Onward Medical N.V. (ONWD) Earnings Call Transcript & Summary

Okay. Good morning, everybody. I hope you're all enjoying the J.P. Morgan Healthcare Conference 2025. Next presentation is by Onward Medical. I'm very pleased to introduce the CEO, David Marver.

Thank you, Thomas, and thanks to all of you for choosing to join us today. Nice to see all of you. Onward is a very cool company. I'm incredibly lucky to lead it. It's one of the most innovative companies that you'll encounter. We have 10 FDA breakthrough device designation awards, already almost 280 patents, and we got our first Time Magazine best invention of the year last year as well. We're also a truly mission-driven company, you'll see that. The community that we're seeking to serve those with spinal cord injury and their families, they've been for decades without viable options. They have injuries. They're in rehab for a few months, and they're told to go home, nothing else can be done for them. And we have a real opportunity to make a difference here. Along those lines, following the requisite forward-looking statements slide, I thought it would be interesting to start with a video. So we got our first FDA approval actually just a few weeks ago in late December. We are a platform company, which is unusual in medtech. We have 3 technology platforms. And the first was FDA approved in December, it was a de novo authorization. And this is some of the media coverage that followed. [Presentation]

Okay. So very pleased to get that FDA approved and begin our commercialization. If you're just meeting the company for the first time. It's a good time to engage because of everything that has been occurring. This is a slide that just shows our highlights from the second half of the year. And I'll talk about these in more detail throughout the presentation. We secured exclusive rights to our own brain computer interface technology. So this enables thought-driven restoration of movement. We also continue to upgrade our Board. We recruited a new Chairman, Rob ten Hoedt, who just retired as President of Medtronic International and also a longtime Chairman of MedTech Europe, which is the equivalent of AdvaMed over there. So a very well connected, smart, creative person. I'm delighted to be working with him. We also raised approximately $50 million late in the year, equity capital, anchored by a strategic called Ottobock, which is a fantastic German family-owned company. Again, more details to follow. And then, of course, we received the FDA approval for ARC-EX in late December. So why are we here? We're here because there is no cure for spinal cord injury. It's a huge unmet need. And most people associate a spinal cord injury with paralysis and loss of sensation. But if you know anyone with an injury, you know that it affects so many other functions incontinence, loss of sexual function, poor blood pressure regulation, poor temperature regulation. And these are all things that really impact the person's ability to get through activities of daily life. And so assistance is often required to help them get through their day. You can see the insulins and prevalence numbers here, there are 7 million people worldwide with a spinal cord injury. Just in the U.S. and Europe alone, 650,000 people. And oh, by the way, it does look promising that these same technology platforms and approaches may help people also with Parkinson's disease and stroke. So the numbers have the potential to expand greatly from here. And it's an expensive injury as well. A lot of health care utilization, a lot of need for outside support. So the average lifetime cost to support someone with tetraplegia is over $5 million. If we can offset some of that by introducing independence and greater function that can also be a win for the payors and health care systems worldwide. Indeed, our vision is that empowered by independence with our therapies, empowered by movement and independence, people with spinal cord injury will enjoy life in the ways that matter to them. Some of them want to walk again, but others prioritize being able to go to the bathroom without having to insert a catheter, restoring sexual function, hand function, for example. And we want to help people in any of those ways. These are the 3 technology platforms that we're in the process of developing and have largely developed, starting with ARC-EX. As you heard, this is now commercial. We have FDA approval for this. It was a de novo authorization. The pivotal study results were published in Nature Medicine, one of the world's leading scientific journals. And we're going to pursue additional indications and expand the label by leveraging investigator-initiated studies. It's an easy device to study because it's an external stimulator. We also have our own implantable platform, our own purpose-built IPG and family of leads. And the first indication we're pursuing with this platform is blood pressure instability following a spinal cord injury. We expect IDE approval and to start that global pivotal study, the middle of this year, to get that started. Those of you who are generalists who do biotech, that's the equivalent of a Phase III pivotal study. And we're using this device. Actually, we've been implanting it since early 2022. So we're using this in clinical feasibility studies to look at blood pressure, lower limb mobility, also upper extremity mobility in SCI and Parkinson's disease. So it's a very versatile device that gives us a chance to have a very broad label over time. Recently, we've been combining the ARC-IM platform with an implanted brain computer interface to enable thought-driven movement, much more natural movement, a true digital bridge, and we've implanted 3 people so far for both mobility and upper extremity movement. More to come on that. This is also -- it's an attractive market if you're a scale-up company. A lot of these markets, if you're a small company, you really have no chance going up against these big multinational incumbents. We don't have a lot of the traditional barriers that are faced by emerging medtech. Let me just run through some of these. First of all, it's a big TAM. So just for our first few indications, it's a $20 billion TAM. But if you look at our pipeline and everything that we're already exploring in clinical feasibility studies that TAM expands to over $100 billion. We also don't have to spend a lot of marketing dollars, a lot of capital on marketing because there's a high level of awareness within the spinal cord injury community, clinicians, patients and their families. And you saw our ability to garner earned media as well. I mean that was one story on Good Morning America, but we've been on BBC, CNN and so on. That to me is a big advantage because you do see in neuromod some companies spending a very high percentage of revenue on sales and marketing. This is not a need that I foresee for us. We also don't have to build a huge sales organization. We don't have thousands of call points, clinics and hospitals nor do we have to reach thousands of physician specialists. People -- these clinics that care for people with spinal cord injury, there are about 500 of them in the U.S. and Europe. So we can deploy our own field sales and service organization, build our own channel, which will provide us advantage over time. We don't have a big training burden, so we don't have to put surgeons through an expensive burdensome training program. PTs and OTAs -- physical therapists, they already deal with stimulation technologies in the course of their work. And the surgeons here, the functional neurosurgeons, already know how to implant a device like this for pain. So for them, it's an easy incremental addition to their practice. We also have favorable reimbursement pathways in the U.S. and other major markets. So we can use existing codes or operate without a code for a while, and I'll get into more detail on that. And I think quite importantly, very limited competition and safeguards against future or emerging competition once we demonstrate that this is indeed an attractive market. And that includes proprietary technology. A lot of IP, as I mentioned, almost 280 issued patents, a lot of our know-how and then establishing this channel, first channel of its kind, I think, is also an important defense. So let's run through now the technology in a bit more detail, and you saw some of this in the opening video. This is the ARC-EX stimulator. It's about the size of a tablet computer. It sits actually on the desk. And it's not a wearable, it's not designed to be used 24 hours a day. It's designed to be used for an hour a day, so episodically. And you saw when it's on a person can move in a way they otherwise could not move. And by moving that way, they can train performing that movement and they recover the function once the device is off. So this makes rehabilitation effective for the first time in the chronic spinal cord population. This device connects to leads that are placed on the skin, near the area of the spinal cord that's responsible for the function we're trying to restore. So here, we're trying to restore hand function that's controlled in the cervical spinal cord. And then the PT or the clinician uses this tablet programmer to define the stimulation parameters. Big TAM here, so $6 billion, about 200,000 people just in the U.S. and Europe are medically eligible for this based on the first indication. And here are some of the results from our pivotal study called Up-LIFT that was published in Nature Medicine middle of last year. So it met all the primary and secondary endpoints. 90% of participants improve either strength or function. This is a group of people for whom nothing is available that can do this. 87% improved quality of life and we saw responders up to 34 years after an injury, not 3 months or 6 months after an injury, but 34 years after an injury. We also, in addition to no serious device-related adverse events, the participants reported reduced spasm, improved sleep, improved sensation and touch and meaningful improvements, by the way, the ability to lift a filled cup, push a button on a remote control, pick up an object with a fork, stuff that matters in daily life. This is the implanted platform, ARC-IM, we call it. So we have our own purpose-built IPG and family of leads. It's controlled and recharged wirelessly through the skin using this hub. The patient can control and titrate the therapy with a smartwatch, and the clinician again, can define the programming parameters using this tablet programmer. The first indication we're pursuing here might surprise you because we do have some clinical feasibility evidence around helping people stand and walk again. But we chose to be first with managing blood pressure in stability. Big TAM again, 215,000 people in the U.S. and Europe are medically eligible. And again, I'm going to use one more video here, which I think can explain far better than I could. Why this blood pressure instability, why addressing this is so important for people with spinal cord injuries. [Presentation]

So this is a young woman in early 20s. She was injured in a car accident, while on vacation in the Balkans and literally could not get out of that because this blood pressure instability, it's called orthostatic hypotension. So it's tied to posture or postural changes. So often, when they try to transition from their bed, when they're sleeping in the morning to a wheelchair, it can take 45 minutes, even longer because they're continually faint -- fainting and syncopal. And so her life was very, very bad. And then now you can see, she's recovered her vitality and she's back in her PhD program. So this is the sort of recovery that we want to enable with this therapy. So we're prioritizing this because to me, it's commercially viable, it's impactful. It really makes quite a difference. You don't need to rehab a lot afterwards, grow muscle mass back and so forth. Cardiac dysfunction is actually the leading cause of death in people with SCI. This blood pressure instability affects 3/4 of people after spinal cord injury. And the indication that we're seeking to pursue here includes both this orthostatic hypotension, low blood pressure, but also these dangerous spikes in blood pressure that people with spinal cord injury have because their body cannot cope with autonomic signals, such as a full bladder or an itch. And so they get this spike, they can lead to stroke and thrombolytic events. This was validated, at least our approach was validated by another Nature paper in 2021 and also by a DARPA grant to support our development of this platform, which indicates to me this is a significant problem among our veterans with spinal cord injury. Another big TAM, as you can see, so over $7 billion; 222,000 medically eligible in the U.S. and Europe alone. We also have helped people with spinal cord injury, even complete spinal cord injury, recover the ability to stand and walk again. This is something that we would like to introduce. It could be our second indication with the ARC-IM system, multiple Nature papers that describe the mechanism that we're employing to do this, very interesting. And then as I mentioned at the onset, we've been combining ARC-IM with an implanted brain computer interface to enable a true Onward DigitalBridge, so really bypassing the injury digitally. So recording a person's intention to move with the BCI, translating those signals into instructions for our spinal cord stimulator, which then stimulates the spinal cord to create thought-driven movement. We've done 3 people so far, 2 for mobility, 1 for upper extremity function. We published on 1 so far, another Nature paper. And we expect to implant 10 or 15 more people with the benefit of grant funding from Christopher Reeve Foundation, for example, and the European Innovation Council. This is an exciting area. I think there's a lot of hype in this area. We have, though, a unique and meaningful application for these brain signals. So a bit more on this. I think Onward is actually quite well positioned strategically relative to others. As if you follow this at all, there are multiple companies racing to develop a brain recording device or platform, mainly to control computers, computer peripherals, voice generators. We're the only ones that are using BCI technology to restore movement of the human body. And that's really our unique expertise. And last year, we secured the exclusive rights to a BCI technology from a French biomedical institute. It's the same institute that spun out deep brain stimulation. So they've got a long history in neuro technology. And our implantable platform, our ARC-IM is built to be BCI ready. It's built to receive instructions from other devices and sensors, and it's agnostic as well. So we believe strongly in the BCI that we brought in-house. We think that's going to enable us to be first-to-market with a meaningful therapy. But in the future, as other technologies develop, there's nothing that precludes us from also sort of plugging into those brain recordings as well. So I like where we're positioned here, and I don't think we're necessarily getting the value that we deserve for the progress that we've made. I think that's maybe some latent value and upside. Okay. So we're now commercial, obviously, as of late last year. And what are people saying? I mean there's a lot of enthusiasm among the patient groups. This is the Reeve Foundation. Their Chief Science Officer said, this is the first ever therapeutic option for SCI. It shatters decades of belief that these injuries were untreatable, the impossible is now possible. The German Association, I've been following this for over 20 years. Nothing like this has been brought to the clinical setting and Wings for Life out of Austria, this is our most visible success. So again, we don't have to spend a lot of capital on marketing. We've already been contacted by thousands of patients. Also the go-to-market, as I mentioned earlier, is really straightforward. There's a limited number of rehabilitation clinics. And they're really at the core of what we're trying to do over the next several years. They will decide whether to, of course, purchase a device for use in the clinic or prescribe one for use in the home when the label expands to that. They'll also refer patients to neurosurgeons in the area for the implanted device at which time they'll come back for ongoing care. So this channel that we're putting in place to build trusting enduring relationships with these clinics very strategic for us, very strategic. We've already hired our initial sales organization. You can see the regions here. And also, again, reinforcing limited number of call points in the U.S. and Europe. And we're going to be really focused at first on the top 75 accounts in the U.S. Those are our pivotal study sites. Also these hubs within the VA system that focus on spinal cord injury as well as other flagship centers. So starting with 6 reps, increasing to 12 throughout the course of the year. Let's learn, let's see where to deploy them what the archetype is. And then later, we'll expand to the other 375, which includes VA spoke centers, other rehabilitation centers. Eventually, we think for this first platform, ARC-EX will have 20 or 25 reps here. And then we'll increase the size of the field organization in preparation for the implantable introduction. This is a very complicated slide for a setting like this, but I want you to show that we've put thought into the reimbursement pathway. So the reimbursement doesn't really matter for clinic purchases, they can use their capital equipment budgets, but for home use, personal use. We're actually going to not pursue a Medicare code, a HCPCS code for 2.5 years because we want to establish invoicing history at our desired price point. And we have the luxury of being able to do that because so many of our patients are cared for by the VA or workers' comp. And we also think some percentage of them can self-pay because they have legal settlements or access to GoFundMe campaigns that will support the purchase of devices. Thereafter, we'll seek the Medicare code. And then private payors are really the wildcard. Typically, they follow Medicare. But given the sympathetic nature of our patient population and really the compelling results we're seeing, I think on a case-by-case basis, we can get the private insurers to step in here, but maybe we can convince them to make coverage decisions as well. That's really upside for us. Also, given that we're now commercial, I need to pay some attention here in the deck to our operations considerations. So we've put in place a scalable manufacturing process using easily sourced standard components and raw materials. We're leveraging a contract manufacturer that has ample capacity. And then we're doing the final kitting and assembly ourselves in our headquartered facilities. It takes less than an hour. So again, not a constraint, but we can control the quality at that time. And then also to further mitigate risk, we're building early, so ahead of demand and in large lots to ensure consistency. We get the stimulation engine from a CDMO in particular, in the Netherlands and then other suppliers contribute to the device. And then after assembly, in rest of the world, we're going to ship directly. But in the U.S., actually, we have quite an important relationship with a distributor partner called Lovell. And this is owned by a former military veteran who has preferred contracting status with the VA. And indeed, because of that, we're already on the VA contract, just days after we got FDA approval. So we can start selling into the VA right away, in very unusual and a real advantage that we've gained via this relationship. In terms of team, I didn't introduce myself too much, but I'm in medtech, my whole career. First half was with Medtronic in the U.S. and Europe in Cardiac the management, cardiac surgery, diabetes, sales, marketing strategy, product strategy, business development. I also ran a NASDAQ-listed company. I founded a couple of startups. And I joined Onward 4.5 years ago and returned to Europe at that time. Rob, I mentioned our new Chairman, impeccable credentials and also just an outstanding guy and a very strong team. And then that speaks to the mission. We can attract people here who know how to do it and want to make a true difference. I should also comment a bit on Ottobock. So we did raise the $50 million in equity financing last year, Ottobock anchored it. So I hadn't heard much about them before I started this outreach. It's a private company, but a global leader in prosthetics, direct in 60 countries. In the U.S., they have 400 company-owned centers where these prosthetics are fitted, 9,000 employees, very profitable, almost $300 million in EBITDA. And they're now our largest shareholder. And it's a good partnership. We're just going to sit down and figure out what can we do together that would provide advantage to both of us. So nothing forced, nothing compelled, just a good supportive partner that's been in the field for over 100 years and has a lot of domain expertise. And they consider what we're doing to be a game changer. There was a lot of news flow last year. I started with the kind of big 4 bits of news flow from the second half of the year. It's not going to stop. We're going to have continued catalysts enabled by these 3 platforms we have. So with ARC-EX, we still want to get home use or personal use added to the label this year. So along with that, the beats are home use submission, home use authorization, also European approval, so the MDR submission CE mark and first commercial sale outside the U.S. With the ARC-IM, the implantable platform, we're doing early feasibility clinical work in Parkinson's mobility funded by the Michael J. Fox Foundation. We also have an important clinical results publication from the clinical feasibility work. So heading into the pivotal study, we will publish in a top-tier journal, the results from the first 14 people to receive this therapy. And then associated with the pathway to getting ARC-IM approved in the U.S. IDE submission, approval and first participant enrollment. Also this year, we want to use ARC-IM on bladder function, this underactive bladder. See if we can eliminate the need for people to insert a catheter 6 and 8 times a day to urinate, which leads to frequent infection and antibiotics courses and sometimes hospitalization. This is also grant funded from the Christopher Reeve Foundation. And then we'll continue to do ARC-BCI implants. Again, grant funded. So it's really a nice model. A lot of our pipeline activities, they advance with the benefit of grant or nondilutive funding. So we can be very focused in the deployment of our own capital on things that are closer to commercialization. All right. Thomas, take it away.

Thanks very much, Dave. How much time do we have left back?

10 minutes.

Okay, great. So we have time for a few more questions. Is there anything from the floor to kick us off? Yes. Stein from the Netherlands.

You briefly spoke about competition, but when do you realistically think you will face it and from who?

Yes. So it depends on the platform. So with the external device, there are actually 2 very small companies that have spun out of University of California that are working on similar external stimulation devices. We've actually already exclusively licensed the intellectual property from University of California. So we think we're in quite a strong position from an IP perspective, notwithstanding scale advantage, experienced management team, being first to market, all of those advantages as well. So really when talking about competition on the implantable side, one has to envision that the current active implantable companies, maybe like a Medtronic, Abbott or Boston, may view this as an attractive new category, and they may want to enter the space. They would have to modify their hardware, conduct clinical studies. They have to navigate our very large IP portfolio and they'd have to develop the know-how as well. And having been in strategy for Medtronic for a while, I can just add, they prefer to use their balance sheet and try to buy us at that point. Not that we want to sell, we think we can create an independent, autonomous, very valuable business given everything that we have going but this is how we're thinking about competition. I did spend some time already on competition with the BCI where, again, all those companies, for the most part, are working on different things. Our unique place in that space is our knowledge of how to restore movement of the human body using a BCI. So I don't view them as competition really. We'd like to see the field develop more fully, but we feel very secure in where we sit there.

Yes. At the front end.

Yes. So now you're commercialized in the U.S. How is the kind of the U.S. structure building out now that you -- this is going to be a primary focus at least in the commercial leasing side? How is that going to build out now in the U.S? I know you have -- I think you have an office in Boston. And where do you go from there relative to the U.S. company versus a Netherlands company, and I think you might be doing in Europe relative to getting approvals?

Yes, Gerry. So we have -- it's a little complicated, I have to say. So we were founded in Switzerland by neurosurgeons and neuroscientists at the leading kind of engineering school there and hospital there. And then the first professional CEO actually moved the company to the Netherlands. And then when I came aboard, I moved a lot of it back, so we could work really closely with those researchers and improve our velocity and so on. So we do -- we're domiciled in the Netherlands, but we have significant operations in Switzerland and now significant operations in the U.S. as well. So what's in the U.S., mainly a field sales and service organization and a clinical trial engine. In addition, a lot of the management team are Americans who have experience working in Europe because it can be actually challenging to find Europeans who have experience commercializing in the U.S. So we've gone the other way. And that's me, for example, but that's kind of our archetype for management. And I think it's going to continue to evolve that way. We'll have the customer-facing sales and clinical group here and then the kind of management functions largely over there. At a certain point, we might simplify things a bit. We'll see. And we are Euronext listed today, but we're obviously exploring coming over to NASDAQ at the right time. I think, hence, the invitation from JPMorgan to present here today.

Is it a U.S. subsidiary here actually?

Yes, we have an inc., of course. We have a Delaware Corp here.

You're located here or you're located there?

I'm over there actually. I'm in Switzerland. Yes?

Firstly, the clips in the videos specifically were very, very moving. I just wanted to actually -- that got me thinking from the ARC-EX and ARC-IM products that you do have, are there any additional indications? Because you did mention a few, but just wanted to understand what other applications is something that you guys are looking at or could look at?

So I think it's early days, but this external device now that it's approved, it's fairly easy to use it in research settings to explore other indications. And so we're partnering with a number of different centers around the world who have grant funding, and we're supporting them with devices to facilitate these studies and identify additional indications. So you'll see people looking at using the ARC-EX device for upper arm function, for stroke, for example, for blood pressure, for mobility. We've seen restoration of sexual function, body temperature regulation. So I think my perspective on that is let's see where the data takes us. It's pretty -- it's a pretty efficient way for us to determine the next label. And if the data is good on one of these and the -- and it's something that's prioritized by the community, then we'll do it. With the implantable device, that's Class III. I think we have to be a bit more intentional about what we do. But we have the benefit of being able to gather clinical feasibility study data, up to 10, 15 patients using grant funding. So there again, we're using our implanted platform in Parkinson's for blood pressure and mobility and in spinal cord injury for mobility, upper extremity function and then starting this year incontinence. So underactive bladder, again, not competing with Axonics now Boston Scientific or Medtronic there. So that's the way we're thinking about it. And I think we -- if we come back in a year, maybe the picture will become more clear. And we're not forced or compelled to make that decision today either, again, let's see where the data takes us.

Okay. Maybe one from the podium. I think you spoke a little bit, David, about the BCI and in-licensed to BCI. Why that specific BCI? And why was it suited to the applications that you're pursuing?

Yes. Thank you. So there are lots of different BCIs out there. Some are intravascular, some are penetrative, so they're robotically delivered and then hundreds of electrodes are woven into the brain itself. Others are these thin film structures that are deployed with a catheter and unfoil underneath the dura. And I think they're all interesting, but none of them are really ready to do what we need to do. And they all have, I think, at this point, still some fundamental questions associated with them. And so in this BCI that we brought in-house, this is a relatively simple device that sits on top of the dura, doesn't penetrate that lining of the brain nor does it penetrate the brain. And it also already has 7 years of human safety data, and it gives us enough resolution to power what we need power. It's enough information to restore movement. So for us, it was a relatively easy decision to bring that out so that we could develop a platform under our quality system with an integrated bit of hardware and software. But again, if any of these, they're all very well funded at nice valuations. If any of them make a lot of progress, great. We're going to continue to chat with them, but we're very pleased with the partner we have now.

Okay. Thank you. Are there any more questions from the floor? Okay. I think we can leave it there then. So Onward Medical and David Marver, thank you very much.

Thank you, Thomas. Thank you.