So there, we struggled a little bit, and we had to do some more focused DTC reaching out direct to patient organizations. So the learning was education of sleep physicians, it is crucial. And then last, what we also were seeing in Germany is that the importance of also patient testimonials, people speaking on forums being positive about your technology. And also there, we have positive interactions. So that was the German proof of concept. Next thing since this year, we entered the U.K. market, where both competition and Genio entered at the same time. I can tell you, there you see that we are so identified who will be the #1. And I think we have a little bit the lead after 6 months. And then last, we also wanted to explore the distribution model. And there, we are unique by entering in the Middle East countries. So we did our first implants in Dubai, in Abu Dhabi and in Kuwait. And there also, we are learning what it means if we would go indirect. So those are the 3 eye-learning concepts. Germany, closest to the U.S. with differentiation. U.K. [indiscernible] at the same time. We show that we can take leadership. And then in the Middle East, we are the only provider to go indirect and also there we have...

Fair enough. And as you look at your experience in those 3 markets, is there any specific type of patient where you're more successful? Or what is the ideal patient profile that you're looking for that's really successful with Genio?

So it's a very interesting question because when you look at obstructive sleep apnea, the average age is roughly 53, 54 years old. So I hope those people live a little less 30, 40, even longer. So it's becoming almost like a lifestyle implant that we would like to promote in the sense that we have an implant for life, 25 years longevity. We have a passive implant that is totally, but also the brain is external. So there is no need for resurgery anymore. And we want to also have people that are conscious about their health. I mean, if you have a BMI of 40 and you refuse to lose weight to be very straightforward and you want to not change your lifestyle, I mean, I don't think an implant or a drug will change your life. There need to be some kind of motivation, especially in sleep. So we want to stay away from those extreme of BMIs above 35. We want to position ourselves for people who are conscious that a healthy lifestyle will also give them, I mean, not only more functionality, but also the aspect of not buying of comorbidities. I think that is very important. And when you look at the perfect Genio patient, it's a female or a male 53, 54 years old, who are conscious about this and who also want to make an effort to stay healthy for the coming 20, 30, 40 years.

And I guess, in the vein of health, there's obviously a lot more optionality now for people above a certain BMI with therapeutics that might take them below a certain BMI threshold. How are you thinking about the evolving landscape in therapeutics, either expanding your funnel or not expanding your funnel? Or does it change the Nyxoah opportunity?

So the GLP-1 question.

Yes.

So what is the impact on this? So as I was saying, all of clinical evidence is done with the BMI limitation of 32. So that is where we know we can be very efficient and offer safe technology. So if you look at the GLP-1s in the SURMOUNT trial of Eli Lilly, the average BMI was 37. And we saw clearly that the AHI was also very high, it was 50. So there is a correlation between the weight of the person and obstructive sleep apnea goes without saying. Now these results were showing that when you use a GLP-1 and you are a GLP-1 responder, you can lose up to 25% of your BMI. So the 37% becomes somewhere like back of 20, so 28, 29. The correlation with AHI was patients were losing, in fact, 40% to 60% of events. So 50 becomes somewhere in the 22 all the way to 28. This is spot in where we have strong clinical evidence where patients are still in need of treatment and where they have demonstrated also their motivation to lose weight. So this assessment, we were unable to tap on if there would not have been GLP-1 because we are limiting ourselves at 32, and we do not want to take the risk to increase our BMI because I do think it will be a strategic mistake already with a young novel technology going to so extreme high BMIs that you could have a failure rate that will be higher, but it's not helping nobody. So we see this as very positive. Will we lose some patients? Definitely. I call it more the cosmetic use of GLP-1. But if you see net-net, there will be more patients coming in from the extreme obese and high BMIs than patients were going out because of more the cosmetic use of GLP-1.

Yes. Okay. Fair enough. I think one -- maybe going back to a bit of the commercial side of the equation. I think if I'm remembering correctly, you mentioned over 100 trained physicians in your last earnings call. Can you talk a little bit about sort of the cadence of physician training and what the period was to train those 100 physicians and if we should expect 1,000 physicians in the next call if you trained over 2 weeks? Or how should we think about physician training?

So first of all, I would like to complement my training and educational team because they're doing a phenomenal job. Just to highlight how we do this, we [fly] physicians in most of the time on a Thursday, late afternoon. We start with a dinner where we also have discussions on what is the patient's phenotype, how should the perfect patient look like. We bring also sleep physicians in these trainings. So this is already this relationship building between the ENT surgeon and the sleep physician. We start very early, 6:30 in the morning with a theoretical session. And then after the theoretical session, the surgeons go into the cadaver lab and they start learning how to implant. The sleep physicians, they go with our technical people learning how to program, how to stimulate, how to interact with patients, what to expect from a technology. And then we are all coming together for the light lunch and people are flying back. The next group is coming in, in the afternoon on Friday. The next group is coming in on the afternoon on Saturday. And each time we have a physician group of roughly 12 physicians because with the cadavers that we are doing, we want to make sure we can guarantee the correct quality and 12 surgeons at a time is perfect, and we have weekend between 24 to 36 surgeons that are trained.

And how many of those trainings do you have to do to feel comfortable that you'll be able to successfully implant on Genio?

After the training, the surgeon is flying back to us of our hospital. They -- before the training, we have identified a number of patients so that they can start also actively implanting. We will send all the process to make sure that the first 2 cases have gone spotless. And what we see in the learning curve is that 4 implants is more or less a magical number that surgeons are feeling really comfortable. So -- and then they're off to a great start.

Right. Great. And is that -- are the 100 physicians, are they -- is it across centers? Is it multiple from a specific center? I know you mentioned there was a target of 25 in the near term. How should we think about either geographically, is there any specific place that you're starting...

So yes, we have a focused launch. So my marketing colleagues, they told me the word heat maps. So heat maps where you have the hotspots a little bit the large implant sites and also where the real network is coming from, we have mapped all this out. To my surprise, you're seeing that the East Coast is much more -- showing much more hotspots to this work compared to the West Coast. Don't ask me why. And then you see that we have specific regions like, for example, the Texas region, where you have also in the Midwest. So what we are doing is with a focused launch, we have identified several of those hotspots, and that's where we start rolling out our technology.

Great. And how should we think about in those hotspots, are the VAC committees, how is that progress going? How should we think about this?

So I feel like we do in my entire business model. So first, we have the heat maps, you have the hotspots. Then we look at the VAC committee because there is also a huge difference in getting an approval from a VAC and it varies from 1 week to sometimes up to 8 months. So we put a second layer like in these hotspots, which are the ones with the fastest VAC committees. That's where we were Monday, August 11, 12, 13, 14. So that's the first one, resulting in the ones that are already having the approval granted to us, and that's how we will further expand.

Great. Maybe moving a little bit further down the P&L. So you mentioned you had hired the commercial presence back in December. So we should probably have seen some of that already rolling through the P&L. But what should we expect going forward in terms of OpEx, R&D, et cetera? Should we expect OpEx to ramp? How should we think about the cadence of OpEx?

Well, as I mentioned, we will be scaling up our organization, our commercial organization significantly every quarter. So that will definitely have an impact. And I'm looking at our CFO, but I will not be sharing concrete numbers. I don't think this will be wise at this point, but there will be definitely a scaling up when it comes to further building the organization. Then you touched on something that we did not spoke about, but it's innovation. Although we are a small company, we put innovation as one of the top priorities going forward. in the vision of making sleep simple. I think we can further make progression in our implantable part. But for me, what is so important will be also the patient aspect. And that part, I named something very simple. I would like to have every patient getting live feedback in the morning when they wake up in how their sleep quality was. We already have a patient app, but we can do much more on this. We can provide information about the ODI. We can provide information about the number of events. So -- and I do think that this will also increase compliance. It will also make patients like owning their technology. And that's where we are investing in. In our wearable component, we are wearing sensors, for example. Because over time, I would love to have an implant for life that is intelligent that knows automatically when are you sleeping that can also adapt simulation. And then on the other hand, I want to have a wearable component that is providing data to patients, but also providing data to health care providers and to us to continue self-learning to increase, in fact, the quality of our device. That's where we are investing in. And over time, if I look a little bit further, and I'm thinking 5 years down the road, I want to have a technology with all the wearable component that you don't even see when the patient is implanted. And there we are thinking about pillow charging concept. So you would have your coil in the pillow, you would have a battery on the night stand and a closed-loop system. This is existing. We just need to roll it out. And here, I'm getting totally carried away and but that is what makes our platform so unique by having a passive implant. We never have to reoperate this patient. we can upgrade all of this without making another incision in the human body. And this is a [indiscernible] technology will never be able or capable to do this. And that's why I think we are in the next-generation hypogoserim, and this will resonate well with patients and with physicians.

Yes. No, absolutely. I did have a question -- actually, my next question was going to be about R&D and about the pipeline opportunities. So you mentioned the pill, you mentioned the intelligent design. How should we think about the cadence? You obviously have a ton of near-term just with the commercial. But as we look further out, 18 months from now, 24, 5 years from now, where -- what's the future hold in terms of next-generation devices?

So with our current technology, I'm convinced we are extremely well positioned to compete with what is existing. So then we will further expand in the CCC patients, representing 30% of the total population. So from an indication perspective. Now if we go to a product innovation perspective, the implantable component, we are exploring how to stimulate independently. Now we do bilateral, but we can also do this independently. That will help us also treat more complex airways and give the physician more and more leverage. The next thing that we will do is in the revenue component. So we are -- next generation is ready. It has a different shape. It follows more the shape of the chin, sorry. It contains a sensor. It will further develop the app and provide already and capture more data, as you can expect in roughly 18 months from now, it will be regulatory approved. And then the next step will be that we are going all the way to the and then we will be 23, something like that.

Yes. Wonderful. I think one of the things that you mentioned that I don't want to shortchange is you recently announced the ACES trial has reached a number of patients where you feel comfortable you're going to get good data out of it or a powered study, right? So can you maybe talk about what the ACCESS study will provide, what sort of clinical validation it will provide and what TAM it opens up for you?

Yes. So today, the physicians need to do a specific examination called DISE, drug-induced sleep endoscopy to whether identify if a patient has a complete concentric collapse or not. If they do, they are no longer eligible for what is existing on the market, okay? So this examination is something that is cumbersome for physicians, but also for patients. And you feel a little bit as we say in Europe, like when you care the endoscopy she in your stat while you're still awake and you're a little bit under, but you are still awake and then they will see what happens with your airway. This is something nobody likes. So when we designed the ACCCESS trial, we are also very straightforward. If you want to have an on label for CCC, you also need to make sure that the physician and if we go again make sleep simple and a physician can expect the same outcome for a CCC patient as for non-CCC patients. So the primary endpoints are identical as we have in DREAM. So that is one aspect. We had to implant 106 subjects in this study. I will not disclose the precise number, but we have a sustainable number where we believe that we have strong power analytic power to convince that this also should be on label in the U.S. We have the data from BETTER SLEEP. We have a live experience in Europe. So we do feel comfortable. We also are seeing that FDA currently with other companies that are in the clinical stage are accepting like up to 30% of patients being CCC in a study cohort of roughly 100. We have significantly more patients than 60 to name a number in our ACCCESS study. And we want to bring also CCC patients a solution in SAP in the U.S. So we closed the enrollment. There is a 12-month follow-up that will be us next year around this time. And then we will do a PMA supplement submission, normally 4 to 6 months. So I hope that by the first quarter in '27, we can also have the label expansion in the U.S.

Wonderful. I think we have about a minute left, so I'll ask last question. What do you think is the most underappreciated part of the Nyxoah story that you would want everyone to know?

So I think that people are not fully realizing how differentiated our technology is and how bilateral stimulation will make a difference to maintain also more complex airways open. So that is one aspect. There is one thing I would like to say, and it's may be a funny anecdote in the last minute. But 3 years ago, we made the decision to manufacture in the U.S. for the U.S. Today, with all the price discussions, it seems to be also a good decision. So I think that's also important. And then we are also having a manufacturing site in Europe for the international market. And I think in the last 30 seconds, the scalability of our platform, as I was already explaining a couple of times, I think this will benefit the patients so much. And I think that's crucial in managing obstructive sleep domain going forward.

Wonderful. Well, we look forward to seeing how you change the landscape of OSA. Thank you. Thank you very much for being here.

Thank you for having us.