Q-linea AB (publ) (QLINEA) Earnings Call Transcript & Summary

Welcome to the Q-linea Q2 Report 2021. Today, I am pleased to present CEO, Jonas Jarvius; and CFO, Anders Lundin. [Operator Instructions]. And afterwards, there will be a question-and-answer session. Speakers, please begin.

Thank you very much for that. So first all, me and Anders are really happy to present for you our accomplishments during the second quarter of 2021. It's been a very exciting quarter, as we've seen in the presentation and Mats has read in the report as well, but I suggest we get going, and we take up the next slide, which is our disclaimer slide on Slide #2, and in case me or Anders will make any forward-looking statements. But then we move on to Slide #3, where we have sort of the highlights of the quarter. We, as a company, are developing disruptive solutions for faster infectious disease diagnostics. And the first product, as we could now announced during the quarter is now CE marked, and we'll talk more about that and the excellent performance we accomplished during that study. But if we then look overall, what we have done apart from having the CE marked in May 4, 2021, for the first product targeting gram-negative bacterias in patients with blood stream infections. We could also announce the start of our U.S. clinical study for the American market. We have also several commercial evaluations ongoing and we are really receiving good and strong feedback from those early potential customers. We've also grown a little bit in the quarter and are now 150 employees and consultants at first quarter end. If we then look apart from our lead product ASTar now CE approved, we have also made some very good and excellent development with our next product in development. That's a portable culturing technology that truly could enable saving additional more than 10 hours in the time to result for patients with sepsis. I'll also describe a little bit about the accomplishments we did there. But if we move to Slide #4, I would just like to put the first product into context. Sepsis or blood stream infections is one of the most severe threats we have in our health care system. Sepsis is a syndrome that it can occur. If you have a bacterial infection somewhere in the body, both bacteria can then leak out into the blood stream and under circumstances, our own immune system can start attacking our body and eventually shutting out -- shutting it down, leading to death. It's a big problem around the world. Every third second, a person will actually die from sepsis. In Europe and U.S., around 0.5 million people will die every year. So if we look at Slide #5, where we put 2 of the biggest challenges we actually have for mankind in sort to speak. We have sepsis to the left. As I said, the leading cause of that in our hospitals, around 1/3 of our person that will die in a hospital, will die from sepsis. Also septic patients when they progress throughout the disease and move from sepsis to septic shock, they also move into the intensive care beds. Very expensive beds, we have a few of these beds as we have seen during the pandemic and that's also one of the main driver that sepsis is the most costly condition to treat in the American health care system. Another problem, and that's where Q-linea can come in, is that around 50% of all patients receives inappropriate treatment. And that's the reason because you have to start treatment without actually knowing what bacteria is causing the condition and also what antibiotic to use to treat the patient. And even worse, around 20% of these persons will die before you get the current diagnostic result. So this is, of course, where Q-linea and our lead product ASTar can come in, and we hope things dramatically change the outcome for these patients. But on the other side, if you look at to the right, you have antimicrobial resistance. And this is, of course, a condition as soon as you start treating or using antibiotics, patients will receive a lot of drugs, but care will start growing and develop resistance towards those antibiotics. It has been presented as the biggest threat to mankind. As you know, antibiotics has really changed the game in how we can make treatment for cancer, for surgery, and of course to fight common infections. And here, again, rapid diagnostics could dramatically reduce unnecessary prescription. For instance, it has been reported that for respiratory issues, around 65% of all treatments are unnecessary. It might be that the patient had respiratory disease caused by virus and not by bacteria. And then of course, you should not use antibiotics. And we have sort of a very unique moment now to start acting upon this because if we continue to use antibiotics and we don't have better diagnostic methods, it sort of depicted that the death toll will rise to around 10 million people in just 30 years. So we really need to start to act now, and we think that our product could be one piece of the puzzle in this very big, huge problem. If we then move on to Slide #6. This is really the highlights of ASTar, our first product. What I want to stress out is that we have developed ASTar together with our future customers that we are now, of course, approaching as a commercial company. And we had really listened into what's the need for these customers today. And what do they highly appreciate when they look at these type of diagnostic methods. And we have the 4 pillars, easy to use, fast, comprehensive and accurate. Now we have highlighted a couple of these areas within these 4 blocks, fully automation. What does that mean? I will come back to that on the next following slide. Also, of course, having a high throughput enables you to diagnose and run a lot of samples at the same time, meaning you can handle peak loads and lead-time hospitals. But of course, you can also have a high sustained throughput on larger hospitals. If we look to the right comprehensive, well, if you're going to act upon a result, you need to have a comprehensive result. So you don't have to wait for a traditional test that can take additional 1 to 2 days before you can actually change treatment. So comprehensive panel is important. And last but not least, I would say, is a true MIC results. And the mix result is the concentration that kill or inhibit bacterial growth and today we see in the right of antimicrobial resistance. The value of the MIC has increased over the years, and we anticipate it to increase even further for the years to come. So we think we have built a system that is future-proof and also built to handle other indication apart from blood, such as urine or isolates. So if we look at some of these areas and go into detail what they actually will mean for the hospital, for the patient. So we take a look at Page #7. This really covers the full automation. When you look at this lab, and I would say particularly now under the pandemic, we have seen that you have the huge workload at the labs. You have very little time to spend on each sample to be analyzed. And with full automation, it means that anyone in the lab can load a sample at any given time point. But it also means that the lab personnels can do more in less time. And when we evaluated the system here in Uppsala University Hospital that was one of the very strong feedback we received, they felt they can actually do much, much more with a system that's fully automated. And you also know that you will always have the same time to result with a system that you can simply load in less than 2 minutes, walk away and then the result will be presented. If you have manual step, that means basically that you have to start a manual step and in many cases, you might have to do something else in between before you come back to that particular sample. And that could also provide, of course, longer but also variable time to result, depending on the sample, and of course, how much time you have at that given moment. So we think that full automation is an absolute key for long-term success. Then take a look at Slide #8. When we rapid AST and a broad antimicrobial panel, that's also important. So what you see in the middle of the image, you will see the traditional diagnostic workflow for septic patients without going into detail, it's a multi-step multi-day process. Just start treatment day 1, empirically, meaning basically blind because you are lacking diagnostics. You use all the knowledge you have as a physician to treat, but you still have to select 1 treatment to start with. And then you have to wait until day 3, day 4, depending on, you have the green circle, where you actually know exactly what antibiotic to use to treat that patient with. And as I mentioned earlier on in the talk was around 20% of the people will have guided at this point. So of course, time to result matters. And ASTar with the full automation and, of course, Rapid AST, it means they can do that with a little less effort from the lab and you can also do it much, much faster. But here, the comprehensiveness of the panel comes in because if you have a broad panel, say, around 20 antibiotics or larger, it really means that you don't have to wait for the identity of the bacteria. You can simply start as soon as I have a positive blood culture. If you don't have a broad panel, you typically will have to wait until you have the ID analysis and then select the appropriate panel if it's an E. coli or if it's staphylococcus aureus resistance. So broad panel also could help you save time. If we then move into Slide #9. This is just one example where we think that you can see the value of rapid AST. This example comes from the preclinical study we did together with Uppsala University Hospital. This particular case was for an elderly gentlemen who had neuro surgery, and he was then diagnosed with aspiration pneumonia. And in the middle of the picture, you can see all the time stamps from the diagnostic workflow at the hospital. And day 1, he was put on Cefotaxime and then you can see that day 2, you had a positive blood culture, meaning that you can see presence of bacteria in the blood. And of course, at this time point, you could immediately start and lower the sample into ASTar. ASTar then presented the results the same day and actually reported that it was resistant towards Cefotaxime. Of course, at that time point, we were not CE approved, you cannot act upon that as you can do now. So you have to wait until the next following day to get the verification of the traditional method, but actually verified, yes, this is resistant towards Cefotaxime. Of course, more importantly, ASTar provided results on 10 more antimicrobials compared to the standard practice, and you could also provide what antibiotic to use to treat this patient with. So if you could have acted upon this already at day 2, we think this could have a dramatic outcome different for this particular patient. So I think rapid AST is definitely here to stay, and we can see a big and growing need for these type of tests. If we then look at Page #10. This becomes a little bit more complicated slide, but I'll try to explain it from a high level. This is why is true MIC or MIC value is important. And MIC was, again, the concentration that kill inhibit bacteria. Well, the reason is that if you can provide a MIC value, you can choose really the optimal antimicrobial amongst the various antimicrobials with the pathogens is susceptible to. And if you look at the image in the middle, you can see 2 antibiotics, you have antibiotic X on the top and antibiotic Y on the bottom. You can also see the orange line, which indicates the breakpoint. And the breakpoints are, of course, the guidelines as from EUCAST here in Europe where you can see that below that breakpoint below that concentration, it's all susceptible towards that specific antibiotic or above it, it's called resistant. And then you can see the small arrow that indicate the MIC value. That's the value where you can't see growing in presence of the antibiotic. And what is the importance of the MIC value? Well, if you look at antibiotic X, you can see we have 3 white concentrations between the MIC value and the breakpoint. And in antibiotic Y, you have 4 concentrations, meaning that it's farther away from a breakpoint. And then, of course, you can have a more successful treatment with knowing a mixed value, which you can simply choose if you have a method that only looks at [ SIR-only categorizations of sensitive intermediate to resistance. So here again, delivering a true MIC value could really select the optimal treatment for that particular patient infection. So it has a great value. And of course, when we see more antimicrobial resistance, this becomes more and more important. I have another example on Slide #11. Here, it's a little bit different. But also knowing the MIC value could really guide the treatment for a better patient outcome. This example comes from staphylococcus aureus and according to the EUCAST guideline, it's call susceptible for vancomycin, that's one antibiotics, if the MIC value is equal or less than 2. The problem with vancomycin is that it's quite toxic for patients, so you don't want to treat the patient with a very high concentration of vancomycin because that can have adverse side effects. And if you look at the middle of the slide, you have 1 green box where you see a MRSA strain deemed X, which has a MIC value of 0.5 milligrams. So of course, it's susceptible because it's less than 2. On the other side, you have MRSA strain Y in the pink bar. And there you can see the MIC value is to also susceptible according to EUCAST. But the problem here is that if you want to treat a MRSA strain with a MIC value 2, you need to have a very high concentration to have an effective treatment. And in this case, it would need around 800 milligrams per hour in liter. And that is a very high concentration that is actually toxic for that particular patient. So this is another example of just having an S.I.R method, you could start treat the patient, but with severe risk of producing worse side effects and toxicity in that patient. And you might actually not use vancomycin is that produce even a tougher drug. So here again, the MIC value can truly guide an optimal treatment for that particular patient. If we then move on to Slide #12. This is just the overall possible benefits for providing faster results. So these are 3 independent health economic studies that have all looked into what are the effects if you can provide the answer, 24 hours faster than the current standard practice. And from left to right, they have indicated a dramatic change in mortality. So of course, providing the correct treatment faster means that much, much more possibility for the patient to survive. Also in the middle part, that's more towards antimicrobial resistance. If you can early on go away from a broad spectrum treatment to a narrow-spectrum directed treatment, of course, you reduce the pressure for antimicrobial resistance to develop and you reduce the pressure for superinfection, which is a huge problem in our hospitals. And for the hospital to the furthest right, we can also see that this particular study indicated that if you are on the correct treatment faster, the patient can actually leave the intensive care bed, the expensive beds, the beds we have too few of in the hospitals on average 2 days sooner. And that, of course, is a huge cost saving for the hospital and also it frees up capacity intensive care beds. And as we have seen during the last year, this is something that's extremely important to have those beds available. And ASTar, could overall in general, provide 24 to 40 hours faster diagnostics. So we think that we are really looking forward to starting our own health economic studies to really look into how ASTar could play a role in the treatment outcome for these patients. If we then move to Slide #13. We then move into some of the key highlights for the second quarter. Of course, the biggest one was the CE-IVD mark that we received from ASTar in May. We had very strong excellent data. We'll show that on the next slide, had a broad coverage in our panel, and we've got strong usability feedback. But as I also mentioned, of course, we're also not just focusing on Europe. We want to go out to the U.S. market as soon as possible. And we could start clinical study for the U.S. market in June. We will perform a majority of the analysis in-house here in Q-linea in Sweden. We are now in a very late-stage contracting with very reputable hospitals in the United States, which we look forward to announce in the not-too-distant future. Thermo Fisher Scientific is also preparing to ramp up and starting the reference testing. So that is all something that's going to happen in the very near future. Of course, then, what we have also seen is we have now several sites currently participating in the commercial evaluation of ASTar. And of course, this is done together with Thermo Fisher Scientific or actually led by Thermo Fisher Scientific and we have received so far, very positive feedback from those evaluations. And as you could also see from the Q2 report, at this stage of launch, we don't plan to see positive margins really within the first year. And that depends, of course, on strategic placements of instruments to the right customers, and of course, initial low volume on kits versus instruments at this stage. And this business is really driven by consumables, and we want to see that ramp up. And that's why I think the full automation, the high throughput has set us starting a very good spots to be able to accomplish that. If we then look at Slide #14. These are the summary data from the CE study. And if we focus on the left part of the slide, there are typically 3 major categories where you need to present stronger data compared to the guidelines. And from top to bottom, we have what's called the essential agreement and that is really that the system can provide the same MIC value as the reference. You can see what you need to be above for FDA and ISO it's around -- it's 90% or 89.9% in the U.S. and ASTar provided 94.7%. So very strong results on the MIC value. In the middle part, you see the categorical agreement, that's the S.I.R. Of course, ASTar provides not only make value but S.I.R. treatment guidelines. And these can be used also by general practitioners, physicians in a bit simpler type of diagnostics. Again, you need to be about 89.9% in the U.S. and 90% in Europe. And we had 97.6% in the study. So super strong results. Last, you have to provide reproducible results, meaning that you give the same answer every single time. Here, requirements are a bit higher. It's 95% for both the U.S. and European markets and ASTar presented 99.6% reproducibility. So very, very strong data in the study. If we then look to the right, of course, this was our first product launch, our first panel launch. But already today, we offer the broadest combination of antimicrobials and dilutions of all currently available AST solutions. And of course, we delivered through MIC results. And on the smaller graph, you see below to your right, here we compare the coverage of antimicrobials and dilutions with the 2 other companies that provide a fully automated solution on the market. And of course, ideally on this graph, Q-linea is the orange circle. You want to be as high up to the right as possible to have the broadest coverage. And you can see that we already now by margin provides the broadest coverage but we are not satisfied. We really want to broaden the coverage even more, and we are still working with extending the capabilities of our system to really be able to act upon 95% or above of all infections. And I think that's a very good sort of goal to strive against. If you then look at Slide #15, we have some follow-up on the second quarter. Of course, we had a very successful direct share issue, the gross proceeds of SEK 301 million. And this really enables us to strengthening the commercial activities, build production ramp-up activities faster and, of course, support geographical expansions. Because we see together Thermo Fisher, a very promising market and a huge market for these type of products. And of course, we see us start to be a good product in that market. And also, as I mentioned in the beginning, we also had some very successful development of our portable culturing technology. We now have fully autonomous prototypes tested with excellent results. We are doing a European and U.S. market study that's ongoing to really fine-tune the concept, and of course, by having a portable culturing technology, it really means that you take the capabilities of culturing of the central lab because that's where it happens today, and you move that out to the patients where you take these samples. And of course, what that means is you can have a much more streamlined workflow in the lab. You can save more than 10 hours for many blood cultures because today there needs to be transported from the site of sampling to the central lab, and that can take a lot of time, 10 hours or even more. And of course, during that time today, nothing happens with the sample. But with our technology, as soon as you load the portable culture technology with the sample, you start incubating and reading. So of course, all the time that you have today wasted can now be used. And to me and to us in Q-linea, it's very important because we could then provide equal and better care for everyone. It doesn't matter if you become sick outside the hospital or during night time, you can still have the same time to result with this technology. So we really look forward on taking that to the next step of development. If we then move on to Slide #16. We, of course, need to comment on the Corona pandemic. I see, as I hope you also see, we see a slow but study move back to the normal life. We have seen a decrease in the COVID cases within the company, and we have seen, of course, more and more employees now being vaccinated. And we have actually started during this quarter for the first time to deescalate some of the predictive measurements within the company. So far, we have seen no major changes in time lines due to Corona or COVID. But of course, as you can see, we see the delta variant, there might be more variants coming up. So the time frame for the studies we plan can be affected. We still have to follow it carefully and see what happens. So far, I think it looks good. And we could, of course, see a potential effect on the commercial activities, either within the Q-linea or with our partner Thermo Fisher Scientific. We still see that it's moving in the right direction, and we're very happy about that. And of course, we're most happy that more and more people are vaccinated and less likely to actually die from this virus. And I think that is what should be most important to all of us. But as we say, it's not over yet. We follow it carefully, and we try to do correct mitigating actions when possible. So fingers crossed that vaccination will really ramp up throughout the world. that they are affected through the new variants that we see. So with that, I move to Slide #17. And that, I will hand over to Anders Lundin, our CFO in the company. So please, Anders.

Thank you, Jonas. I will, in 3 slides, go through the highlights of our income statement, balance sheet and cash flow that we reported this morning in our Q2 report. So starting with the income statement for the second quarter. We saw that during the second quarter, we -- the company carried out the first sales to Thermo Fisher of ASTar and consumables. So we reached SEK 4.3 million here. As Jonas already mentioned, we are having a negative cost of goods sold of SEK 9.3 million, giving us a negative gross margin of SEK 5 million, minus 117%. We had an operating result of minus SEK 68 million, which are higher than last -- the same quarter last year, mainly due to increase in the personnel cost. And we reported loss after tax of SEK 67.9 million. Earnings per share before and after dilution were minus SEK 2.47, and that is compared to the same quarter last year of SEK 2.37. So if I move into Slide 18. The balance sheet that we have by the end of the Q2, we had cash and cash equivalents of SEK 48 million and the SEK 10 million, the comparison is by the end of the year, end of 2020. We have invested in -- we have this direct issue and we got the liquidity. And sorry for that. We invested liquidity in the short term fixed interest funds of SEK 221 million is the balance by the end of the quarter. And we have also invested in listed bonds. The total of that is SEK 184 million, and we have also a short part of the bonds of SEK 57.1 million. We have inventories of about SEK 22.6 million compared to the SEK 12.4 million by the end of the year, and that includes a write-off of SEK 2.8 million in the quarter. So going to the my last slide on Slide 19. That is the cash flow statement for the second quarter. We had cash flow from operating activities was minus SEK 45 million, which was improvement by almost with SEK 10 million from the same quarter last year. The decrease in the cash outflow is mainly due to the improvement in working capital which is temporarily, you can say, we have increased our accounts payable and short-term liabilities. That's mainly invoices we will need to pay during the next quarter. We have some investment activities of SEK 203 million, which is the investments we are doing in the short-term interest funds and listed bonds. And the financing activities in the quarter were SEK 284 million, and that is the direct issue of SEK 301 million, minus the cost, the issue-related costs of SEK 17.3 million. So by the end of the quarter, we have in our -- we have total assets that can be transferred to cash within a couple of bank days of, all in all, SEK 510 million. So with that balance, the Board have assessed that will be sufficient to cover the needs for the next -- at least next 12 months. So by that slide, I would like to hand over to Jonas. Jonas?

Well, thank you very much, Anders. That concludes our presentation for the Q2 report, and we are now, of course, available for any questions. Thank you very much.

[Operator Instructions] And our first question comes from the line of Adam Karlsson of ABG Sundal Collier.

The first one, the obvious one. Are you able to comment at all on the number of systems that are placed in labs or perhaps the number of sites we're after is currently being evaluated?

So thanks for that question. So we have decided not to go out for that at this current period because we are at the early stage, but I can say that we have several sites in Europe and also in the U.K. that are now participating in running the system. We also actually have an additional site in Sweden, which also going to be included in part for the U.S. studies for some of the reproducibility. So we have a number of systems out and really running it in a clinical setting and really appreciate testing the systems, and we are very happy with what we see so far. But we have decided not to go out with any new placements because that will mean a lot of press releases coming up. So I think that will be my answer today, and I hope you can appreciate that.

Yes. That's fair enough. And I was wondering if you could give any more detail around the planned health economic study in terms of time line or size or design or so on or perhaps when you're looking to update us? And then as part of that, obviously, the commercialization has begun, although obviously in a highly focused way. But have you gotten any more sense for the weight that kind of would be customers are placing on an in-house after specific clinical outcome or health economic study?

Right. Yes. What I can comment on is that we are planning actually not 1 but 2 health economic studies. We're planning to do one study more in the northern part of Europe, which is typically less resistant setting. And we're planning one study that will be performed in the southern part of Europe, where we have a bit more problem with resistance. So because we, of course, want to evaluate ASTar in the low resistant settings versus also higher resistant settings. We are in contracting phase or have actually finished contracting with several of the sites that are obtained to participate in the study. So we will announce more details on the study already during this autumn. I think that's going to be important, of course, for the long-term success of the system. And I think it's also in my book, very well planned to look at it at different settings because you might have a little bit different needs of -- for a resistance for these two type of environments. The unfortunate part is that Northern Europe will see more already seen more resistance coming up. So we might all be high-resistant settings in 5 years or so. But currently, we can see these 2 sort of ones that we would like to investigate. So it's progressing well with regards to that. And I think a couple of comments we have, what we can see from evaluations is customers really appreciate that it takes so little time, less than 2 minutes, around 2 minutes to load a sample and you can actually upload it and then walk away and start doing a lot of other activities because all these labs as of today are still heavily involved in COVID-related testing. And of course, having that simple-to-use system is really a key. The second part, I think what we see is that people who have not experienced rapid AST before, they actually start seeing that particular cases where they actually react to see, oh, this bacteria is actually resistant, I can really act upon that. So it's sort of this lightbulb moment, which I think is really encouraging for us as a company, developing rapid solutions to see that when the customers connect to that and really truly see, this is something we can act upon. This could change the outcome potentially for this patient. So I think those are the 2 perhaps biggest ones that I would like to highlight. Then of course, when we look at the throughput for the system, of course, eventually, when we see the first initial phase of commercialization moving over to more of a ramp-up phase. And with the goal, we have to also address a bit larger hospitals where we can see the benefits of the throughput to come out in place. So I think that's really what I look forward to coming forward. But so far, I would say that both on health economics and of course, on evaluations, the feedback we receive is good. And of course, another important part of this type of controlled launches that it gives you time to see, do we have any achieving problems? Is there some software bugs that need to be addressed. So we can actually correct that before we go broader. And I think that's also very, very smart way to launch a system to be able to have a long-term success because we always aim in the 3- to 5-year scenario with our business plan with the way we develop our products and also looking out now, for instance, for the culturing device, where we think can be a very important key in connection with ASTar, but also a stand-alone product and also quite encouraging to see that to think about how that can also be linked into the workflow in these labs.

Great. And just on that point of follow-on product and product expansion and so on. Obviously, the gram-positive panel, you've got isolates, the portable blood culture [indiscernible] -- And then the plan for a health economic study or 2 studies. Curious to hear kind of to what degree are you needing to prioritize where you put your time and money and assuming all of these processes are not proceeding in parallel? What can you say in terms of where, what you're prioritizing the highest is there a clear order for that? Or, Yes.

Yes. In a sense, I think that's clear. And of course, we have a lot of discussion with a Thermo Fisher Scientific. I mean they are a great partner to us and, of course, have extensive knowledge throughout the world in these type of labs. So of course, this is something we discussed together. When I look at priorities and of course, you're also right, we are not a huge company. We are still limited, we can't do everything at once. We need to prioritize. I think also the successful fundraise we did enables us to accelerate some of the tracks a little bit more than we could have without the fundraise, and I think that's good for the long term. But I would say that on a high level, of course, gram-positive panel sort of completing the offer is top of our list. And of course, we're already working with that for sure. And then really, when we look at the future of ASTar, we're really looking into, of course, isolates market being a very interesting market. And with a broad panel with 2 MIC results that ASTar provides, we think that, that can actually bring a huge value to that market. But we also have urinary tract infections, for instance, quite a big group of people. So I would say that the priorities are for sure within the company, and we are, of course, discussing them. But on a high level, I would expect the gram-positive being the top one. And then perhaps following on with isolates would be the second priority as it is today. It can change for sure, but that's the working assumption. For the part of blood culture knowledge, it's a little bit different. That's something that we have seen very, very interesting feedback on now when we've done market analysis, and we can really see the benefit of this product for a lot of different settings in the U.S. and Europe in urban and rural areas. So that's something that we -- with the fundraise wanted to be able to actually accelerate even further because the data we have now a fully independent working prototypes is absolutely excellent. We can actually be faster on just through growth detection than the fastest standard cabinets today. So that's always positive. But then, of course, we can use the entire time for transport also for that. So that's something that we really look into and see can we accelerate that even further. And what strategy should we then have for that? So I hope that on a high ladder answered both questions.

Yes. No, absolutely. A question on the cost side, obviously, operating expenses, slightly higher year-on-year and quarter-over-quarter driven by, we understand a rise in personnel costs. I was wondering if you can say anything about kind of the OpEx trajectory looking forward? Are there material addition to the cost base as you see further significant personnel additions? During the rest of the year? Or is there any kind of indication or guidance you can get on that sort of thing?

Also on an overall level, I think it also covers a little bit to the strategy as we have discussed. So we do see that we want to grow in the commercial-driven activities a little bit more, for sure. But then I would say, on the investment side, what we really focus on there is scaling up our production capabilities. When we see the market, which is not just in Europe and U.S., it might be other regions. We really see that we would like to scale up production capabilities. It's more of a -- more or less a [indiscernible] date-driven business. So we would like to have the capacity both for cost of goods, of course, but then, of course, also to be able to meet the possible volumes that we see for this product. So I think that will be investments coming up for further scale-up of production we will see a ramp-up on personnel for some time, I think, but maybe not a dramatic increase, so to speak.

Okay. Got you. And perhaps just finally. We saw that there was an additional site study, site added for the U.S. pivotal study. Just the rationale behind bringing in another study sites that to do with that to do with kind of the capacity for the study sites to add a sufficient number of samples given the pandemic or so? Is it to kind of ensure speedy completion of the trial? Or was it for kind of commercial reasons to kind of build relations with a potential future customer? Or how should we think about that addition?

Yes. Of course, no, it's not really for the capacity of the site. It's really to have more ASTar being run to be able to prepare the commercial activities in the U.S. So it's more to have additional sites running the system. So I would say it's more of a commercial decision to do that. Of course, it will not be negative in the throughput of patients, but that has not been limiting. The size that we have or are in discussions with, and we will announce some are -- they have a big throughput or a big number of blood cultures. So it's more to be able to be more commercial ready when we then sort of enter the U.S. market.

Our next question comes from the line of Alex Cogut of Kempen.

I'd just like to start with the European commercialization. You commented earlier that on the strategy you're taking out a kind of evaluate the system and work on the bugs. But you also mentioned going into a ramp-up phase at some point. When would you expect that to happen?

Yes. Alex, of course. So when we look at this, I mean, everything, of course, depends on the evaluation. So far, we think it goes great. So what we do see is ramp-up coming up during the autumn. That's currently in the planning. So we're not looking at the ramp-up years to come. It's more months to come, so to speak.

Got it. And I think broadly in Europe, how long is the sales cycle?

Well, so of course, we don't have any numbers for that just yet. If we look at Accelerate Diagnostics, which is the first company sort of pioneering this field, I think when they started, they had some 12 to 15 months or so sales cycles, they moved it down to 9 months. I think the difference here a little bit, when we talk to and have Thermo Fisher Scientific as a partner, First of all, they have deep relationships with, I would say, more or less all labs in Europe. They are, of course, a big company. They have very good products in this space. So they have a very, very good traction at those labs. I think also it depends a little bit. Also perhaps you remember that when Accelerate went out, they had cash base sales initially, that was our focus. I think when we think about the market today, I -- and of course, this is my personal opinion, Thermo Fisher will, of course, decide it's their home ground. But I really anticipate to see more of a rate in rentals. And of course, that type of different sales strategy, I would say, enables a lot more customers to be able to cut that time quite significantly. So I think also this shows the strength with a strong partner that could offer cash-based sales, rate in rental, renewable leasing agreements depending on the customer needs, and they have everything set up already day 1 to be able to offer a wealth of different sort of funding opportunities for the system. So I mean, those are the numbers that we have seen from Accelerate. Of course, we think that with our strategy, they can be better. But I think this is something we all have to wait and see. And over the next quarter, see how, how -- what will the time line be how efficient can we together with Thermo Fisher should be as taking these systems out commercially. But that's probably the indication I can give. It's early days.

Got it. No, that's very helpful. And I was just wondering, will you be able or allowed to report at some point of commercial KPIs such as placements and consumer volumes?

Yes. So this is something, of course, we discuss with Thermo Fisher. We have not really decided on the [ pure stride ] yet. I mean we have, in general, our plan is, as soon as we have seen commercial traction, where we can actually start seeing that trajectory is, we'll try to be as open as possible and as open as our agreement allows. So these are discussions that we'll come back to. And hopefully, we'll be able to provide you with some better details there. But again, I would say, early phase, and we need to really see that we do that properly, so to speak.

Got it. And perhaps the last one on your menu expansion. When would you expect to talk about test beyond the service application?

During the autumn, I would say.

And we have one further question in the queue that's from the line of Jonas Amnesten of Redeye.

Congratulations to the good progress as well, mainly some clarification. Should we understand it as we can expect volume -- increasing volume sales for systems towards the end of the calendar year and then for consumable kits to follow deeper into 2022?

So thanks for the question, Jonas. I would -- I typically don't like to give guidance on that at this early stage. But of course, I mean, if we everything turns out as we want here, and we can start seeing some broader expansion during the autumn. I think it also depends, I mean, typically, when you see hospital buying a system that will start low volume. Of course, they want to familiarize and they want to really see the system in their setting performing, which we, of course, expect. And then, of course, our goal has been done to see volumes coming up. So I would not say that it's an unlikely scenario that you present. But I think that it's a little bit too early for me to provide some guidance. But I think it's a quite good rationale to see the systems coming out initial volumes might be lower because you really want to test them out. And then, of course, you would like. I mean, our simple goal has been reading the capacity of ASTar to enable every single positive blood culture that's unique in that hospital to be run in our store, and that's definitely still clear our goal. I think that every patient who presents bacteria in the blood stream, they are a sick patient. They should be provided with rapid diagnostic solutions. So I think that's really our goal here. And of course, also, long term, having a high capacity and full automation, I think also enables us to address some of the larger hospitals and institutions that have really big volumes, but really run their lab as a business, meaning that you really need to see how much time do you actually spend with manual step versus automation. So I think that's really an interesting customer category to me personally also.

Interesting. And also during the call, we get the impression that you are probably likely to progress with isolates opportunities in the portable opportunity, more or less in parallel land, is that correct?

So the portable technology, for sure. We are really working with that, and I think the fundraise enables us to make the right decisions there. I think on isolates, I still think that our priorities first will be the gram-positive. And as you know, ASTar today can perform isolate analysis. So then it's more also of timing on when do we think the right study is to do a clinical study for that. We are, of course, always also looking into there are a number of new antibiotics or antimicrobials sort of entering the market. And we want to have a goal to be able to provide these new drugs, so to speak, early on. And that might mean that you want to wait a little bit for instance, for isolate to be able to include those drugs. I think the gram-positive is still the absolute highest priority now. Since we also know what ASTar can perform on isolates. So it might be a strategic decision that we will sort of set during the [ Volterman ] and be able to come back to you also with perhaps some clearer guidelines on really what's the order of the next sort of expansion on ASTar.

Excellent. And finally, a clarification on the health economic studies, is that something that we should expect feedback on deeper into 2022? Or...

I would say so. These studies are, of course, quite big. You want to have statistical power in those analysis. So I would expect I'll perform those studies during next year, yes.

And also the range or indicative cost benefit is a broad and that probably will also reflect different categories of patients and perhaps also acute patients and likes. Will you include different categories in these studies?

Yes. So without going into the details, I mean, typically, what you see is an ICU patient or an ER patient, those are the biggest category for sepsis. And I think that, again, this is my personal opinion. I think it's a little bit sad, if you only focus on one of those groups in a sense because you might show some benefits, but you might actually lose benefits from other group. So I think it's at least important to think about how do you address these two big groups. And it might be different when you have a high resistance settings versus a lower resistance setting, you might want to plan the studies a little bit differently. That's at least how we think about it. So I think that you are right. And I think also, to be fair and honest, we are now planning 2 studies to be started. But we see that health economic studies is going to be a continuous work within the company to expand to further sites, other geographies, maybe pinpoint some specific categories. So I think as economic studies is something we're going to run for many years. Of course, we want to start and stop the study to look at the results. But I think this is a very important value also to provide some data to the hospitals on where could you improve the most? Where does it really make more sense for rapid AST today, depending on the setting and where do you think it should plan to go next. So I think we have or Dr. Tiziana Di Martino, who is responsible for the study planning, and I think she's done an excellent job in pinpointing finding the right measurements and for these various studies. But at this point, we won't disclose really the details of how we plan the studies and perhaps for obvious reasons. We are not the only company thinking about this. And I think we have a good strategy. So I would like to keep it internal for quite some time.

That's very useful. And finally, something that perhaps we should know already larger health economic study. Can you remind us what sort of an indicative cost range can be expected without, without taking that as a fact future factor of your particular study.

So I think when -- it depends a little [indiscernible]. I mean large studies can be on 13 and 14 sites. I don't think that's how we want to start it. If we take, for instance, if you compare it to a clinical study as we perform now, for instance, then I would say that those are in the order of SEK 30 million to SEK 50 million or so. Majority of those activities are analytical part of the study, maybe 1/3 of that is covered more connected to the hospital costs. So maybe that could give some indication. And then, of course, it all depends on how many sites do you want to included in the study. And here, I think we same as we launch, we want to start with fewer sites, which are very representative to their respective category, but still large enough to provide statistical power. And then I think when we come out in the out years, we might want to extend them to a little bit broader side. So I think that the study cost initially for health economic will be a little bit lower now. And then, of course, as also volumes are up for grow, we might want to plan to do some larger-scale studies. But maybe that can provide some indication on what we think about the cost of the studies.

And as there are no further questions at this time, I'll hand back to our speakers for the closing comments.

Okay. Thank you very much for that. It's been a very, as I said, interesting quarter. I think we had some very good questions. I do hope everyone can stay safe because the pandemic, as you know, are not over. Please vaccinate yourself. If you haven't done so, it's important for the world. And I also hope that all of you will have some well-deserved vacation in a nice weather, whatever you would like to spend it. So with that, me and Anders would like to close the call for our second quarter report of 2021. Thank you very much.

Thank you.