Sedana Medical AB (publ) (SEDANA) Earnings Call Transcript & Summary

Hello, and welcome to today's webcast presentation with Sedana Medical. With us presenting today, we have the CEO, Johannes Doll; CFO, Johan Spetz; and CMO, Peter Sackey. [Operator Instructions] And with that said, I'll give the floor to you guys. Please go ahead with your presentation.

Thank you. A warm welcome to Sedana Medical's Q3 report. Thank you very much for joining us today. As you've heard with me today, I have our Chief Medical Officer, Peter Sackey, who will talk about our progress on the U.S. side in just a little while; and our CFO, Johan Spetz, who will take us through the financial update later on. If we start on Page 3 please, with the highlights of the third quarter. Our corporate priorities have, of course, remained the same. You have heard me talk about those numerous times now. Number one, achieve steady growth in our existing markets; second, to reach breakeven in our ex-U.S. business as a first important step towards our longer-term profitability aspirations. And these 2 together, a healthy growing business and the profits from it will form a stable platform for our third big priority, which is to make headway towards our U.S. approval, which could put Sedana on a different growth trajectory in the future. On the sales side, we've had a good quarter with SEK 40 million net sales, which is the highest Q3 we've had in our history. That's also been the case for the first 2 quarters this year and frankly, also what you would expect to see in a company with the ambition of reaching a new all-time high in sales, including the exceptional COVID-19 years. There were some exchange rate distortions during the quarter, but when assessing performance, we are, of course, looking at the growth, excluding currency effects, and that number was 20% year-over-year, which I'm very pleased with, especially as all our regions have contributed to that growth. That puts us at 19% growth year-to-date and therefore, above our sales guidance of 14% to 18% for the full year that we have communicated at the beginning of the year. And based on that good performance so far, we feel comfortable raising the sales guidance for the full year and now are aiming at net sales growth of 17% to 20%, excluding exchange rate effects. So from 14% to 18% to 17% to 20%, which is now our new guidance. Turning the focus to profitability, which you know is a big focus area for us. During last year's restructuring, we turned Sedana Medical into a much more commercially-oriented company by streamlining our corporate headquarters and pretty much all noncustomer-facing activities to allow us to shift resources from the headquarters to the front line and implementing a disciplined investment approach, focusing on countries with strong momentum and good local profitability. And that strategy continues to work. Q3 seasonally tends to be the lowest sales quarter, which is also the case this year. And despite that, we are seeing good progress on the bottom line. We had an ex-U.S. EBITDA of minus SEK 5 million, which compares to SEK 12 million last year -- minus SEK 12 million last year and also minus SEK 11 million last quarter. Also during the quarter, we have signed an agreement to acquire our main supplier, Innovatif Cekal, which according to our projections, will add 2 percentage points to the EBITDA line over time once we close that transaction and have worked through the existing inventories. On the U.S. side, enrollment of both Phase III trials in the U.S. is completed, which is a great milestone to reach, but also important from a cash perspective. The main driver of our cash out over the last quarters was payments to the hospitals for recruiting each patient. That's done now. There's a bit of a lag effect, as you can also see in this report, while the invoices are coming in and the invoices are being paid and so forth. But we can then expect our burn rate to come down significantly next year, and it will be a small part compared to this year's level. We've also taken an important decision with regards to our submission strategy. As you know, any FDA process has a fairly high level of uncertainty. And as a company, you don't have all aspects of that process under control, as in the end, it's the FDA calling the shots. So our strategy to mitigate this uncertainty is to seek very frequent interactions with the agency to align on as many elements of the submission as possible to avoid surprises later on. And in one of these recent interactions, the FDA has actually recommended that we integrate our European clinical trial into the U.S. submission by pooling it together with the 2 U.S. trials, so running an analysis across. This is different from what we have expected based on previous input where the European study had got rather limited weight. On the highest level, that is very good news because we know that our European trial had very favorable data. And now the FDA will not just be looking at the 2 U.S. studies, but also a pooled analysis combining all 3 studies, so the 2 U.S. studies and our European studies, which adds 300 patients, again, for whom we know that we had positive results. We met the primary endpoint. We had superiority in several secondary endpoints, and we had good safety. And therefore, this makes the file even more robust and strengthens the submission overall. So we have decided to follow the FDA's recommendation here. It was a recommendation, not a strict requirement, but we will follow their advice if we find that this pooling is technically and clinically feasible. Peter will speak more about this and we execute the plan. There will be an implication on the time line, which will shift by approximately a year, and we will also add SEK 20 million to SEK 30 million in additional cost. But weighing the pros and cons here, we firmly believe that the integration of 300 additional patients with favorable outcomes and a strengthened submission is well worth it and will create more value in the long term. If we then move to Page 4, please. Here, we are looking at the sales development over the longer term. And you can see that I already -- what I already talked about, the restructuring of the company and especially the shift of investment towards the frontline teams and field force effectiveness measures we have implemented have led us back on a growth path. So after 9 months in 2024, we are 19% above last year. The 2 COVID years and especially 2021 still stand out as a trend break here, but of course, we are confident that we will reach a new high in sales this year. If we then move on to Page 5, you can again see the impact of our work on the bottom line. You see some seasonality in the sales on the top part of the slide, but the trend is quite clear after the biggest EBITDA loss in the company's history in 2022. Q3 specifically usually has the lowest sales, but both for ex-U.S. and on a group level, we see a good improvement versus Q3 last year and also compared to the last quarter despite slightly lower sales. And again, we continue to be fully focused on turning our ex-U.S. business profitable so we can build on a stable financial platform for the U.S. launch. And just as a side note, the shift in the U.S. time line to integrate our European trial will put us in a position where by the time of launch, we'll have an even stronger ex-U.S. business, which will hopefully be generating cash at that point in time. If we then go to the next page, Page 6, please. It feels some time ago that we announced the transaction of Innovatif Cekal, but it was during the quarter and is an important building block towards building a long-term profitable company. So let me briefly recap what we will do, why this is a very good deal and what will be the financial impact. So we will acquire our main supplier called Innovatif Cekal based in Klang just outside Kuala Lumpur in Malaysia. Main supplier means that they are not only our only supplier, but they manufacture our main device, the Sedaconda ACD and certain accessories such as adapters, for example. And therefore, they represent a sizable part of our cost of goods. The purchase price is SEK 34 million, of which 75% will be paid upon closing, which we expect in still this year in Q4, and then 25% of the price are deferred by 2 years. There are 2 important reasons for why this is a good deal. Firstly, we gain control of the supply chain of our main product. So we are less subject to price variations are in control of future scale-up of the capacity to meet our growth plans. And over time, we can implement measures to further enhance productivity as well. And secondly, that's the obvious one, we are expecting to add 2 percentage points to our EBITDA once the existing stock is depleted. So I see this as a logical next step in building a long-term profitable company. We will pay for the transaction out of existing cash. The deal will pay back quite fast. We expect a positive impact on our operating cash flow already from 2025, and we should have a net positive overall cash effect from 2028 on. And importantly, we continue to be financed to execute on our plan also with this acquisition and the incremental cost on the U.S. side that I've talked about. Then if we go to the next page, on Page 7, let's have a look at our financial guidance for the full year. As I said, on the sales side, we have guided for 14% to 18% net sales growth. We continue to track above that range with 19% year-to-date. So we have now raised our guidance and at the same time, made it a bit narrower. So the new guidance for the full year is now 17% to 20%, excluding currency effects. We also had guided for reaching breakeven in our ex-U.S. business during the year. We've reached that milestone in Q1. And as you know, with the seasonality in our business, Q2 and Q3 are quite a bit lower from a sales perspective as we had much less ventilated patients in the ICU. So EBITDA could not be positive yet. But as I've talked about on the previous slides, we will continue to do everything to steadily improve our profitability over time. So overall, well on track on the profitability side and raised sales guidance. On Page 8, the next page, let's look at our Q3 performance in the different regions. Germany has recovered from a comparably weak Q2 and specifically a weak June when we had very, very low numbers of ventilated patients in the ICU. In Q3, we saw even less patients than in Q2. The average German ICU reported 9% less patients per day compared to Q2, which is not atypical for Q3, where people tend to be on vacation and generally healthy. Despite that decline, we reached approximately the same level of sales as in Q2, which in euros meant a year-over-year growth of 9%. So Germany for me very much continues to be an investment case with very attractive local EBITDA margins and still solid growth. So we continue to invest in further growth and continue to focus on our commercial execution, specifically in Germany working on growing penetration of inhaled sedation in high-potential customers where we still have a lot of upside. Then on Page 9, our other direct markets, again, delivered a very strong quarter with 49% growth in local currencies. Spain continues to perform very strongly. So the combination of strong execution, updated treatment guidelines and pricing and reimbursement approval continues to show an impact. And I'm also very pleased that the U.K. sales have significantly accelerated throughout this year after the MHRA has finally given us approval end of last year. France, the third big market in this group of countries has had a rough year. And with rough year, I mean, flat sales. And the reason for that is 2 vacancies from sick leave that we were not able to fully compensate for. Our sales are very sensitive to our promotional activity in the field and with our customers. So if we are out there, we are seeing the growth. If we're not out there, you see the sales slowdown. And at the same time, some promising tenders have been delayed. So overall, we are looking at a quite flattish sales development this year, which for us and for us as a growth company and for our growth aspirations is not good enough. So we're very focused on addressing that remaining vacancy. So we are back in the field with full force, and I see good opportunities to accelerate the growth going forward again. If we then go to the next slide, Page 10, please. As many of you know, we had a long period of time where it was less positive to look at the performance in our distributor business. We had declining sales for almost 2 years as a consequence of excessive stock building during COVID-19. We never let a good crisis go to waste. So we have used the time to restructure the team and implement a new approach, which focuses our support on a few select key partners with high sales potential and positive momentum. And what we see now in the fourth quarter -- in the third quarter is actually the fourth quarter in a row with solid year-over-year growth. In this case, 30%, excluding currency effects, and that growth is mainly coming from these prioritized partners. So our strategy is working. Then if we go to Page 11, please, and switch gears to the United States. As you know, the U.S. is our largest growth opportunity and one of the reasons why we are so focused on turning the ex-U.S. business profitable as we want to be able to launch in the U.S. based on a stable platform in Europe and a cash-generating business. We've estimated the U.S. market potential for our products to be SEK 10 billion to SEK 12 billion, which is 3x larger compared to the current direct markets combined. And this is because, of course, a higher number of ventilator beds, but also a medical practice that favors intubation and mechanical ventilation more than in Europe and also an overall price level. So all of that combined shows in that high potential. We also see a very good product market fit, given that most mechanically ventilated patients in the U.S. fall under a DRG system, which means that a hospital makes more money if they implement therapies that reduce time on the ventilator and reduce time in the ICU, both benefits of inhaled sedation that we have shown in Europe. In addition to that, we know from our European trial that our inhaled sedation patients needed less opioids. So 30% less opioids in the adult trial and even 50% less in our kids trial, our pediatric trial without the patients experiencing more pain. And the country in the world that is most sensitive to avoid opioids because of the opioid addiction epidemic and more than 100,000 drug overdose death every years in the U.S. So bringing a therapy that will reduce the use of opioids in a vulnerable patient population would be a major plus on the U.S. market. And we also fit quite well with existing treatment guidelines, which are very focused on fast wake-up, speedy recovery, early activation. And again, these are things that we're seeing every day in Europe, and we'll hopefully also see in the U.S. data. And on top of that, Peter and his team have done a tremendous job in building a network of key opinion leaders already in our clinical trial sites who, as you know, have some of the premier names in the U.S. hospital landscape that are very supportive of the therapy and already very active beating the drums at different conferences. So we -- to sum it up, we have a high market potential, a good product market fit, a KOL network that's eager to get started and high-level results that are upcoming soon. And with that, I'll hand it over to Peter to go a little bit deeper into the U.S. and of course, specifically the updated submission strategy.

Thank you. Okay. So Slide 12. As Johannes mentioned earlier, we will -- we have taken the decision to integrate the European SED001 trial in the U.S. submission. And this was all based on recent FDA input in a Type C meeting response where the FDA proposed -- recommended that we include SED001in a pool of fixed analysis across all 3 clinical trials. And we had the option not to do so, but we need to justify why we did not do such a pooling. And after careful analysis, we decided that we should follow the advice from the FDA and integrate the European trial in this pooling strategy. And that, as Johannes mentioned, includes 300 patients, and that's from the SED001 study that was published in Lancet Respiratory Medicine in 2021, where the outcome was very favorable. And this means that pooling that study together with the U.S. studies will make our submission more robust. And in a way, you could say it's a way of derisking our U.S. submission as well. The patients, the ICUs are slightly different in Germany maybe than the U.S., but Germany represents a more mature and experienced sort of user base. So it's relevant -- it's still relevant, I think, for the future in the U.S. to include these data and outcomes. And this has implications though, and that's -- that we have more data to submit -- more granular data to submit and more data to merge, and this will imply significant work. And as you mentioned, Johannes, also additional cost and additional time. If we move over to Slide 13. So to describe a little bit about what this really means and practically is that there's now a phase ongoing, the feasibility assessment phase where we are looking at the data -- the granular data in SED001 and the U.S. trials, the 4 months of the data and the way the endpoints have been derived and looking at ways to merge these data so that they make sense. And that's significant work to get that done together with the statisticians, the pooling statisticians and the individual study statisticians. And we are -- we have high hopes that this will be possible. And if it's possible, we'll move from the feasibility phase into the actual pooling of the data, which will be once we have the data analyzed for the individual studies. And the mapping work, as I said, is ongoing on how to convert the data sets to match with each other and also statistical analysis plans are being developed, including a European study. And once we have all these things set, we will approach the FDA and get a green light from them on the pooling strategy and also on the study data standardization plan. And if all goes well, which we do expect, that will then render extensive standalone documents related to the Summary of Effectiveness and Summary of Safety, so-called ISE and ISS. And in these kind of documents that are typically several hundred pages long, you do both side-by-side comparisons of the individual studies, but you also look at the pool data. It's like a meta-analysis where you do subgroup analysis. And we have, I think, 6 or 7 different subgroups that will be looked at, for example, young versus old patients, then patients with high severity of illness versus patients with low severity of illness, sex, race, et cetera. And these analysis will be run across the different populations in the Integrated Summary of Efficacy, it's the intention-to-treat population, the per-protocol population. And in the Integrated Summary of Safety, we're looking at different safety populations, so for all randomized patients -- randomized patients and run-in patients, et cetera. So as you can understand, it's very many different results that will be generated. And these results require a careful analysis and consideration and rationales or discussions. And that's -- these things take time, and they have to take time. The FDA will be looking at the data themselves, and we need to know the story ourselves when we submit. So if we move from Slide 13 to Slide 14. As you know, the 2 studies were run across the whole U.S., and we had 31 clinical study sites that were involved. And these study sites have many champions that are looking forward to support the development of inhaled sedation in the U.S. and to be our ambassadors at the time of launch. So we're looking forward to continue working with them in preparation for a successful launch ahead. And then we can move to Slide 15, and I hand over back to you, Johannes.

Yes. And I've covered some of this already. But of course, our view on the market potential in the U.S. and also our go-to-market strategy have not changed. We see a market potential of SEK 10 billion to SEK 12 billion, which is approximately 3x of the market potential we see in the market in Europe. And that coincides with a very concentrated customer base. So there's less than 5,000 hospitals in the U.S. that have ICU care, a little less than 2,800 with 10 beds and more, so a little more sizable intensive care units. And these 2 things together, a high potential and at the same time, a manageable OpEx level to cover this concentrated customer base leads us to our strategy to launch ourselves. So we believe the best way to create value here is to deliver proof of concept ourselves. So we would like to keep control of the assets and capture more of the upside. And the reason we're confident about that is that we already can build on that very supportive network of key opinion leaders in these clinical trial sites. So we will make a targeted launch where we build on these clinical trial sites as our lighthouse accounts, and then we will build sales territories around it. And that kind of a prudent targeted launch strategy, we believe, is the best way of creating value. And once that proof of concept is done, then we will have a choice whether we want to scale up ourselves, whether that is the right time to bring in a new -- an additional partner, et cetera. I'm not excluding any options at this point in time, but the primary strategy at this point is to go ourselves. Back to you, Peter.

Thank you. So if we move over to Slide 16. Q3 includes the summer months, July, August and September. We still had significant activities in different congresses, and was very satisfying is to see that there are more and more congresses where inhaled sedation is not driven by us, but actually by physicians who submit abstracts and also by the committees who include inhaled sedation in the program. So for example, in the Extracorporeal Life Support Organization congress in Detroit, there were invited speakers from Europe to talk about inhaled sedation in ECMO, both in adults and in pediatrics. The New England Critical Care Pharmacotherapy Symposium was -- had a presentation by John Devlin, the #1 guideline author for the sedation guidelines that are used globally speaking about inhaled sedation. He was also one of our PIs in the U.S. study for a big group of pharmacists who are important decision-makers in the U.S. And we also had activities driven by the Pan American and Iberian Federation of Critical Care Medicine and Intensive Therapy webinar in the summer. And then we had some European congresses also, and we expect to see more activity in the last quarter of the year. We move over to Slide 17, and back to Johan and Johannes.

Thank you, Peter. So if we take a closer look at our financial results for the quarter, Johannes has already touched on some of these numbers, but just to add a bit more context and color here. So we report net sales for the quarter of SEK 40 million. That's up from SEK 34 million in the corresponding quarter last year. So 16% growth in reported currency and 20% growth in local currencies. So what we see in Germany is a growth of 6% in SEK or 9% in euros. Other direct markets, strong growth contribution, 44% in reported currency, 49% excluding currency effects. And as Johannes pointed out, it is mainly driven by Spain and U.K. Our distributor markets increased by 24% in reported currency, so 30% excluding FX, and that is mainly driven by our prioritized distributor partners in Europe. The stronger sales and our continued good control of our COGS means that our gross profit is up to SEK 28 million for the quarter compared to SEK 24 million in Q4 last year. So a slight increase in the gross margin, 71% for the quarter compared to 70% in Q3 last year. EBITDA, Johannes also showed this earlier. We are continuing to improve our profitability. So EBITDA for the group in Q3 2024 was negative SEK 9 million, an improvement compared to negative SEK 13 million in the corresponding quarter last year. EBITDA ex-U.S., which is an important metric for us, as you know, we report negative SEK 5 million for Q3 2024 compared to negative SEK 12 million last year. What these EBITDA numbers reflect is an underlying OpEx level for the period of SEK 43 million, which is up slightly from last year, and that increase is partly driven by costs related to the acquisition of our main supplier, Innovatif Cekal that Johannes also mentioned earlier. So that OpEx is, of course, to be considered nonrecurring in nature. But overall, what's important to -- as a takeaway here is, of course, that EBITDA for us continues to improve as we grow sales and remain disciplined on the cost side. And that's, of course, still very much the plan for that to continue in the coming quarters. Then if we turn to the next slide, Slide 18, please. Here, we can take a closer look at our cash flow and available funds. So starting on the cash side. At the end of the quarter, we had SEK 226 million in the bank compared to SEK 304 million at the beginning of the quarter. So negative change in the cash position of SEK 78 million, and that is driven by CapEx of SEK 36 million. And then also important to note that other important drivers are a change in working capital of negative SEK 20 million during the period and also a currency effect on the cash balance. As many of you know, we have a large portion of our cash in U.S. dollars. So there is always a currency revaluation effect on those when the currencies move. So that was negative SEK 11 million. So adjusted for the decrease in working capital and this FX effect, the change in the cash position would have been SEK 47 million for the quarter. Some of the drivers there. So cash flow from operations was negative SEK 29 million. And again, that's driven by a significant working capital effect of negative SEK 20 million. So other than that, of course, it lines up with the EBITDA for the period. Cash from investments for the quarter, I already mentioned that negative SEK 36 million. And that is, as you know, driven by our U.S. clinical study and now also the work preparing for the U.S. submission. So total cash flow for the period of negative SEK 67 million. Then, of course, as I mentioned earlier, there is also the FX effect, which then means that the change in the cash position adds up to the SEK 78 million mentioned previously. With patient recruitment now completed in the U.S. clinical study during Q2 of this year, we now expect CapEx to be significantly reduced and in particular, as we go into next year 2025. And that is an important point that we want to highlight that remains very much the case even also when we consider the expanded scope of the U.S. submission that we've announced today. And also, I should add, when we account for the acquisition of Innovatif Cekal, so we will see a significantly lower CapEx level in 2025, considering all of those drivers. Just briefly also in terms of liquidity management, we have approximately 70% of our available funds in U.S. dollars, and we have no long-term debt in the company. So we expect to be fully financed to execute on our strategic plan for the company. And then if we move to the next slide, please, Slide 19. This shows the updated shareholder list as of September 30, 2024. And of course, we remain grateful for the support from our shareholders. And with that, I hand the word back over to Johannes.

Yes. And let's look at our last page, Page 20, to wrap things up. Let's just take a step back here and recap the investment case for Sedana Medical. Our business model lends itself to attractive profitability over time, and that is for 2 reasons. We continue to see good gross margins of 70% and up. And so by definition, we can become quite profitable as a business when we reach scale. And our customers, as we've said, is intensive care units, so a relatively small, concentrated target group that can be covered with a reasonable operating expense level locally. And we've already seen a good proof of concept that this model works in our main market, Germany, where the majority of intensive care units are already our customers today. The team is generating attractive EBITDA margins on a local level. And while we are not at the same scale yet everywhere, most of our countries contribute positively by -- with local profitability by now. So we have the proof of concept, and now it's all about reaching further scale, convincing enough hospitals to use inhaled sedation more broadly and achieving profitable growth as we have seen over the last 2 years. And here, we have convincing clinical data on our side, showing that patients really benefit from inhaled sedation. And equally importantly, we can also show that hospitals save money with inhaled sedation versus the previous standard of care. There's still lots of places to grow and create more countries that have good penetration as Germany, with regulatory approval in 18 countries in Europe and the largest commercial opportunity in the U.S. still being untapped with the FDA giving us Fast Track Designation. And let's not forget, as Johan also mentioned here, a solid balance sheet and a cash level that is sufficient to execute our plans. So that concludes our presentation. Thank you again for listening, and we'll be very happy to take your questions.

[Operator Instructions] We've got the first person calling in with the phone number ending in 3089.

Hello, can you hear me? Mattias Vadsten from SEB.

Loud and clear.

Perfect. So yes, I think I have a couple of questions relating to the U.S. news here. First one, I think I'll take them one by one. So first one, why does this news come now and not, let's say, years ago? Also to that, when do you expect to be able to present the headline data from the studies? And if this look good, why is not that enough? I think there are quite extensive Phase III studies in the U.S. That's the first question.

Yes. So the question is why now and not a long time ago. As I said, we do have a strategy to be in frequent exchange with the FDA, which I think is the best way of derisking the file. And in this specific instance, we have had an interaction with the FDA around the integrated summary of efficacy and safety. And here, the FDA has come forward -- in that context has come forward with a recommendation that is actually different from input that we had previously received. So initially, the company tried to get the European trial involved in the U.S. submission. That was, of course, in our interest because it was -- we knew it was a successful trial with 300 patients. It was very similar endpoints with favorable outcomes. So it would have made the submission stronger back in the days, the FDA was not amenable to that. So it didn't assign as much weight to the study. Now that seems to have changed. I can't fully explain why that is, but they have come forward with a recommendation to include the European trial in this pooling analysis. So it's not just adding the European trial as an appendix, if you like, but it's really running an analysis across all 3 trials, which adds 300 patients, which makes it more likely that you would hit certain end points with statistical significance and just makes the overall file much more robust. So why now? It's a result of our continuous ongoing dialogue with the FDA. When it comes to the high-level results, there's no change. So we are continuing to wait for those. We're looking at 5 million data points between the 2 U.S. trials. So it's a massive amount of data. Once the data is being handed over to the statisticians, things will be relatively quick. So then it's simply running the programs -- the statistical programs over the data. But it depends a bit on when our CRO is ready to hand over the data. So there's no news on that, no change in time line. And then your third question baked into that is, wouldn't the U.S. data have been enough, so why do you need the European trial?

I could comment on that.

Yes, please.

Yes. So just to explain that for the FDA, they, of course, very curious to know how this works, especially in subpopulations. And they ask -- I mean, for us, I think that they ask could have been expected earlier. But as Johannes was alluding to, the early assessments of the European trial was that it was not a well-controlled trial. That was all based on nonblinded primary endpoint assessment. But when one thinks about the European study, it's not too different from the U.S. studies in that. The U.S. studies are blinded on the primary endpoint, but not on other endpoints. So in a way, I would say that the European study should be -- should have been as valid as the U.S. studies at an earlier stage, but this was not the FDA's take. Now that they come with this request, we could choose not to try to pool, but that would mean we need to give good justifications. And the loss of those 300 patients would mean that it's also harder for the FDA and for us to understand any subgroup differences when it comes to both efficacy and safety. So on one hand, the FDA are asking this, and it may be helpful for us to derisk the U.S. project. And on the other hand, they want to see the pool data. They want to see more precise estimations. And most importantly, I think they want to see subgroup analysis to -- so that we can characterize this therapy appropriately. And this is quite recent news, and it's taken some time for us to both evaluate sort of pre-feasibility discussions and also looking into the consequences when it comes to the work and time line. I hope that answers the question.

Yes. And then I guess my follow-up, when do you expect this feasibility work to have been done? And yes, if you could shed some light on how challenging this is to do in reality?

Yes. So in reality, I would say it's ongoing, but this is a joint venture between the clinical team, the study statisticians and the pooling analysis statisticians where you need to go into the so-called SDTM datasets and look at the way that data have been mapped in the SED001 study, how they're mapped in the SED003 and SED004 studies. It was so much simpler just to pool the U.S. studies because they are identical in design. The way that data have been mapped there is identical, whereas the SED001 study, that study started in 2017. Also a simple thing like the primary endpoint, it may sound very straightforward to pool the results, the proportion of time. But for assessing that or for getting the estimate on a patient level, there are multiple intercurrent events that impact that. It's called the estimand, the sort of the way the primary endpoint is derived. So for example, the way you manage rescue sedation in one study gives failure time of a certain number of minutes, say, 30 minutes, plus/minus, whereas in the U.S. studies, the failure time is different, and that depends on that. The FDA have been very sort of interactive and picky about how they think we should assign different intercurrent events when it comes to penalty time or censor time. So just the primary endpoint is very complex. We need to now decide whether we go midway or whether we go with the German way or whether we go with U.S. way and then we need to get the U.S. -- the FDA's blessing on the way we decide for that endpoint. The primary endpoint is the most complex. But even the key secondary endpoint in the U.S. trials is the opioids. There we compare, we use one type of unit, the fentanyl equivalent units. Fentanyl is the most commonly used opioid in U.S. ICUs. We compare baseline with dosing during study treatment. In the German study, we simply compare the groups with each other. So every endpoint we want to do a pooling on, we need to both map the way we've collected data. We also need to decide what sort of -- what are we comparing with? Are we comparing with baseline or comparing between groups? And that's simply quite a lot of work. And that's just the sort of -- I think on the mapping side of things, the work has started, but it's going to take us a few months before we determine both clinically and statistically whether the results that will be rendered from this merging of studies will be -- will make sense. And for every endpoint, we will have to make a decision and give a rationale for why we decided to pool or didn't pool. And that's sort of the -- that's the feasibility phase. I think it's very likely that we will be able to pool a number of the efficacy endpoints. The benefit, so to say, is that we know that the results from the SED001 study were almost all results were in favor of isoflurane, and that includes not only opioids primary endpoint, it also includes time to wake up, time to extubation, ICU stay, ventilator-free days. So we are very eager. I would say we see this as a very positive development. In the grand scheme of things, if I was to choose just looking from the outside on this time line extension versus this opportunity that we are now given to include the positive results from the German study, I think that this is -- actually is a positive development for our U.S. case. Cost efficacy is going to be super important in the U.S., and we now stand a better chance to demonstrate that.

I appreciate that clarification on what it takes and how you do it. Do you have any assessment on timing to when this work can be done? So just we can follow-up.

I mean, the feasibility assessment?

Feasibility assessment, yes.

I would -- so we're actually working on the timelines. But I believe that in the -- I mean, in the spring, we will know if it's possible or not because that's when the work has to start. So the preliminary is that there will be -- it will be possible to pool some, but exactly which of those endpoints will make sense to that will be sometime, I would say, in the spring that we'll be able to give more information on which endpoints we ultimately will be pooling.

Okay. And then my last one. My last one is if you could talk about the patent situation post approval and to what extent this is impacting that in the U.S?

Sorry, did I answer correct? The patent situation?