Photocure ASA (PHO) Earnings Call Transcript & Summary

All right. Well, good afternoon, everyone. Good morning here in the U.S. My name is Dan Schneider, President and CEO of Photocure. Welcome to Photocure ASA's First Quarter 2024 Results. Joining me today is Erik Dahl, CFO; and David Moskowitz, Vice President, Investor Relations. Next slide. Just a reminder, the usual disclaimers are in place for today's pression. Slide 3, please. All right. Great. So first quarter highlights. Product revenue grew at 10%, unit sales 6% year-over-year. We had 17 Saphira towers placed in the U.S. There were 6 new accounts that were open. There were 5 upgrades from existing accounts and then -- and we'll get into this more today. We'll talk about the 6 mobile Saphira towers that are now carried in the ForTec's system. The -- in Europe, we're executing on the priority growth markets, both U.K. and Italy had significant double-digit growth, France is also coming on. The underpinnings of that business look very, very strong. We're expecting an increased momentum through the rest of the year. And the Nordics have stabilized, and some of the countries have actually increased slightly as they await the upgrade to Olympus Blue Light equipment in the second half of this year. We still face ongoing challenges with flexible BLC in the U.S. slowly eroding. Single manufacturer in the U.S., which plays into the Citizen's petition and the hope that one day soon the product is classed down to a Class II for a 510(k) pathway. We are fully aware that all the major manufacturers of Blue Light equipment across the globe are highly interested in the U.S. market, and they're queuing up for that day. And then we've had a slight delay in the Olympus upgraded Blue Light equipment. We expect it to be in the first half of this year. It is now pushed into what they're saying now is early second half of the year, so ongoing. From an EBITDA standpoint, we had nearly NOK 8 million, excluding business expenses, was NOK 8.6 million. It's been mostly stable for 9 straight quarters, so we are getting our operating leverage. We have a very strong balance sheet with NOK 258 million in cash, and as we announced recently just in the last couple of days, Cevira has been entered into the Chinese NMPA for review by Asieris, and that brings a $2 million milestone to Photocure, which we expect to get in the coming week. Recent milestones, the Phase III data trial in China using high-def equipment was presented at ASCO GU and at EAU, was met with a lot of interest. In addition, I think probably one of the most significant presentations in quite some time was a VA Bravo data at AUA. It was a packed room. People were standing room only. There were only 4 questions mostly intrigued and asking and what this really means, understanding that what we are saying is that Blue Light technology in the era of all these new expensive therapies coming up can make a definitive decision in the diagnosis and treatment for bladder cancer patients. Said another way, patients who have Blue Light Cystoscopy will get a better diagnosis and get on the right medications sooner. And if they don't work, they'll go to the next generation. So this was extremely exciting, with not only recurrence, but progression overall survival showing significance. There was an acceptance, I said, of the Asieris Cevira program. That is -- I know there's been various conversations on various platforms. That is a probable 18-month review. We'll wait to hear officially from Asieris as that continues through its pathway. And as you all know, Hexvix for China was submitted last fall. That too is on an 18-month pathway. However, because of the data from Hainan, the medical tourism data from real-world evidence, there is a thought that maybe the Chinese authorities may speed it up a little bit more. But both are on the typical 18-month review program. ForTec Mobile, we'll talk a little bit more about this strategy. It's probably maybe one of the worst kept secrets in the history of business. The definitive agreement is in process between Karl Storz and ForTec. It has been ongoing negotiations for months. However, for anyone that's aware, you have probably seen it, ForTec has already begun the promotion and begun doing cases across the U.S. with their mobile platform. They created a special rack tray to carry this equipment mobile throughout the United States. They started in the -- in 2021, with the pilot program with 1 tower. They recently purchased 5 more. They have 6 in their possession. This is the beginning of where they intend to go with this. If you look at any of the past analogs of various mobile equipment that they've carried, whether it be the Fusion, MRI or Galil's laser -- cryoablation system, which I actually personally had experienced with back in my past history, they make a significant impact on the market, and we'll talk a little bit more about how that makes that impact, but this is really exciting for us. And we're in the early, early stages of what this could mean to us. And finally, the reclassification of BLC. There was an additional supportive comments by Olympus to the Citizen's petition. We also had written into the Oncology Center of Excellence, and we'll continue the pressures there, both legislatively and regulatorily. All right. Next slide, please. So let's get into the segment trends. Slide 5, please. All right. So for the U.S., we had strong trends in the commercial region picking up in March. We are still facing some of the headwinds of Flex. If you remember back, Flex was officially declared to be beginning the withdrawal or the lack of support basically beginning in March of last year. So for the first quarter of this year and second quarter this year, we still face significant Flex units that we had in prior years that we don't have now because we've now -- we're down to 27 Flex machines operating in the U.S. through the end of March. In Europe, there was a consistent growth. A lot of that is fueled by a good amount of business. And Germany continues to grow at its mid-high single digits. And then we had significant growth now for several quarters in a row in both Italy and in the U.K. This is fueled by the upgrades and the reignition of many of the old accounts as well as new accounts. And we expect France to pick up momentum as we move into second, third and fourth quarter of this year. So very, very, very pleased with the developments. And I feel like the organization has got back on track after facing some things that weren't so much in our control, whether it be Flex, COVID, the delay in the Cevira launch, et cetera. So looking really forward to it. I think Europe, in particular, is looking forward to the Olympus launch, which is used in approximately 35% to 40% of the accounts throughout Europe and very heavily throughout the Nordics, which we intend to regain position on. Next slide, please, Slide 6. So some of the key trends in North America, revenues increased 13%, in-market units rose 2%. But I think what's most important, and this is sort of an estimate, is that the rigid growth was approximately 12%, and that is outpacing the flexible BLC phase down. We'll continue to see BLC slowly erode through the market this year. Really where we're at today is the loyalist who really believed in Flex and used it are trying to hang on to it. They are, in many cases, relegating it to the more severe cases. So usage may be dropping, but they're trying to keep it going for as long as they can. In the installed base of BLC Rigid, as I mentioned, there are 17 Saphira. We also had a temporary backorder on 5 new account POs for Q1 that will be placed here in Q2 awaiting certain pieces. This is a temporary backorder expected to be resolved. We had 9 accounts reactivated in Q1. We had 18 reactivated in 2023. Your question might be, what is reactivation? Reactivation are accounts that may have gone 9 to 12 months without purchasing and many times, reactivation is a matter of a key user who has moved from one hospital to another, could be the equipment has been down or they haven't upgraded it or could be a process snafu through the nursing staffs. But in any event, the accounts are being reactivated and back online. We also strengthened the label in Canada for reuse and CIS. And then we also launched our -- beginning launch of the ForTec Mobile strategy that initiated in the first quarter. The 2024 AUA was outstanding for us. BRAVO II data was presented, as I mentioned. I think it's also important to note, in this space, if you're wondering how important Blue Light might be, the non-muscle invasive bladder cancer space has currently 29 registered trials in the U.S., 10 of those are Phase III. In almost every case, these are trials seeking patients who have BCG failures or CIS. And if you look at what Blue Light does, that is exactly our spot. We are the best at detecting carcinoma in situ, and we're fantastic at detecting whether or not BCG has worked or not worked in the treatments. And this opens up the opportunity for these second-line therapeutics. So as you can see, there's a lot of interest from their side of it to see Blue Light Cystoscopy rapidly adopted throughout the U.S. and eventually throughout Europe as well as they make the registrations there as well. Pace on registry to that point is extremely viable. We capitalized it last year. It is highly interesting to all the major manufacturers. I can't get into specifics as many of these things are under NDAs, but there's a lot of interest in looking at real-world evidence and how their products are being used in the Blue Light case. And then also a lot of activities around reclassification, as I mentioned earlier, with all the major manufacturers now having weighed in on this. And in addition, the special controls which is basically the recipe, has been put online by Karl Storz. And so we are hoping that the FDA picks this up and begins the process. But at this point, we have not heard through Karl Storz yet any official word on it, but we are hopeful and we continue as an organization to apply as much pressure as we can, despite it not being our Citizen's petition, but we are doing everything we can to get this fixed. Next slide, Slide 7. Right now in the U.S., 40% -- 42% of the scopes in the U.S. are in the new Saphira and we have 5 on backorder, and we'll continue to progress. Our range this year was 40 to 70 new Saphira. And again, this first quarter, we had 17. So we're well on track for our guidance. Slide 8, please. So trends in Europe, revenues increased 9% year-over-year, and there was an 8% unit growth in Q1, heavily driven by Italy, U.K. and Germany and Belgium. We executed on a plan to increase penetration in those priority markets as I said, U.K. and Italy. These are not small double digit. These are actually very, very strong double-digit growth in these countries. So we're really looking forward to. It's been consecutive quarters now so we can claim that this is actually a path that we're on. And we know that in France, the underpinnings of the business from KOL engagement, key institutions adoption, equipment upgrades and new purchases that all those things are in place now, and we expect France to start picking momentum up through the first -- through the second quarter and through the second half of this year. Two abstract presentations, there's pictures to the right. A lot of interest in Photocure and Blue Light Cystoscopy. And then we had many of the major KOLs across the globe who I met personally at the booth at EAU in Paris. All right. Next slide, please. So I'm going to take a moment on this slide just to kind of talk through some of the markets in the DAC region, Germany, Switzerland, it's a gold standard. We have KOLs in place, good equipment. The upgrades that we do in Germany tend to be more minor because they've done a good job of keeping their equipment up. They have a high penetration rate in roughly 40%, 45%. They continue to grow at mid-single digits. We don't see a change to that quarter-to-quarter. It's ranging in and around the 5% to 7%. So we expect that good strong middle single-digit growth. In the Nordics, we had the issue with erosion due to outdated Olympus equipment. Olympus had the highest percentage of penetration throughout the Nordics than -- as compared to the rest of Europe. So the solution for us was to stabilize this business, which we have done, and we are in process of co-launching, so working with Olympus to co-launch Olympus new Blue Light equipment in the second half of this year. In the growth markets, which is France, U.K., Italy, Benelux, we're seeing underlying critical business ignitions in place, the KOLs, access to accounts, if you remember, we took over Europe in the midst of COVID. We didn't have access to many of the accounts for the first 12 to 18 months. We've gotten the equipment upgrades in full swing. I think we had 153 upgrades to date so far. The datas and the interest in Blue Light Cystoscopy is extremely high. The KOL engagement is extremely high. So country by country, the issue in France was equipment upgrades is critical. We also had some delays from Karl Storz and some of their deliveries on upgrades. The solution is the deliveries are in place now as we've moved through the first half, and we expect growing impact for France coming into the later half of this -- well, this quarter, second quarter through the second half of the year. In the U.K., we had issues with health systems striking even though we've got new accounts up and running and upgrades taking place, but we expect increasing momentum through the U.K. In Italy, a lot of outdated equipment. I think we've talked about in the past, we've got a similar mobile program piloting in Italy to offset some of the capital cost issues that they face and also trying to get around some of the niching because of it. So we are now engaged with some of the leading cancer institutions throughout Italy. We have a very, very strong growth rate going on in Italy, and we expect that to continue forward. And then Benelux was our very first European countries to turn around, in the first half, was growing at roughly in the mid-single digits as well. So very, very strong. The one other comment I'll make, we have the untapped markets. We have now started a pilot in Spain. Spain has a total addressable market similar to the U.K., roughly 60,000 TURBTs and it comes in at the average price for all of Europe in terms of its average selling price. The reimbursement is in place. The issue was equipment. We've now convinced Karl Storz enter that market and start the pilot. So we'll look forward to Spain contributing to the European results in the future. All right. Next slide. So this one is the slide on Asieris and the 2 programs that we've out-licensed to them. First one is Hexvix for China. As you know, it's been submitted to the Chinese NMPA. We expect that will continue. We know they're actively reviewing that file. Everything so far is on track as far as we know. So we could hear something at the end of this year and first half of next year. And then Cevira was most recently submitted in the last few days. That is an 18-month review. We have a $2 million milestone payment due to us that should come in the next week or so, and then that will then start through its process upon approval. Both of these products will be additional milestone payments and then, of course, royalties and sales milestones into the future. So these are all likely 2025 events. All right. Next slide, I'm going to hand over to Erik for the Q1 financials. Erik?

Thank you, Dan. Let's stick or stay on Slide 11 for the time being, please. And what we're going to look at in the next slide is the consolidated income statement. We'll look at the segment report for the 2 main segments. And finally, we will look at the cash flow and the balance sheet. A couple of words about foreign exchange first. As you've seen, the Norwegian kroner weakened also in the first quarter year-over-year and measured by unweighted quarterly average. The U.S. dollar increased about 2.7%, and the euro increased 4% year-over-year. And measured in Norwegian kroner, the impact is on revenue, positive approximately NOK 3.5 million, and on operating costs, negative approximately NOK 2.8 million. So we have a net positive EBITDA impact of approximately NOK 0.5 million. Final comment before we go to the numbers. Please keep in mind that unless other currencies specified all amounts mentioned in this presentation are in Norwegian kroner. So next slide, please, Slide #12. Yes. What we're looking at now is the consolidated income statement. Starting up with revenue, it was NOK 118 million in the first quarter. It's an increase of 11.8% or 10% -- NOK 11.8 million and 10% from Q1 last year. And the main driver was volume growth of 6%, but we also had the impact from foreign exchange as well as increased average selling price. The revenue increase at constant currency in Q1 was 8% compared to the first quarter last year. So it's well within guidance. Total operating expenses, including business development expenses was NOK 102 million, which is an increase of NOK 1.5 million from Q1 last year. And the increase was driven by foreign exchange with a total of approximately NOK 2.8 million, which is offsetting cost containment measures and timing of project expenses. EBITDA in Q1, after business development expenses, NOK 7.9 million in total. This is an improvement. The EBITDA of NOK 7.9 million is definitely an improvement from NOK 9 million from last year's first quarter, and the improvement is revenue driven. Currency impact included in EBITDA is approximately NOK 0.5 million positive for the quarter. Then we have depreciation and amortization, NOK 7 million in Q1. Main cost item is the amortization of the intangible asset related to the return of the European business from Ipsen in 2020. And net financial items in Q1 were a net cost of NOK 4.8 million, compared to a net cost of NOK 2.4 million in Q1 last year, and the increase in net cost is driven mainly by foreign exchange. Tax expenses NOK 3.9 million for the quarter. The net tax expense is mainly driven by intercompany items in the parent company as well as a minor amount of taxes paid in European subsidiaries. And after net financial items and tax, we have for Q1, a net loss of NOK 7.9 million compared to a net loss of NOK 11.7 million same period last year. And the main single driver of this improvement is improved revenues. Next slide, please. We're going to look at the segment performance. North America first, revenue for North America increased 13% in Q1, driven by price increase, foreign exchange and volume. The volume increase was 2% year-over-year, significantly impacted by a decline in Flex volume due to ongoing flexible BLC phasedown in U.S., and the rigid volume increase is estimated to 12%. Q1 direct costs declined year-over-year with NOK 1.7 million or 4%, in spite of a 2.7% strengthening of U.S. dollars compared to NOK. And the contribution was NOK 4.3 million positive in Q1, an improvement of NOK 7 million compared to same quarter last year. The improvement is revenue as well as cost driven. EBITDA in Q1, negative NOK 5.1 million, reflecting an EBITDA margin of negative 11% compared to negative 28% Q1 last year. So we have a year-over-year improvement of 17 percentage points or NOK 6.5 million. Looking at the European region. They had year-over-year revenue increase of 9%, which is mainly driven by in-market volume increase of 8% and by foreign exchange, partially tempered by stocking at wholesalers in the quarter. We are pleased to see significant growth in priority growth markets in the quarter. Direct costs decreased year-over-year NOK 1.7 million or 6% in Q1, in spite of negative impact from FX as euro appreciated 4% year-over-year. So we ended the first quarter with a contribution of NOK 36 million, compared to NOK 29.6 million in Q1 last year, and the improvement is driven by both revenue and operating costs. EBITDA for Q1 was NOK 19 million, reflecting an EBITDA margin of 27% compared to 22% in Q1 last year, a year-over-year improvement of 5 percentage points or NOK 5.3 million. Next slide, please, to look at the cash flow and the balance sheet. Net cash flow from operations NOK 5.1 million positive in Q1, compared to negative NOK 9.1 million in Q1 last year. The improvement was mainly driven by EBITDA and working capital. Cash flow from investments was in first quarter positive, NOK 0.2 million, and cash flow from financing in Q1 was negative NOK 6.5 million, which was driven by the Ipsen earn-out payment. The improvement from last year is driven by the repayment of NOK 6.3 million of the term loan from Nordea, which was fully repaid at the end of the second quarter 2023. So this gives a net cash flow in Q1, negative NOK 1.2 million, compared to negative NOK 22 million in Q1 last year. And the year-over-year improvement is mainly driven by improved EBITDA as well as working capital and last year repayment of the term loan. And with this net cash flow, we end first quarter 2024 with a cash balance of NOK 258 million. Looking at the balance sheet. We ended the quarter with total assets of NOK 714 million. Noncurrent assets was NOK 333 million at the end of Q1, and this included customer relationship with NOK 108 million. Customer relationship is the intangible asset identified in the purchase price allocation for the Ipsen transaction. Noncurrent assets also include goodwill from the Ipsen transaction of NOK 144 million and a tax asset of NOK 45 million. Inventory and receivables, NOK 122 million at the end of Q1, and the increase from last year is mainly driven by increased revenue. Long-term liabilities at NOK 151 million include the earn-out liability related to the Ipsen transaction of NOK 126 million. And finally, equity. At the end of the quarter, NOK 483 million, which is 68% of total assets. And this concludes the financial section. Thank you. Dan, back to you.

All right. Thank you, Erik. Next slide. Two slides left. We'll go to Slide 16 on sort of a summary on Q1 2024 results, which I'm very, very pleased with. We had 10% product revenue growth, 6% unit, and I think what's most important is year-over-year in the face of Flex decline, but we're executing against the key initiatives. And our focus, as we said, coming out of fourth quarter is to drive utilization and the many, many upgraded towers and new towers that have been placed throughout the globe. We continue to build on our operating leverage. Commercial businesses contributed positively in Q1. We see that continuing into the future, which is what we're all, of course, striving for. We have 17 Saphira towers installed, 6 new, 5 upgrade, and then we have the 6 mobile, I think, excitingly, we're launching the ForTec Mobile tower expansion. And to just kind of give you -- I know there'll be questions on this, to give you some context on this. If you look at some of the analogs that have been involved in these mobile strategies, I've seen somewhere, when ForTec got involved, market share in a 5-market player, so there are 5 different companies in the MRI fusion space, the folks at ForTec were able to drive 91% share because people like the operating model better than having to buy the equipment. So I'm not saying we're going to get 91% margin, our share, but I also want to say that I think this is a significant growth opportunity for Photocure, especially if you think about today's world where interest rates have risen, capital equipment budgets and capital budgets in general have tightened. So this is a release valve and, I think, a clever way to continue the growth of Blue Light Cystoscopy. The installed base of 154 Saphira towers in -- throughout Europe now represents -- I mean, in the U.S., now represents 42% of the towers in the U.S. And these towers are much more reliable. And what we see in general is that old machines slowly decay over time in usage, but these Saphira systems were able to regain that momentum. The Flex phasedown continues to be a challenge, but the growth of the rigid market is outweighing that Flex pressure. We, like I said, first and second quarter of this year, still had pretty strong Flex numbers and then it started waning second half of last year. So we'll be up some significant comps here in the second quarter, but then they'll start declining. The priority growth markets in Europe are responding well. And like I said, U.K. and Italy are in very, very strong double-digit growth consecutive quarters in a row. There is strong momentum in the entire space in non-muscle invasive bladder care -- bladder cancer and BLC. We have strong support and all these therapies are looking for an opportunity to work with us, and the cash balance remains strong. So Slide 17, last slide, is anticipated milestones. We're going to reiterate our '24 guidance at this point. We'll revisit when we come back to you at the end of the second quarter presentation in August, about 6% to 9% product revenue growth, positive EBITDA and 40 to 70 Saphira installs, including both new and upgrades. And as I said, we had 17 this quarter. So we're well on our way. A high focus on increasing Hexvix/Cysview kit throughput through continuing to grow the BLC tower base in the U.S. and the use in leveraging of the ForTec Mobile strategy, the penetration in the EU priority growth markets and the pursuit of Flex BLC equipment. We didn't talk about that today, but that continues to look forward to announcing that in the near term, but we intend to come out with a proprietary flexible system because that addresses approximately 2/3 of the total addressable market in which cystoscopies can be utilized. So we want to be in that space, especially in light of the fact that last year, first quarter in '23, the pipeline and the interest in Flex was exploding. And I think that's a testament again to the importance that Blue Light can play in the future of definitive care, definitive diagnosis for all these expensive therapeutics that are hitting the markets. We'll continue to proactively support the Citizen's petition, doing absolutely everything we can. Data will continue to publish from real-world evidence patient registries as well as third-party sources. Again, exciting news at AUA when we presented BRAVO II and we showed significance in recurrence progression and the holy grail of overall survival. And then finally, the Asieris assets will progress through the year. Again, these are Asieris' products, they will communicate. They're a public company themselves. We'll communicate when they communicate as best we can. But we anticipate that will continue to progress. What we are also aware of is they are going to have a pre-MAA application meet with EAU -- EU authorities. The reason for that is they did have European patients in their Phase III, and they want to see if the European Union or the European authorities would accept an application for an approval for Europe. If that is the case, they'll try to follow by the end of this year. And then we understand that they are going to reenter discussions with the FDA based on the Phase III results of Cevira being a different clinical design than what the FDA was requiring, they're going to see if they can get the FDA to agree to the way they had designed it. So I think with that, we can move to the last slide, which is Q&A and turn it over to David, who is probably going to have questions for us.

Okay. Thank you, and hello, everyone, and thanks for all your questions. Good queue of questions today. And Dan, you're correct. A lot of questions on ForTec. So question one, is the ForTec decision that you mentioned today, is that the large order that you were expecting? And related to that, is there still a large order to come?

Yes. I would call it the first phase tip of the spear of where they want to go. They start with 1 tower for their pilot in '21 and '22. They were negotiating from midyear last year all the way to where we are today for the extension. They purchased 5 more, which they've now deployed, and they do have -- so that gives them 6 in market today. They do have intention to expand that significantly for the rest of the U.S., and I think that's about as much as I better say without them having an agreement and announcement out themselves.

Okay. Great.

But I think the good news is we -- a partial big order. So it's just the beginning, yes.

Okay. Perfect. Excellent. Another question on the guidance, actually. Some people are feeling that the guidance is conservative. Can you give us -- can you comment on that and also talk about the key factors that would drive the guidance to the higher end of the range for this year?

Yes. I mean we're in the first quarter, and it looks very good. And I feel like we're in the range and very strongly in the range. I think Erik and I both agree, you can't come out first quarter and start adjusting your guidance, and we can take a look at the midyear. Why? What has to kind of happen to push this guidance even higher? I think ForTec traction, this model is phenomenal, is all about utilization, is driving utilization. So if they have a tech in every procedure, that's different than what we can even do. They have hundreds of technicians in the U.S. that sit in operating rooms to make sure that the cases go off. They try to stack 2, 3, 4 cases a day. They're running towers all over the United States. They're getting to accounts that don't have capital equipment -- or don't have capital budgets or maybe they're tied to Olympus, but they'd like to use Blue Light. I mean this has so many different opportunities for us. I can't underscore kind of excitement around what this potentially could mean for us. I think the Olympus launch in the second half for Europe is extremely critical. The sooner in the second half that happens, the better. We are in co-launch planning with them, in particular, for the Nordics. We also are working on regaining ourselves in Denmark. We feel we have a very strong application to go into the Danish Treatment Council. So look forward to that. That will be probably a late second half event, which then will lead into 2025. I think all of the excitement around non-muscle invasive bladder cancer and all these therapeutics, particularly in the U.S., are going to drive a lot of excitement around detecting and finding the patients who are BCG unresponsive or may have CIS, but it's undetected under white light, but can only be seen under Blue Light. So I think that's going to fuel our tanks. I think the continued traction of the EU growth, now that they've had full access for well over a year now, you're starting to see the fruits of that labor with KOL engagement, key oncology institutions now adopting Blue Light, new equipment throughout Europe. So it's very, very good. Yes, I think those are the -- I think that's -- and then it's driving the operating leverage. We've got a solid cost basis for our sales organizations, and I feel like we can drive more profitability, yes.

Excellent. A lot going on. And you answered a subsequent question about the Danish Treatment Council, when could that happen. And you talked about later this year, early 2025. Great. Cool. All right. Can you talk about the utilization of Saphira towers? How do you expect that utilization to trend over time?

It's old trend. You got to put in context of how institutions buy, and it's sometimes hard to pick up trends. You need a good time horizon on this. What we know so far is that, in particular, in Europe, especially Italy, now France, but U.K., those equipment were very, very old, and we're all, but abandoned. Getting new Saphira, new equipment in there, whether it's Olympus, Saphira or Wolf, has actually had a dramatic impact on their business. So there is absolute increases. In the U.S., we saw a little bit of a different nuance to that. In the U.S. standard definition over time degrades. The light bulbs dim, the equipment breaks, they have issues with cleaning it. The cables are busted. And so the usage goes down over time. What we've seen with Saphira is increased reliability as we predicted, and usage of those machines. So yes, it's -- and I think the excitement. It's now in high def versus standard def. So I think the physicians are really enjoying the experience in Blue Light. And I think beyond those things, other things that does also impact is make sure the process is in place, the users -- you have multiple users on it, using the Blue Light needs each institution. So I think it will continue to improve.

Okay. Excellent. With regard to the ForTec strategy, how will ForTec, Karl Storz and Photocure all work together on this initiative?

Yes, it might be -- this is exciting, actually. All of us are 100% aligned. I'll say one thing. On the organizational side, there was organizational changes at Karl Storz. I know the individual who leads the U.S. from the broad perspective, is the next Philips guy. Philips had experience with ForTec, very, very positive experience. So they are engaged and excited about. The way this program works is Karl Storz sells the equipment to ForTec. ForTec then deploys the equipment and they charge a per surgery case rate. And in that case, our disposables are used. And it's in those disposables that flow money back to Karl Storz. For us, it's Cysview. So we have an incentive. We want to see as many cases as possible to go off, Cysview is used, Karl Storz makes money on both the capital equipment and the disposables or the reusables -- not the reusable, disposables. And then the guys at ForTec make money on each procedure as upcharge. So all -- both us, Karl Storz and ForTec reps have met on local levels to develop strategy plans on which accounts to go after, which ones make sense, which users, which urologists, every account throughout the U.S. has put those plans together. And now with 6 towers deployed, some of those regions in the U.S. are already actively engaged. They're doing cases this week. They did in last week, week before that. They continue to grow. The key here is trying to stack cases. So if ForTec is going into hospital A, they like to see hospital A put 2, 3, 4 cases in a row so that they wheel in the Blue Light machine, the tech is there, the cases go well, they pack it back up, they put it back on the truck, they clean everything and the next day to go to hospital B and hopefully have 2, 3, 4, 5 cases lined up. And they will do that every day of the week. That's different than if you own the machine at hospital A. Then you're doing 3 or 4 cases, but it could be 1 on a Monday, 2 on a Tuesday and 1 on a Thursday, and then that machine sort of sits dormant. In this case, with ForTec, every machine can get to multiple accounts. They may get to 4, 5, 6 different accounts per machine, maybe more than that. We're going to see where this goes. And I think that's what they kind of learned is how to target, how to operationalize this as they were going through their pilot program in '22. So -- in 2022. So we're there. And they're extremely -- they are really excited about this. And as you've seen, if you get on their website, their LinkedIns, they had the dinner program at AUA, I mean, they are making a big deal of this. So with them promoting it, Karl Storz promotes it and we promote it, I think we got a -- that's what 3, 4, 5x the number of people on the street talking Blue Light in the world in which non-muscle invasive bladder cancer is exploding, pretty darn good opportunity.

Excellent. Wide diversity of questions here. So you mentioned in your prepared remarks, the co-launching of -- with Olympus on their new Blue Light. The question is, is there a cost to Photocure? Does Photocure to bear any cost with regard to co-launching with Olympus?

Now time to sit down with their territory reps to determine where the opportunities are, prioritizing it. But no, the cost -- I mean, the cost is us going out and now talking that Olympus has new Blue Light machine on the market. But no typical, I guess, what someone is asking is launch costs like as if we are Olympus ourselves. That's their money, their deal. But we're there to assist and help and accelerate where we can, particularly in the Nordics where they have a 90% share.