Ondine Biomedical Inc. (OBIMF) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Ondine Biomedical Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received in the meeting itself. However the company can view the questions submitted today and publish response where it's appropriate to do. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Nicolas Loebel, President and Chief Technology Officer. Good afternoon, sir.

Thank you, Alessandro. Hello, and welcome to Ondine's 2025 Midyear Results Presentation. We're looking forward to telling you about our strong progress, how we've gained momentum in key areas and how we're preparing for what's coming next. As always, before we dive into the presentation, a quick reminder, today's presentation includes forward-looking statements, usual uncertainties and risks. And with that noted, let's move on with the presentation. Our vision remains as bold as ever, a world free from untreatable infections. Of course, we're referring to the steady rise of antibiotic resistance, which is a serious threat to health care worldwide. Already more than 200,000 patients have benefited from this technology, proof that the impact is real. Our photodisinfection platform positions us to address this massive unmet global need that is hospital-acquired infections often involving antibiotic-resistant microbes. And we're just warming up with rapid growth in Canada and now expanding sales into the U.K. and other countries. As you know, we have developed a commercial platform designed for multidirectional growth. This is a powerful disinfection tool that does not rely on antibiotics. It can eliminate all bacteria, viruses and fungi from topical surfaces on the human body without harming human cells. You can see the light activating laser on the right, it's disposable tips and the handpiece and the blue photosensitizer solution on the top right, that's the solution we paint, in this case, interior nose to kill microbes that would otherwise cause surgical site infections. In the U.S., we're partnered with HCA Healthcare, a $70 billion company operating more hospitals than any other health system in the U.S. That's over 41,000 staffed hospital beds and thousands of ambulatory care centers, physician groups and other sites of care. HCA is running our Phase III clinical study, more about that later in the presentation. Outside the U.S., we're partnered with Mölnlycke Healthcare, a leading wound care and surgical solutions company based in Sweden. Mölnlycke acquired rights to distribute Steriwave in many countries outside the U.S., initiating in the U.K. at the beginning of this year and integrating the product alongside their Hibiclens franchise for patient skin prep prior to surgery. We're extremely excited about our partnership with Mölnlycke and the growth we see as a team coming soon. Over the past few years, we've built this commercial platform launching in presurgery. You see that in the bottom left of the graphic. We've now started the move into the ICU, where patients are often in critical condition and highly susceptible to hospital-acquired infections. The market size is huge for just these 2 indications at over $10 billion. but we can expand further with additional uses in dialysis, in cancer patient protection and other indications. And of course, we can expand, as you see on the bottom of the slide, into the many geographies serviced by ourselves as well as Mölnlycke across all of these indications. But perhaps the most exciting growth engine comes from our strong pipeline with products in infection control of burns and wounds, sinus disease, intraoral disease, ventilated tubes and wound odor control. Each indication represents a new access point into hospitals and health care systems. This pipeline significantly compounds the value of the platform. And this occurs directly at the hospital level. Hospitals are not just onetime customers. They're long-term partners. As we add new indications, our footprint with each institution grows deeper. This occurs with less investment into customer relationship management than otherwise would be required because the hospital has already adopted the technology and seen the impact that it can produce. I'm going to turn the presentation over to Alan Thomas now, our CFO, to discuss financial results. Over to you, Alan.

Thanks, Nick. Strategically, we continue to invest in our 3 key pillars in the first half of the year, namely clinical, commercial and operations. For clinical development, that included our Phase III trial working with our partner, HCA Healthcare. As previously communicated, we anticipate completing patient recruitment this year. We've also earmarked funds for investment in our commercial team. This will ensure continued growth in our hospital and sales pipeline as we work towards U.S. approval in the future. Finally, we invested in our day-to-day operations and administration. Ondine has always been a lean focused organization, and we are assessing our current team and structure to optimize this investment. This will ensure we continue to meet our objectives in terms of both commercialization and clinical research. Now this investment strategy has paid dividends for us, as you can see from our results. This includes a 41% increase in medical facilities using our product, double-digit revenue growth, an improvement in our gross margin and a 100% retention rate with our customers, substantiating the value that Steriwave and Ondine provide to these organizations. From a clinical perspective, we now have 16 sites operational for our Phase III trial, and we completed our ICU trial. Commercially, we continue to add new accounts with a 41% increase year-over-year as previously indicated. In addition, we onboarded our EU distribution partner, Mölnlycke, and our Mexican distribution partner, Kabla. Operationally, we completed the migration of our next-generation product, which will continue to improve our bottom line and our margins going forward. As indicated, we added 12 new accounts in the past year. I want to give you a bit of a visual on this. This includes new location and growth in 5 key Canadian provinces, which in aggregate account for 90% of the total Canadian population. Again, our retention rate was 100%, substantiating the value proposition of our product to our clients and end users. Our existing customers continue expanding their use of Steriwave, and we're proud to support them on their mission to eliminate hospital-acquired infections and improve patient outcomes. Our work and effort translated into positive fiscal results, and we're extremely pleased with our performance in the first half of 2025. This was marked by continued revenue growth and improvements in gross margin. Specifically, revenue growth remained strong, increasing 18% year-over-year. Gross margin increased to 65%, up from 62%. This was primarily driven by the cost of direct material reductions in our next-generation product. Operating expenses increased to $13.2 million, which was about $4.8 million higher year-over-year. This was mostly due to an increase in our R&D costs or research and development costs resulting from the active phase of our U.S. clinical trial. General and administrative expenses, along with sales and marketing spend, have remained mostly flat as we continue focusing on disciplined and efficient spending. Net cash flows from financing activities in the first half were $5.5 million, driven by an investment from our HCA health care partner. Subsequent to the period end, we completed a financing for GBP 11 million or approximately CAD 21 million. So to conclude, we believe our first half commercial results continue to demonstrate the effectiveness of our product across a broad spectrum of applications. Our increasing adoption rate, organic growth within existing customers and expansion into new markets underscores our strong market position, paving the way for sustained revenue growth in the future. Finally, I'd just like to provide a quick update on our Mölnlycke partnership. We continue to work together to develop our strategy and relationship, which included a face-to-face strategic planning session in the U.K. in July. Mölnlycke have identified and are focused on large hospital targets with serious infection control issues. As everyone in the medical and pharma sector is aware, these large accounts have a longer sales cycle. However, the potential upside of these accounts substantiates this investment from both a time and cost perspective. Currently, Mölnlycke is on pace with expectations, and we're very pleased with the momentum they are generating. For example, sales we've seen U.K. sales grow by more than 40% in the first half of 2025. This is a really exciting time in our corporate life cycle, and our strong unit economics position our company well for scale and growth. We are pleased with our progress to date and expect sustained revenue growth in the second half of the year. I'll now hand the presentation back to Nick, who will go over our clinical and NDA time lines. Thank you for your time.

Thank you, Alan. To reiterate comments from the beginning of the year, we are, first and foremost, an evidence-based company. We understand that folks from nurses to physicians to hospital CFOs all require peer-reviewed evidence of success. This extends to regulators in what is now a post-MDR world, the new medical device standard in Europe and elsewhere. Our Phase III clinical study in the U.S. moved into high gear, as you heard from Alan, during the first half of this year, with HCA hospitals kicking off across the country. We started and completed enrollment in the Canadian ICU study in the first half, more on that in the next slide. And we sponsored several pharmacoeconomic studies demonstrating the rapid return on investment for the Steriwave system and initiated several other investigator-led clinical studies in hospitals across Canada and the U.K. As I said, in our ICU study, we completed enrollment that was in late July on our ICU study with Dr. Steve Reynolds, a preeminent researcher and physician in Vancouver, BC. The ICU represents a $4 billion expansion opportunity for us because the number of times a patient will receive Steriwave treatment during their stay is roughly every other day while occupying a bed for 1 or 2 weeks. That contrasts with the single use prior to surgery for present customers. We anticipate results from this study to be released during the second half, and we look forward to sharing with you plans for ICU expansion at that time. In terms of our U.S. clinical study, no substantial change from our previous guidance. HCA hospitals have now initiated crossover with treatment hospitals becoming control hospitals and vice versa. There is a slightly shorter second half because the hospitals are now familiar with the study protocol and other operating parameters of the study. We still expect conclusion this year, and we expect FDA submission of the new drug application to be complete by mid-summer. We will also initiate distribution partnership discussions at that time. This brings us to potential approval by the end of the year with sales initiation shortly thereafter. In conclusion, our platform is gaining ground across Canada, the U.K. and Europe with global opportunities ahead. The strength of the model lies in scalability, one platform, multiple indications, many markets. This creates significant leverage for long-term value creation, and that's across the globe. We see the outlook as very strong with multiple growth drivers ahead. That concludes the formal part of the presentation. Thank you for your attention. We'll take questions you may have. And once again, thank you for your continued support and engagement of Ondine.

Well, that's great. Thank you very much for your presentation. [Operator Instructions] I'd like to remind you the recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. We have received a number of questions, both pre-submitted and throughout today's live presentation. And what I'll do is I'll start with the first question here, which reads as follows. For Steriwave, can you please explain what a hospital has to purchase? What item is the one of purchase and what items are disposable and purchasing regularly? Also, what are the cost of these items and what profit the company makes in these items?

I'll take that one. The onetime versus the recurring purchase portion of the question, hospitals require one or more light source units. Which are either placed or sold or rented to the hospital depending on a variety of circumstances and the size of the hospital. For each patient treatment, the hospitals purchase disposables. The treatment kit, if you will, is 4 formulation applicators and 1 nasal illuminator. On the revenue question, the revenues are primarily driven by these recurring disposable sales. These obviously generate ongoing demand with each procedure performed. In terms of margins, as shown in the results that you just heard from Alan, our gross margin has steadily increased. We've risen from 49% in 2021 to 65% for the first half of this year. And in terms of profitability, the long-term profitability is driven by scaling adoption across hospitals and increasing utilization within the hospital. And these recurring disposable sales providing this steady and growing revenue stream. As volume scale, we also expect to see further margin expansion because we get manufacturing efficiencies and economies of scale from that volume.

That's great. Another question here on your cash flow projection. So cash flow projection details with impact on cash burn/accumulation in relation to revenue potential over, say, the next 3 years, i.e., how much do you have to spend in order to obtain serious revenue?

I'll take that one. We did provide guidance after our recent funding. And basically, we indicated that, that funding got us cash flow runway to the end of Q2 2026. So we don't provide any further guidance beyond that, that we -- that was provided earlier.

Thank you very much, Alan. Another question here. What are the reasons for the Phase III trial being delayed by around 6 months? Are you confident it won't be delayed further? And when do you expect the trial to complete?

The clinical delay was primarily due to 2 factors: one, longer-than-anticipated time lines for the clinical sites to come online. There were 14 sites. It's a very large company. And there were some resource constraints that were unexpected at some sites that affected patient recruitment and throughput. To mitigate that impact, we increased the number of participating sites from 14 to 16, which has helped accelerate enrollment and it has improved the overall trial momentum. But I want to stress that the delay was purely operational in nature. It's not related to the product or any safety concern. The integrity and quality of this Phase III study remain our top priority as a company. As mentioned during the presentation, we do not anticipate delay. Patient enrollment is expected to complete this year. Top line results anticipated in the spring of next year.

Thank you very much, Nick. Another question here. The company said it's working on other products. When can we expect an update on these?

I'll take that. The current focus, obviously is, as I said, achieving our top priority, which is the Phase III study, achieving this key regulatory and commercial milestone, and that does expand to working with Mölnlycke Healthcare outside the U.S., particularly this U.S. approval and then obviously, market expansion there, too. We do have a superb R&D head reporting to me who is working on future technologies. Those are the ones I mentioned in the presentation. including prototypes in burns and wounds, new cost reduction initiatives, et cetera. And they're all very exciting, and I'll provide further updates on these as they become available to the market.

That's great. And the final pre-submitted question we have before we move into the live questions. We have recently seen many companies move their listings overseas or indeed delisting altogether. Can you reassure investors of your commitment to continuing your listing on AIM?

I'll take that one. Yes. At this point, no plans to delist from AIM. As we grow, obviously, we'll assess all our options, but we're very satisfied with where we are right now.

That's great. Thank you very much. We have a couple of questions here around the same themes. So what I'll do is I'll just read them both out and then you can answer them in one fell swoop. Please, can you tell us more about the ambitious sales growth strategy you mentioned in the statement? What could year 3 sales look like under this strategy? In support of your ambitious 3-year sales growth strategy, we are prudently building the organizational infrastructure processes and talent necessary to enable sustainable growth and profitability. And the other question is, do you have any revenue forecast and hospital increase targets for next year?

At this point, there is no guidance we're providing on revenue. So that's standard for us. We've provided guidance on the cash flow to Q2 2026, and that's all the guidance we're providing at this time.

No problem at all. Two other questions in around a similar theme. So how quickly do you expect hospital uptake to last FDA approval? And the second question is, assuming a successful trial outcome with HCA, how fast might the draw be to roll out Steriwave? Would HCA start with trial sites? Or would they look to roll out more broadly? Also, are all the potential commercials agreed subject to trial success? Or would there be in a period of negotiation?

Alan, I can take some of that and then hand that back to you.

Yes. I think I'll just -- thanks, Nick. I'll just reiterate though, overall that any questions on expected revenue, whether it's this year, next year or in 3 years is there's just no guidance at this point. So I just want to reiterate that to the investors. I'll leave you the HCA question, Nick.

Sure. Which was the -- assuming a successful trial outcome, how fast would the rollout be? We do anticipate a rapid rollout. We can't tell you scope and scale. But given the fact that we would already be in 16 HCA hospitals and there are numerous interested parties that contact us pretty much daily on this product all through the U.S., we do anticipate a really rapid rollout. And more importantly, it's comprehensive across both the approved indications, which would be for presurgery and any other off-label use.

Another question here. What are the revenue product streams in the pipeline?

The product pipeline involves 2 major areas. One is the continued development of products related to presurgical decolonization. That is making sure that patients are clean from the head to the toe before surgery. As you know, Mölnlycke Healthcare is a preeminent company in skin decolonization using their Hibiclens franchise. This is chlorhexidine gluconate, and they do a very good job of disinfecting everywhere, but the nose, which is where we come in. And between the 2 of us, we anticipate that this is going to be an extremely important development for them and for patients worldwide. That's within the nasal decolonization franchise. So as you move into different types of surgeries, as you move into different types of locals, even down to emergency units, urgent care centers, long-term facilities, step-down units. The second component of that answer is outside the nasal decolonization component, and that will primarily look like areas that have been identified in the presentation. I think the most exciting ones involve treatment of burns and wounds, which are traditionally very difficult to treat. They're often contaminated with pseudomonas, with other microbes, very difficult to both disinfect and maintain the growing tissue that's healing. And we feel we have very good opportunities to disinfect those burns and wounds in a way that is safe and effective and integrates well with current technologies such as negative pressure therapy. And then finally, we've spent quite a bit of time as Ondine in a company developing things like sinus disinfection, disinfection of surfaces within the mouth, disinfection of appliances that get placed into humans, such as ventilator tubes. The same thing could be true for disinfection of components like prosthesis, artificial hips, pacemakers. Work is being identified as a result of our ICU study in dialysis patients and importantly, in cancer patients, where there is very often a type of tumor that erupts through the skin and then is relatively not exposed to the immune system. Without being exposed to the immune system, bugs will proliferate fast, and that produces odor. It's one of the biggest issues with cancer patients with these so-called fungating tumors. And we can take care of that problem, we think in a very effective way. So it's those kinds of product developments that you'll see coming from us.

Thank you very much. The next question we have here, with Mölnlycke, how does the responsibility for marketing/distribution work across the EU? Are OBI responsible for the NHS engagement to date? And do Mölnlycke have market access time line/plan that you've agreed with them?

It's a standard distribution agreement in terms of shared revenue model. With regards to time lines, yes, as indicated, we sat down with them in July in the U.K., and we looked at our strategic plan in terms of both location expansion and country expansion. So we continue to work with them to define that and set the goals and targets over the next few years.

Thank you. The next question here, when do you expect R&D costs to reduce?

I think that would probably coincide with the end of the Phase III, which is primarily burning those R&D costs.

Thank you. Another question we have here. How long do your current funds last until when will you need to raise again?

So as alluded to earlier, we've given guidance that the most recent raise gets us a runway to the end of Q2 2026.

That's great. Thank you very much, Alan. Another question we have here. Assuming that HCA draw quickly on Steriwave post any successful trial, are the biggest challenges you might face production/distribution and working capital/receivables? Are you preparing for this yet? Or is this too early?

I'll take that one, assuming HCA and others draw quickly on Steriwave. Of course, production and distribution are key issues. We have a highly scalable operation. We've been doing this for a number of years. As you know, we've had over 200,000 patients treated. We are in numerous hospitals in Canada and now expanding quickly in the U.K. And so we've really hardened our supply chains and our ability to scale the company. Of course, the scaling this question implies is very large for us. And any such scaling requires a very careful approach, which we have started already, as you might imagine, to scaling and ensuring that your working capital is in line with your receivables. We have very, very good operations people, very good supply chain people, very good quality management people. We are in -- currently in worldwide post-market surveillance. So we have really, I think, followed through on the promises we made to investors early on where we said we are going to learn this business and how to achieve these objectives in Canada. We did that. We've really understood what the pitfalls are and how to scale. As I said, it's a really big task, but we're up for it. We really think that we have the ability to address this very large market and then ultimately, with partnerships such as Mölnlycke throughout the world.

That's great. Switching gears slightly. You say that Mölnlycke is on pace with expectations. Can you tell us what those expectations are?

Alan?

Yes. I think as per our presentation, they've set targets and goals for both individual locations and countries. We're looking at larger locations, as I indicated. So a little bit of a bit more time to get those up and running. I can't give specifics on the goals, but as indicated, we sat down, we've planned and we're very, very comfortable with where we are. I provided U.K. as one example and positive on where we'll go moving forward as well. That's really all I can say at this point.

That's great. Some questions really around international markets, and I'll group them together. Do you expect the Mexico market to be just as big as the U.S.A.? And is there any take-up expected in China in the future, so really Mexico and China?

Yes. Historically, the U.S. has been significantly larger than Mexico in both the pharma and the medical device sector. So that would -- that's all I'm going to say on that without giving specifics. At this point, I think with the -- with regards to China, we have a lot of other markets we're working on, and I think we need to focus on that in our trial at this point. So it's -- I don't know the timing on a potential uptake in China. But as I said, we're focusing on EU, Canada, Mexico clinical trial and ultimately into the U.S. at this point.

How broad might the applications for light-activated disinfection be? Are there any -- are there other ideas in the pipeline?

As you can imagine, that's a question we get asked a lot. In fact, a lot of folks bring us ideas. We have identified in the presentation what constitutes billion-dollar opportunities. There are entire companies working in sinus disease treatment, and we can revolutionize that market. For example, popping pills like antibiotics, injecting steroids, those all approach the problem from your bloodstream. We approach it from the other side. We approach it from the outside where the bugs actually sit, biofilm that sits throughout the sinus cavities. But for example, we've managed to integrate these photosensitive compounds directly into plastics. So they don't actually get applied by putting a topical liquid onto the surface to be disinfected. They're actually already integrated into the medical device. So what you do is you turn on a small battery pack mounted on the patient's hip or located in chairside, even potentially ambulatory or at home. And the light repetitively, every 5 minutes, turns on and allows the sensitive solutions inside the plastics to disinfect the plastics. Imagine if you have a long-term indwelling catheter, either in the bloodstream or in the bladder, those very often get infected. And if they're in a central line, one of your main vessels leading to the heart, lung or brain, you can get very, very ill and you can die from a central line associated bloodstream infection. We want to address that market quickly. We want to stop the bugs from getting from your skin, which is where they start and progressing down that catheter into your bloodstream. Pretty much every single foley catheter, the bladder catheter, the urinary catheter will get infected ultimately over time, and there are tens of millions of those placed every year. We've designed and built photodynamically disinfected Foley catheters. You turn on the light every 5 minutes. The catheter self-disinfects, the bugs don't grow and you don't get urinary tract infections and consequent kidney infections. And that's being tested with our friends at University College London in large animals already. So it's that kind of thing ranging from internal to external device type disinfections all the way through to really cool ideas we're developing with Mölnlycke that I can't say much more about that involve developments in wound care and negative pressure therapy, but it's a really exciting pipeline.

That's great. Thank you very much, Nicolas. Moving to the next question we have here. Have you had any discussions with the FDA?

We can tell you that all discussions with the FDA are as you might expect. We've had several discussions with them, progress prior to and during the launch of the study, responses that involve guidance from the FDA. We, at this point, have what we believe is a very good relationship with the FDA. We're very happy with it. And we will update you further should there be anything further with the FDA.

Perfect. And the final question we have here, I think you have covered, but it's really around funding. Future funding has been mentioned to avoid dilution, but we had another one recently. Can we expect a strategic investment instead of dilution when funding will be needed again?

We're always evaluating options and looking to do what is best for the organization. So that's all I can say really is we will look at all options, but no further guidance at this point, really.

Perfect. Well, thank you both for answering those questions from investors. Of course, the company can review all of the questions that have been submitted today. We will publish those responses on the Investor Meet Company platform. But just before redirecting investors to provide you with their feedback, that's particularly important to the company. Nicolas, could I just ask you for a few closing comments?

Great. Thank you. Well, I'd like to take the opportunity to thank you, Alessandro, and Investor Meet Company for putting this presentation together, our internal folks, including Angelika Vance, for all their help with the production. And indeed, we look further to updating investors in the second half on this very exciting company and this very exciting technology, and that will be at year-end. So thank you very much again.

Well, Nicolas, Alan, thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This is going to take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Ondine Biomedical, we would like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.