Observe Medical ASA (OBSRV.OL) Earnings Call Transcript & Summary

Good morning, and welcome to this trading update from Observe Medical. It's now close to 10 months ago that we launched our latest addition to our portfolio, the UnoMeter Safeti Plus, and we would like to give you an update on the progress on the commercial side, but also on our product development side. So just a short recap on who we are and what we're doing, what is our mission here as a company and our ambition level. We have, as you all know, a number of proprietary products that we have already launched, and we have now with this launch back in January, we have now all the Convatec products on the market, and we are seeing the effect of that. We are also, as a second leg of our strategy, working on a approach for the Nordic innovative ecosystem where we do see an opportunity that we can actually strengthen both the companies that we can work with, but also ourselves in bringing those innovations to market. Growth and optimization is a continuous effort that we do. We do have an increasing footprint in the medtech scene, both European-wise, but even globally. And therefore, we do see opportunities coming our way, and we will act on those as we see them coming. This is our position as we have it now. We have the UnoMeter family in the market now, all of it. And we are very, very happy with this. We see a very nice traction in the market, a very positive feedback from customers in terms of product quality and positioning. So very happy about that. We do also still have the Biim in our portfolio, not our first priority definitely as already communicated, but certainly part of our ambition level. We talk about the platform that we are standing on that we have now spent close to 3 years building. We have the 3 -- the third-party manufacturing platform in a cost-effective situation in Suzhou. Product development, yes, we are doing product development work we have done already, and we are launching new products very shortly. Sales and distribution, we do now cover all interesting markets in Europe and continue to expand into Asia and South America. Quality and regulatory, definitely a cornerstone in what we do and certainly also -- from a competency perspective, also a cornerstone on what we are. What has happened in 2025? Also an extremely interesting year from our perspective. We are looking at a situation where we now have sales to 44 countries. We were able to communicate that UnoMeter Safeti Plus and the rest of the family grew 61% here at half year compared to last year. Happy with that. We want to keep that momentum going forward. We did complete also a private placement during the summer period. And we have also managed during the last 10 months to go through a very, very significant debt reduction. We are talking about a debt reduction about from NOK 110 million to around NOK 40 million, which have changed our perspective quite dramatically also on the financial and the attractiveness of our company. We did also, as part of this exercise, make a new agreement with Convatec, where we have now acquired and taken over the IP rights of the UnoMeter family, basically 2 years before it was originally planned, and we are very happy that we are now in full control of our portfolio, very important for us. We also quite recently have a new cornerstone investor as part of our platform. And we do believe that this is going to change also our position going forward. Right now, as it has been for the last couple of years, focus has been very much on the order intake, exploiting the portfolio we have, and we are seeing a very nice development in that. Also, we have earlier communicated that we would launch or prepare the launch of Safeti Max, an upgrade of the Safeti Plus and launch adding to the market this year. This is still our ambition, and we are progressing as planned on that one. So this is what we promised, and this is what we delivered. So we are very proud of that situation. When we look at the order intake on a 12-month rolling basis, we are in a situation now where we are, as I mentioned, in 43 countries across many regions with the center of attention being Europe, but still South America and Asia is growing quite nicely, both in geographical coverage but also in business. And we are basically having very much the same focus as Convatec did to reclaim that market position that we were sort of entitled to with the portfolio we now have. As you will see there, a very nice curve that we are very proud of, obviously, because going back only 2 years, we had 0 revenue, 0 order intake. We didn't have a portfolio. Now we have the full portfolio. We have now seen continuous growth in order intake for the last more than 2 years. And if you look at the development in the last 10 months since the launch of the Safeti Plus product, we are now seeing an acceleration of the order intake and are now passing just now -- a very important threshold of NOK 25 million order intake on a 12-month rolling basis. So not to be underestimated, the fact that we are now present in all these markets, and our distributors are out there bidding and winning tenders. And that means that our business expectedly will continue to develop positively because our presence and our footprint is just increasing by the day. A little bit about the momentum we are looking at. We have talked about repeat orders earlier. If you look at the situation now, we are looking at a very -- actually, the largest part of our customer portfolio or country portfolio, we are seeing now more than 10 orders received and some of them are way beyond 30, 40 orders. So that's a very nice situation that we now have continuation. Our business, remember, that is a recurring business model. When you have a -- won a tender, the business will continue because our products are used on an intensive care ward for 6, 8 days and then a new product is being used. It's a single-use product. So when you have the platform, it's a repeating situation where the orders will keep on coming in. So we're now in a situation where all markets have placed more than 1 order. I mean, 2 orders and upwards. Some smaller markets are still in the lower part because they have been only recently been introduced to our portfolio. But generally speaking, we see now a repetition of our business, which is exactly the position that we have been hoping to gain. As you will also see, 91% of the geographical coverage that Convatec had, they had a revenue equal to NOK 360 million in 2021 in today's currency and prices. We are now present in 91% of the geography that created this revenue. So also a significant step for us, indicating also very much the potential of this platform. Product development. These are the unmet challenges that we want to meet because these are those that our customers, the final customers, the ICU wards are facing every day. And those are the ones that our product portfolio is aiming to solve, offer products that have superior value to our customers, to our users. And the 4 elements that we are looking at is the infection control element. The catheter-associated urinary tract infection is the most common nosocomial or hospital-acquired infection that exist in, I would say, in the western world, the industrialized world. And we play with the UnoMeter, a very significant role in having an opportunity to limit that risk of the patients of getting a urinary tract infection. Very, very important for us. And then there's a number of other elements, the manual measurement inaccuracy, suboptimal measurement frequency. Those 2 elements of measuring. This is -- when you talk about urine output measurement, you do that every hour. It is difficult for the nurse and staff to be precise on the hour. It's also very important that you are precise on the reading. This -- there's an opportunity, huge opportunity to be more precise in doing that because there's a reason why they do it every hour, that is to prevent the risk of AKI, acute kidney injury. So the last bit, very important also these days is the unnecessary staff time expenditure. The situation is that the urine measurement is one of the very last manual processes in an intensive care unit. And we are looking at developing products and already have actually products that solve the issue of not having to manually go and read and document that urine output. We have earlier communicated that our planning is to launch the upgrade of the UnoMeter Safeti Plus already this year, still our plan. We are right now, as the photo indicates, in the phase of doing a pilot study on the infection control elements. So what you see here is our colleague, [ Glaser ], who is doing right now, as we speak, it started yesterday, a pilot study on these infection controlling elements. It's going to continue over the next couple of weeks. And in order to do that, obviously, we need the product. And the situation is that we have now spent the last 5, 6 months finalizing the physical product. So we can basically start manufacturing this product tomorrow. Now we are in the phase of validating the clinical output of the infection control element and also thereby creating the basis for the claims that we're going into the market with and also the technical file and the regulatory approval under the MDR. So that's where we are with this product. We are quite confident that we will be able to keep the time lines as indicated. It's also a little bit about ambition level. The product will work. We are confident about that. But we want to make sure that we get out there with a product that offers superior value documented. And if you go for documented, you can have the strongest claim, you can also have the best price positioning, et cetera, et cetera. Very important for us. But progress is there. As we speak, we see that we are on track. UnoMeter Sippi, next generation of urine output measurement devices. As you all know, it's been in our portfolio for quite a while now. We changed a little bit the strategy when we got access to the mechanical UnoMeters from Convatec. This is now building our platform that I've just shown you, the commercial and also the distribution platform. Sippi, very important for us still. This is next up in terms of what we want to do. But we also do want to recognize the fact that it's only 10 months ago that we, through this network of distributors, launched or relaunched the UnoMeter Safeti Plus, the best product, well documented product in the market. Our distributors are working with that now. We are now promising them a next-generation mechanical UnoMeter Safeti Max in only 6 months' time. We will take a good close look at what is the right timing of Sippi because we have a number of resources available. And when can -- our distribution platform best carry the Sippi product into the market. So this is very -- strategically very important for us. We are monitoring going into the next 6 months, how fast should we be on that product. So this is the summary of the journey we've had and gone through. As you will see here, just a repetition. We have now relaunched the 3 products that combined had a market -- a sales to market in 2021 from Convatec of around NOK 360 million. These are now out there. We have reestablished 91% of the geographical coverage. And now, we are taking the next step into innovation, true fundamental innovation. There's not been any innovation in this market as far as we see it since the launch of UnoMeter Safeti Plus back in 2007. So with us bringing these products to market, we will definitely take a global position as the leader within this segment. It is, in many ways, a niche segment from a medtech perspective, but has tremendous potential for us for growth and for differentiation through this innovation we're looking at. So coming back to the unmet needs that I was referring to in a couple of slides back. These are the 4 unmet needs that an intensive care unit will face when dealing with urine output measurement. And what we're seeing is actually that when taking the first step with Safeti Max, we will be truly innovative in bringing an infection controlling element into the market. That has not been seen before. When we bring Sippi in, we will cover all 4 of these elements because the manual measurement, suboptimal measurement and staff time reduction is elements that Sippi will bring to the market. So all in all, we actually feel that our pipeline is well suited to manage the challenges that the hospitals and the ICU departments are facing looking into urine output measurement. A small recap back to what markets we are playing in. We are looking at -- if you look at on the left-hand side, that is the mechanical UnoMeter. That is the playing field we are in right now. It's a market of NOK 1.5 billion. And we are playing in the darker blue, NOK 679 million market with the sign that we are having. When we add the design that you see below what is often referred to as a front margin system, we will be playing on the full -- a playing field of NOK 1.5 billion. But not only that, we will be bringing in more value to the end users with the Safeti Max and also, therefore, we expect to be able to expand that market and also to take real sized bites of the NOK 870 million, that is right now owned by the front-mounted system because by adding the Safeti Max, we will add additional value that will take users of the front-mounted into a top mounted system that we offer. The next step for us, and we will definitely have that as our primary goal is to take the market from a currently around NOK 1.5 million to a market value of around NOK 4 billion. And what will be driving that is mainly Sippi. When we have a full conversion to Sippi, that is when we are looking at a NOK 4 billion market size. And this will take some time. We will need to launch the product successfully with the right claims. We have all that in our plan. But having to -- having the opportunity to take on new geographies where U.S. markets are the primary target, but also large parts of Asia are preferring the U.S. style version. But actually with Sippi, we will be able to take on the journey of bringing the market from around NOK 1.5 billion to a market potential of NOK 4 billion. Very important for us. We take a big step there. There is no one out there trying to do what we will do with Sippi, meaning convert from the mechanical systems into the digital world. No one is doing that. There are some smaller markets -- some smaller ambitious company with digital versions. They are much more niche oriented compared to our approach. That's the update that we wanted to share today.

So it's a time for a little Q&A. So please, if you have anything, please share. We will pick up those that we can now. Otherwise, please feel free to use the contact points that is on our home page and in all our newsletters where you can have both my contact details, but also Johan's, our CFO's contact details. So feel free any time to reach out to discuss or to have any questions. So let me just check if there's any questions. Yes. So the question is how much turnover do you need in a quarter to cover cost or to be cash positive? Yes. Our run rate right now is around -- on the cost side is around NOK 2 million. And we are having a rather lean and mean approach to our OpEx base. So we are very focused on making sure that our OpEx is developing in the same speed or less than we see the top line developing. I've just shown you the order intake development that will obviously turn into revenue effect soon. So this is a discussion of when do we take a new OpEx, new cost for more resources and to implement our ambitions. But we will not do that before we see that the top line is actually supporting that. So no specific guiding right now on when that will happen. But this is because it's a mixed effect in terms of how quickly do we ramp up the cost and how quickly do we see the order intake continue to accelerate. So this is obviously our main focus to create a cash positive situation. I think that's it for now. But as again said, don't hesitate to reach out, give a call or a mail. We will expand on any topic that might be interesting for you or if there's any questions still remaining. Other than that, please continue to follow us where you can see the progress. We will continuously be as open as we've been so far in terms of the progress, and we expect to bring you those news that will show you that we are developing -- continuing to developing as we have promised. So we look forward to that. Thank you very much for your attention, and talk to you soon.