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

Good morning, good afternoon, everyone, and welcome to our ONWARD's webcast following the publication of our results earlier today. As usual, before we get started, please take a moment to read our disclaimer. Today's presentation includes forward-looking statements, which should be considered with the appropriate level of caution as outlined on this page. The slides and this recording will be available on our investor website after the call. Today's speakers include Dave, our CEO; Sean Sciara, our Chief Commercial Officer; and Amori Fraser, our Senior Finance Director. As usual, we'll go through a comprehensive update before opening for questions. You may submit your questions verbally or via the Q&A module on the platform. With that, I'll hand over to Dave.

Thank you, Seb. So it was an eventful quarter for ONWARD. Since our last update, we exceeded EUR 1.5 million in quarterly revenue. We received CE Mark and U.S. home use clearance from FDA for the ARC-EX system, and we raised EUR 50 million in new equity capital. So let me just run through these in a bit more detail, and then I'll also go into further detail during the presentation that follows. So most importantly, for most of you is commercial traction. So we continue to see acceleration of ARC-EX in U.S. clinics. We sold 40 units in Q3, and we exceeded EUR 1.5 million in quarterly revenue for the first time. Actually, we hit EUR 1.7 million, which is nearly a $2 million run rate. It's $1.96 million at today's exchange rates. ARC-EX systems are now available at over 60 U.S. clinics. We also achieved several important regulatory milestones. We received CE Mark certification for ARC-EX for use in both clinics and homes. We completed U.K. MHRA registration for the ARC-EX system, meaning we can now promote the device in the United Kingdom. We received U.S. FDA investigational device exemption, or IDE, for the ARC-IM system so that we can start the Empower BP clinical study. We received UL Mark certification, which is an electronic safety certification for the ARC-EX system. And we received FDA 510(k) clearance for home use in the U.S., which greatly expands our market opportunity. We continued our science and technology leadership, announcing simultaneous publications in Nature and Nature Medicine, and there was another publication on the LIFT Home study results in Neurology Clinical Practice. From a company perspective, we raised over EUR 50 million in new equity capital, anchored again by Ottobock and also anchored by Invus and a.s.r. And we strengthened our leadership team with the appointment of new senior executives. Let's start with more information on our commercial traction. So you've seen this slide before. This is a demand indicator. We continue to observe very high inbound global interest about ARC-EX. And these numbers are unsolicited inbound requests for more information or for a product evaluation. So thus far, more than 5,000 global leads have been collected, more than 3,300 collected in the U.S. alone and 430 of them are collected from U.S. clinics. So nearly every U.S. clinic whom we consider a target has reached out to ONWARD to learn more about this device. Unsurprisingly, our sales are also increasing, reflecting that demand. In the first half, it was a limited launch where we sold precisely the number of units we intended. And then we preannounced our Q3 results that we had sold 40 units in Q3, placing our year-to-date units sold at 70 and our penetration into over 60 U.S. clinics. We expect the demand in Q4 to remain strong to be sustained. And there are 2 important catalysts that may provide upside in Q4, but will largely be drivers for significant growth in 2026, that being the CE Mark approval that allows us to market the device in Europe and then the 510(k) that we recently received for home use in the U.S. And I'd now like to turn things over to Sean Sciara, our new Chief Commercial Officer, to walk through a couple of slides on our commercialization.

Thank you, Dave. We're obviously pretty excited about the 2 big catalysts that we have in front of us to put us in a great position for accelerated growth in '26. The first of those, as you mentioned, is the European launch. So as everybody knows, we received our CE Mark in September. And since then, we've gone on to complete the additional regulatory work to secure clearance and registration in both Switzerland and as Dave mentioned, the United Kingdom. Our launch is underway. Our initial focus, as you see here on the slide, will be on the critical cluster of DACH, so Germany, Switzerland and Austria. To that, in this initial launch phase, we will add the Netherlands and the United Kingdom. So 2 countries where we've had long-standing partnerships and clinical trial activity. As we look to expand across Europe, we're going to do that with a combination of direct sales where we think that's most critical as well as through distributor relationships where we think that is most appropriate. We have our leadership in place today. We have additional hiring underway. We commenced selling activity immediately upon the CE Mark clearance, and we look forward to first sales here in Q4 and launching some of these early European centers in the fourth quarter. The second of the big growth catalysts is on the next slide, it is -- I would say, certainly equally, if not more important, and that is our recent home use clearance in the United States, which is all of a week old at this point. Initial response from the field has been fantastic. Our inbound leads are up threefold over our typical levels, and our clinic partners are telling us they have clients actively reaching out to them to talk to them about how to obtain a home use unit. Being able to extend this therapy into the home is obviously a very big deal for the community. For people with limited mobility, being able to extend the therapy into the home makes it more accessible. And we know from the LIFT Home trial that sustained engagement and use of the therapy is important not just for maintaining benefits, but potentially extending benefits as well. The home use trial builds on the tremendous success we've had in the clinic. As Dave mentioned, we've got a footprint of over 60 clinics. As people with spinal cord injury will need to get exposure to the therapy in the clinic to integrate it into their rehab programs to establish the appropriate stimulation parameters that are optimized to them, all of that is done in the clinic. So having this really large base already in place gives us a really solid foundation in the United States to begin the extension of the therapy into the home. As it relates to our readiness and getting moving, we've established home use pricing for veterans that are receiving their care through the United States Veterans Affairs system. We have the product on the federal supply schedule, so it is available today. For other home users, we have cash pay and third-party financing options. But we also know that ultimately, we'll need payer support here to make this therapy as broadly available as everybody in the community and we would like. So to help both patients and our clinic partners with that, we're going to be implementing patient access programs to support everything from prior authorizations to claim submissions to, if needed, appeals for claim denials. Development of those programs is currently underway, and we look forward to putting them in place in the first half of 2026. On the logistical flows on how a person goes about getting a system, you can see that on the slide. ONWARD is going to partner with clinics to provide all of that setup and support. So as ARC-EX is only available by prescription only, it means that the start of the journey for a person that wants to get access to ARC-EX in the home is -- the start of the journey is for them to visit their clinic to assess whether or not the therapy is right for them to obtain a prescription. Once there is a prescription, that prescription is sent to ONWARD. ONWARD works with its accredited third-party partner to complete the prescription verification and billing. And upon payment, the device is shipped directly to the person's home. The person then will take that device to their clinic for setup, for programming and for training. That training will be both for them and for any caregivers that they have that support them. And then ongoing support after that point is done in 2 ways. The primary piece of support will be done by the clinic itself, and ONWARD has a team of therapy consultants and clinical managers distributed around the United States to help support the clinics in caring for their clients. Beyond that, we'll also have support through the ONWARD customer experience teams, helping with things like logistics and troubleshooting, and we'll have a bunch of training resources, whether video print and all of those types of things on the website to help with the most common questions and the challenges -- potential challenges in any of those early stages of use. So we're obviously very excited about these new growth catalysts. We've been working on readiness for many months. We're looking forward to being able to bring the new therapy to people living with SCI in Europe and then also bringing this therapy into the home, allowing people living with SCI to extend the benefits that they're seeing with ARC-EX in the clinic into the home setting. Enthusiasm is very high for the product.

All right. Thank you so much, Sean. Let me now move on to some of the other achievements this quarter. Starting with our capital raise. So we raised over EUR 50 million in new equity capital, extending our cash runway into Q1 2027. This was a very clean financing supported by demand from high-quality, long-only and sector specialist investors. Our anchor investors were Ottobock, Invus and a.s.r.'s Global Impact Equity Fund. So we had a strategic specialist investor and a well-respected generalist investor. This is the second time Ottobock has anchored an investment for us, and we really continue to value that partnership very highly. Moving on, we also received UL Mark certification, reinforcing the engineering and process integrity underlying the ARC-EX system. The UL, for those of you who don't know, certifies that ONWARD meets rigorous standards required by UL Solutions across design documentation, certifications, component traceability and safety test reports. This opens the door to certain U.S. clinics and hospitals that have a strict requirement for a nationally recognized testing laboratory mark. So for example, the biomedical engineering departments in certain clinics or hospitals will not permit the purchase and deployment of a piece of medical hardware without this UL certification. So we're pleased to have this now in place. We continued our legacy of outstanding scientific publications in the third quarter. There were concurrent Nature and Nature Medicine publications detailing the blood pressure feasibility study results and the underlying mechanism. So our thanks and congratulations to Professor Courtine and colleagues for those breakthroughs. There was also a publication on the LIFT Home study results published in Neurology Clinical Practice. So more on that. That was a study we did to -- as part of our data package for FDA to get the home use 510(k). There were 5 sites, 17 participants looking at the safety, usability and therapeutic benefits of at-home ARC-EX therapy as a continuation of in-clinic treatment. So 96% of the sessions that were attended were successfully completed. Compliance was high. We observed that the home use maintained or further enhanced the benefits following in-clinic use and 65%, so about 2/3 of participants showed clinically meaningful improvements in at least one primary strength or function assessment during the study. And as is always important, there were no serious device-related adverse events. As far as Empower BP is concerned, and again, we did get IDE approval from FDA to start Empower BP. We have our first site activated, and that is Craig Hospital in Denver, Colorado. This is one of the world's preeminent rehabilitation clinics, and we expect additional site activations to follow this in rather short order, and we further expect to announce the first participant enrollment before the end of the year. We continue to strengthen the leadership of the company. In fact, this is the next wave of leaders that we need to scale the company. I'm very pleased with the group of people who've chosen to work here and commit to our mission. You heard from Sean Sciara, a very impressive guy, very pleased to have him here. He initially joined us as VP Marketing, and we recently promoted him to Chief Commercial Officer. Sean is a long-time leader at Boston Scientific and Integer. He's launched scores of products. And again, we're very pleased that he's bringing his experience to bear at ONWARD. We also have hired a new Chief Financial Officer, who will be starting in early January, Ali Kiboro. Ali was CFO at AliveDx and a senior finance leader at Quest Diagnostics. He has more than 25 years of finance leadership, including service as a NASDAQ CFO. He is very well educated. He has an MBA from the Wharton School at the University of Pennsylvania and very pleased to have him join us, and you'll be hearing a lot from Ali starting next year. And then starting December 1, we have another high-powered senior leader that being Sherry O'Quinn, who will be joining us as Chief Clinical, Regulatory and Quality Officer. She's been a long-time leader in those disciplines at W.L. Gore, C.R. Bard, TriVascular and Endologix, so therefore, start-up experience as well as big company experience. She has experience as well with both Class II and Class III devices, innovative therapies and health care economics, and we're confident she's going to add a lot to the company as well. And you'll be hearing from her as early as December, but more likely next year. All right. So next to comment on our Q3 financial results is our Senior Finance Director, Amori Fraser. Amori?

Thank you, Dave. So as you have heard earlier on the call, we recorded EUR 1.7 million in revenue for this quarter, reflecting continued execution of our early commercial activities. Our cash burn for Q3 was EUR 8 million, driven by ongoing investments in commercialization, R&D and preparation for pivotal clinical milestones. We ended the quarter with EUR 32.9 million in net cash as of the end of September. And following the October capital raise, our net cash position increased to EUR 77.7 million at the end of October. This provides us with a strengthened balance sheet and supports our ongoing focus on disciplined capital management. Overall, with increased liquidity and ongoing operational focus, we are well positioned to execute on our near-term priorities. Back to you, Dave.

Thank you, Amori. Okay. Now on to our outlook. So putting up Slide 23 here on milestones and news flow. And you can see we've knocked out quite a few of these this year. There are some remaining and some may also occur in the first quarter of next year. But we continue to expect to announce first participant enrollment in the EMPOWER-BP pivotal study also first commercial sale in Europe for ARC-EX. Both of those are expected later this year. First-in-human use of ARC-IM for bladder could happen in first quarter. And then first implant of ARC-BCI for stroke is also something that we expect in the coming months. We're likely to refresh this slide as we go into next year, but it's satisfying to see all of these milestones completed, which is really a credit to the very committed and hard-working team here at ONWARD Medical. So with that, Sharon, let's go ahead and open up the lines for questions, starting with the analysts. I think they have to press *11 if I'm not mistaken.

[Operator Instructions] I will hand back to you, Dave.

Thank you. So while we're waiting for that queue, there are a couple of questions that came in via the chat. One of them from Mr. English wanting to know about the pricing for ARC-EX in the U.S. and Europe, clinics and home. So the pricing is more or less the same for U.S. and Europe, allowing for differences in foreign exchange. We do intend, as Sean Sciara indicated earlier in the call, that we do intend to price the home use device about 25% lower than the clinic use device. A couple of reasons for that. One is we're a mission-driven company. Access is very important to us. So we want to make sure that this device and the therapy is available to as many people as possible. And also, it's a more limited device in terms of feature set than the clinic use device. All right. It looks like we've got a few questions, but I'm not seeing them, Sharon. So why don't you take them?

Your first question comes from the line of Ed Hall from Stifel.

A couple of questions from my side. I think, firstly, just on the backlog of leads. Could you talk about this from -- obviously, firstly from the clinic and the home use perspective? And if we think about looking to next year and collating leads into sales, how is this going to be -- how is this going to work? Are we going to see those already in the clinic prioritized? That would be my first question. Second question would just be on your outlook based on the data you've seen from revenues this year as a percentage of sort of ARC-EX devices that are put on rental versus outright purchase. That would be great. And then I have a follow-up after that.

All right, Ed. I love your compound questions. I'll do my best to keep track here. So we are unlikely to pursue a lot of direct-to-patient sales, at least in the next several quarters because we think it's going to be more efficient and effective to go through clinics. And we want people with spinal cord injury to first experience the therapy in the clinic. That way, their programming parameters can be optimized. They can be trained on using the device. Their caregiver can be trained on using the device, and then they can be prescribed use of the device for use at home. And also, as Sean indicated earlier in the call, we -- part of our deployment case is that home use devices are paired with clinic devices and in a very efficient way with a QR code, the programming parameters can be ported over to the home use device. So for those reasons, the way we're viewing the queue or the lineup for home use sales is that we're expecting that most of the home use sales will come from those patients who have already or will experience use of the device in the clinic environment. Secondly, as for next year, as you know, we don't issue guidance at this stage of the company. However, the consensus is that we'll do low to mid-teens in revenue from a euro perspective, which would be mid- to high teens from a dollar perspective. And that would constitute more than doubling and even perhaps tripling of revenue year-over-year. So we would consider that a big success, and that would be in line with year 2 of some of the more successful med tech companies that have emerged over the past decade or so. I think I might have forgotten your third question, Ed.

It was just on -- maybe just looking at this year as a percentage of rental cases versus outright purchase.

Yes. We haven't really broken that down, at least not at this time, but the vast majority of them are purchases.

Yes. Perfect. And then finally, just quickly on -- obviously, you talk about EMPOWER-BP and the enrollment there. We've seen the first site activated in Colorado. Can we just unpack how quickly do you expect enrollment, especially for this indication? You've talked about the broad interest in ARC-EX, and I don't know how you could potentially draw comparisons to the therapy for the clinical trial and how quickly we could see full enrollment?

Yes. We're hopeful that enrollment will go quickly. There's a lot of interest and excitement about the blood pressure instability therapy in the community and the centers with whom we've been having discussions about participation and start-up have been identifying potential study participants. So it could go relatively quickly. It's -- I don't want to necessarily, again, guide on when the thing is going to fully enroll, but we're hopeful that we can get to the point of interim analysis by late summer. So if you recall, again, one of the benefits of having 10 breakthrough device designations is we have frequent interaction with FDA. Such was the case with Empower BP. We do have an interim analysis built into the study where we can pause at 33 participants and look at efficacy at that point. Should that go well, we can stop the study at 33 for efficacy, and I believe 60 for safety, and that would lead to a more favorable launch date. As far as full enrollment, again, I'd like to maybe defer comment on that until we get started on the study and I have more information.

Your next question comes from the line of Jacob Mekhael from KBC Securities.

I have one, maybe a follow-up on the home use purchases. From the patients that are currently being treated in the clinic, do you have an idea in terms of demand that those patients would have towards buying the device? And maybe can you quantify what proportion of those patients would be able to -- or would have the means to buy the device or would be able to get reimbursed for home use?