Nyxoah SA

Good morning and thank you for standing by. Welcome to the NXOA full year 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. I would now like to hand the conference over to your speaker today, Jeremy Pfeffer with Vice President of Investor Relations. Please go ahead.

Thank you, Catherine. Good morning and good afternoon, everyone, and welcome to our earnings call for the full year 2021. Participating from the company today will be Olivier Talman, Chief Executive Officer, and Loic Moreau, Chief Financial Officer. During the call, we will discuss our operating activities and review our second half and full year financial results released after U.S. markets closed on March 24, 2022, after which we will host a question and answer session. The press release can be found on the investor relations section of our website. This call is being recorded and will be archived in the events section of our investor relations website. Before we begin, I would like to remind you that any statements that relate to expectations or predictions of future events, market trends, results, or performance are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon currently available information, and the company assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. For a list and description of risks and uncertainties associated with our business, please refer to the risk factors sections of our Form 20F filed with the Securities and Exchange Commission, on March 24th, 2022. With that, I will now turn the call over to Olivier.

Thank you, Jeremy. Good morning and good afternoon, everyone. Thank you for joining us for our discussion of operating and financial results for the full year 2021. A special thank you also to the entire Nixoa team for their tireless dedication and outstanding performance amid ongoing challenges posed by the COVID pandemic. I'm extremely proud of how our team has exceeded expectations in all our geographies. 2021 was an important year for NICSOA as we accomplished numerous clinical, regulatory, commercial, and financial milestones and positioned ourselves for continued execution and sustainable success in 2022 and beyond. On the clinical and regulatory front, our Better Sleep study achieved its primary endpoint of statistically significant absolute reduction in AHI for the entire cohort, as well as for complete concentric collapse or CCC patients. As a result, we received an expanded CMORC indication to treat CCC patients in Europe, and the US FDA granted us breakthrough device designation for CCC patients. Having achieved a 64% response rate across all cohorts at six months post-implantation, including 67 amongst non-CCC patients, these better sleep results help de-risk our DREAM-USID pivotal study and are giving us confidence that we are incorporating the right learnings to this critically important trial. We have a much greater understanding about patient phenotyping as we advance the DREAM trial, and we look forward to completing implants next quarter. Our patient-centric focus also includes our separated IDE trial for CCC patients in the U.S., which we anticipate commencing later this year to make this technology available to the 30% of patients who are contraindicated for hippoglossal nerve stimulation in the U.S., and we would know and who would no longer have to undergo an invasive drug-induced sleep endoscopy, also called DICE procedure. We also made MRI compatibility a top priority from the get-go to ensure that patients always feel safe and do not have to worry about explanting their device to undergo an MRI, of which there are more than 40 million performed in OSA patients alone every year globally. We were therefore thrilled to secure CE-MORIC MRI conditional labeling to ensure that patients implanted with Genio can undergo full-body 1.5 and 3 Tesla MRIs. On the commercial side, we were extremely pleased to move from the innovation budget to securing a dedicated DRG code for hippoglossal nerve stimulation in Germany. We are also expanding rapidly and have generated strong demand in other European countries, as we managed to secure a dedicated DRG code in Switzerland and have obtained hospital reimbursement in Spain. We are also awaiting reimbursement decisions in Belgium and the Netherlands. Our commercial strategy in Europe is based on a deep understanding of the patient journey, engaging with the implanting ENT surgeons and sleep physicians as key stakeholders in guiding OSA patients to the most appropriate therapy. Building strong relations between both referrals and implanting physicians results in the creation of a center of excellence ecosystem associated with faster therapy penetration and high patient satisfaction. On the financial side, we also successfully completed our second IPO in the span of 10 months. raising 97.8 million through our NASDAQ listing in July, after raising 84.8 million euros in our Euronext Brussels IPO in September 2020. We were proud to welcome a strong group of high-quality investors to our existing US and European shareholder base, and we look forward to building our roster further. More importantly, These offerings provided us with ample balance sheet liquidity, a cash balance of 135 million euros as of December 31st, 2021. That enables us to invest in our key clinical R&D and commercial priorities at this critical time for our company. I will go into more detail on each of these pillars. Let me first reiterate to you our overarching strategy. Our proprietary patient-centric geneal system is the only hippoglossal nerve stimulation device that requires only one incision, which shortens procedure time to around 60 minutes and reduces the risk of infection compared to multiple incisions. It delivers bilateral stimulation, which we believe results in an expanded total addressable market. Eliminate the need for patients to have to undergo the drug-induced sleep endoscopy procedure to determine if they have CCC or not. And last, it is compatible with both 1.5 and 3 Tesla full-body MRI. We are leveraging or strengthened balance sheet to build a growing body of clinical evidence to ensure that this technology is available to as many moderate to severe OSA patients as possible. A population that numbers more than 1 million new patients per year, including more than 500,000 in the US who are eligible to treat with and without complete concentric collapse of the soft palate. Last June, we announced that Better Sleep had achieved its primary safety and performance endpoint of a statistically significant absolute reduction in baseline AHI at six months for the entire patient cohort, as well as for the non-CCC patient subgroup, and importantly, the CCC patient subgroup. This is a critical development for Nixoa, and these clinical results which were presented in a poster at the World Sleep Congress earlier this month in Rome, represent the first body of evidence to demonstrate that bilateral hypoglossal nerve stimulation can be an effective treatment for patients with CCC, who comprise approximately 30% of the moderate to severe OSA patient population and who are contraindicated for other hypoglossal nerve stimulation options that are approved in the U.S., The study also generated a statistically significant reduction in oxygen desaturation index, or ODI, across all patient cohorts. Per the SHARE criteria, as used in our DREAM US Pivotal Study, better sleep achieved responder rates of 64% for the entire population, 60% for the triple C cohort, and 67% for the non-CCC cohort. Considering that as the growing body of clinical data and real-world experience suggests that patient response improves meaningfully between month 6 and month 12, these strong responder rates in all patient cohorts already after 6 months further increase our confidence in positive outcomes for the ongoing dream study. where we need to demonstrate a responder rate above 65% after 12 months. We also note that the mean AHI reduction exceeded 70% amongst responders in both CCC and non-CCC organs, making them super responders. In other words, when a patient responds, the type of airway obstruction will not influence the outcomes using the Genio system. WorldSleep was an outstanding success for us as we not only present better sleep data, but also hosted a physician event entitled Shifting Paradigm in OSA Therapy with Genio that was attended by more than 55 key opinion leaders from the US and Europe. It was invaluable opportunity for us to present our data directly and answer physicians' questions. And we are encouraged by the growing interest and enthusiasm for hyperlossal nerve stimulation in general, and GENEO in particular. To this end, in October, the notified body in Europe expanded our CE mark indication to include triple C patients amongst those eligible to be treated with GENEO. And GENEO is now commercially available in Europe, and the first triple C patients have been successfully implanted in Germany. As a reminder, the ability to treat triple C patients means that all moderate to severe OSA patients will no longer have to undergo a DICE procedure to determine if they have CCC. In addition, the US FDA in September granted Genio Breakthrough Device designation for triple C patients, which provides us with priority review. More on this in a moment. Turning to our clinical program in the U.S., the DREAM Pivotal Study. The DREAM Pivotal Study is our study in the U.S. that aims to, first, confirm safety and efficacy of the genius system, and second, support marketing authorization of the genius system in the U.S. The study plans to enroll 134 moderate to severe OSA patients who failed first-line POP treatment with 12-month efficacy and safety primary endpoints. The trial includes 16 US and 6 international sites currently activated, screening, enrolling, and implanting patients. Let me walk you through our progress on patient enrollment and the funnel that leads from initial enrollment to implantation. As of today, we have enrolled 430 patients, of whom 52 have made it through the funnel to implantation. There are additional 104 patients in active screening who underwent an initial polysomnography and are awaiting a confirmatory PSG to determine if their baseline AHI meets the minimum criteria to be implanted. Based on our experience, approximately 70% of these patients in active screening moved to implantation. meaning we likely have enough patients in the funnel to complete the necessary 134 implants. And we continue to enroll new patients as we speak to fill the funnel to ensure that we have more than enough to complete the study. Of those enrolled patients who do not progress for enrollment, they screen out because a DICE procedure indicates they have triple C, their BMI is too high, or an initial PSG determines that their AHI is not high enough. But to reiterate, we are encouraged by the pace of enrollment and by the number of patients who are moving through active screening. Today our focus is further secure all our slots and making sure that the baseline PSGs can be performed as soon as possible. Now to be perfectly candid, we fully expected to complete implants by the end of Q1 2022, which is next week. Based on the numbers I just shared with you, we will not hit that target in the next six days. While I do not like to make excuses, it's a fact that the Omicron variant caused significant disruptions for hospitals, particularly with respect to surgeries. Many US states placed moratoriums on elective procedures as did European countries like Germany as well as Australia. Even as things began to open up, the backlog of delayed surgeries meant it was increasingly difficult for surgeons to schedule a wartime. We therefore saw very little implanting activity in December and things gradually improved as we moved through January and into February. I am very pleased to see the strong momentum we have built over the last six to eight weeks as more key physicians have been activated and have accelerated their pace of implantation. We are now confident that we will be able to close out implants during the second quarter, which would put us on track to have full 12-month patient follow-up data in the mid of 2023. We will have much more to say on the specific regulatory pathway as we move through this year, but we expect to pursue a modular PMA pathway that we hope will enable us to secure FDA approval and commercial launch in the US in early 2024. Returning to the discussion of CCC, we have been encouraged by our sprint discussions with the FDA regarding the design of a separate IDE trial focused on CCC patients. We will call this trial ACCESS with three C's, as in triple C, and we hope to commence enrollment later this year. We will have much more to say about this trial, including sample size, design, endpoints, and timing, once we have final word from the FDA regarding our IDE submission, which we anticipate occurring before this summer. Turning now to our commercial progress for 2021. As with our other achievements in 2021, I'm extremely proud of the significant progress we made in our commercial operations. We remain committed to our strategy of going deep versus going wide as we focus our efforts on creating a center of excellence ecosystem with high level of clinical expertise between implanting ENT surgeons and sleeve physicians, providing more treatment options to their large patient pools. We have first focused on experienced hypoglossal nerve stimulation centers with an existing OSA referral path. Additionally, we have also managed to open new sites, feeding the funnel of new patients with a customized digital marketing strategy and targeted referral programs. Our focus remains on Germany, where we invested in building an Ixoa dedicated sales and marketing team of 13 people in order to demonstrate our commercial proof of concept. Supported by the strong endorsement of German KOLs and ENT society, we obtained a dedicated DRG coding in 2021. As of December 31st, We were in 12 active implant sites and expect to be active in 25 before summer 2022. Next to Germany, we also made meaningful headway in other key European markets during 2021. We secured the DRG code in Switzerland. We obtained hospital reimbursement in Spain. We continue to await reimbursement decisions in the Netherlands and Belgium. We also further invest in wider market access in the Nordic countries. Last, I would like to turn an update on our R&D activities. As mentioned earlier, in January 2021, we received the CE mark for MRI conditional labeling, ensuring that patients implanted with the Genio system can now undergo full-body 1.5 and 3 Tesla MRI scans. MRI compatibility is consistent with our patient-centric mission and aids in patient quality of life, knowing that over 40 million MRI scans were performed in OSA patients globally in 2020. To date, we remain the only company with an MRI compatibility label for the full-body entry TESLA, which is the most commonly used MRI setup. We also have submitted to the Notified Body in Europe and to FDA our Genio 2.1 Next Generation System, which includes a new patient-centric smartphone app that will empower both the physician and the patient to track progress. This app will also empower the patients, allowing them to adjust the stimulation amplitude at home. The Genio 2.1 activation chip will integrate multiple sensors, including a position sensor, to adjust stimulation levels based on sleeping position and patient movement, what would also be making our technology intelligent. We also remain focused on developing our longer-term pipeline to find new and innovative ways to treat a greater number of OSA patients. To this end, in February 2021, we announced our exclusive licensing agreement with the U.S. Vanderbilt University, allowing us access to technologies and capabilities to develop next-generation obstructive sleep apnea solutions. We are pleased that we can partner with Dr. David Kent, who is the Director of the Sleep Surgery at Vanderbilt University Medical Center, to develop new neurostimulation technologies. starting with one that focuses on the ansa cervicalis nerve stimulation. The ability to treat OSA patients in a different way will further expand treatment options for physicians, resulting in enlarging the eligible to treat OSA patient population. We are building first prototypes at the moment, and we will have further updates on this project later this year. I'm pleased to welcome our new CFO, Loic Moreau, who joined us January 1st. I will now turn the call over to Loic for financial discussion.

Thank you for the warm welcome, Olivier. Good day to everyone and thank you for joining us today. I'm thrilled to be part of the team and I'm excited to embark on this journey with the Nixoa team and with all our stakeholders. I will provide some highlights from our P&L and our balance sheet. For further details, please refer to our earnings press release issued earlier today and our annual report. Revenue was 852,000 for the full year ended December 31, 2021, compared to 69,000 for the full year ended December 31, 2020. The increase in revenue was attributable to the company commercialization of the Genio system mainly in Germany, and with some contribution from Spain and Belgium. Revenue for the second half of 2021 was 497, a 40% increase versus the first half of the year, despite headwinds related to the Omicron variant during the fourth quarter, which included a moratorium on elective procedures in Germany. Total cost of goods sold for the full year 2021 was 303,000, with gross profit of 549, representing a gross margin of 64.4%. While we're not providing any specific guidance on gross margin for 2022 or beyond, we do expect gross margin to improve over time in line with other neurostimulation companies as we achieve greater commercial scale. General and administrative expenses rose to 11.1 million for the full year ended December 3rd. 31, 2021 from 7.5 million in 2020 to primarily to increase commercial reports in Germany and other European markets. We have also scaled up our corporate infrastructure and expect to continue adding headcount across the organization going forward. Research and development expenses increased substantially to 2.4 million in 2021 from 473,000 in 2020 after capitalization of 3.4 million, driven by our efforts to develop the next generations of our genuine system. Clinical expenses increased to 2.7 million in 2021, from 1.1 in 2020, after capitalization of 6.1 million euros. The increase was mainly due to, number one, the completion of the better sleep trial implantation. Second, the ongoing recruitment for the ELISA trial and third, the initiation and ramp-up of the DREAM IDE trial in the United States. This will remain a key investment focus for us in 2022 as we work to complete DREAM implants and manage patients' follow-ups. We also anticipate commencing our ACCESS IDE trial for CCC later this year. We expect that R&D and clinical expense will represent roughly two-thirds of our operating expenses in 2022. We realized a net loss of $27.6 million for the full year ended December 31, 2021, compared to a net loss of $12.2 million for the 12 months ended December 31, 2020. At the end of 2021, cash and cash equivalents totalled €135.5 million compared to €92.3 million in December 31, 2020. The increase in cash and cash equivalents was due primarily to net proceeds that we generated from our July 2021 initial public offering in the US, in which we sold 3,260,000 ordinary shares, including over-allotment, at a price of $30 per share. This resulted in total gross proceeds of $97.8 million before deducting underwriting discounts and commissions and estimated offering expenses. The increase in cash from IPO proceeds was offset by net cash flows used from operating expenses of 25.3 million euros. Based on our current cash balance and burn rate expectations, we have ample liquidity to go to U.S. commercialization in 2024. With that, I will turn the call back to Olivier. Thank you, Loic.

In closing, I would like to reiterate my excitement for where we stand today as a company. Our dedicated team has built an execution culture that produced numerous significant clinical regulatory commercial and financial accomplishments in 2021. And I hope this gives you confidence in our ability to continue to execute in 2022 and beyond. For 2022, you can expect our full focus to remain on, first, completing the DREAM trial, next, commercial execution in Germany, and commencing our CCC IDE studies in the U.S. We are also excited to begin holding quarterly conference calls in 2022, and we look forward to providing our Q1 update in May. This concludes the formal part of our presentation. Operator, I will turn the call over to you to begin our Q&A session.

Thank you. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Again, that's star 1 to ask a question. Our first question comes from Adam Mader with Piper Sandler. Your line is open.

Great. Hi, Olivier. Hi, Loic. Congrats on the progress last year, and thanks for taking the questions here. Maybe just to start, we can talk about the US Pivotal Trial, the DREAM study. recognize, you know, some of the challenges that COVID-19 has presented, and you're certainly not the only medical technology company to be impacted here. But maybe just talk about the level of confidence in delivering against the revised expectation being done with implants in Q2. What informs that confidence given, I think the math implies you need to implant 82 patients in the second quarter. And then maybe just talk a little bit more specifically about the trends you're seeing in the trial in recent weeks. I mean, it sounds like you're pleased with the recent momentum, but was hoping you could put a finer point on that. And then I had a follow-up or two. Thanks.

Thank you. Thank you for the question, Adam. So today, as I already pointed it out, we are at 52 implants. So the calculation is correct that we need to do a little bit more than 80. What is giving us confidence is the fact that the large progress made by on the enrollment with more than 430 patients enrolled. But I think more important is when we drill down one step further in this funnel, having over 100 patients that in fact already passed DICE, that passed the first PSG, and that now are waiting for their baseline PSG. As I mentioned, we calculate roughly 70, but I think it can also be a little bit higher. It's a little bit center-specific, but 70 up to 75% of those that will end up in doing and in getting an implant. So what we see today, enrollment, what is in the funnel, what already has been done, we should be good to reach 134 implants. Now, the other side that I would like to point out is that currently we really have 16 US sites fully up and running on doing implants. Now, what the team did great is they started also finding and going after solutions in order to secure OR time slots, and also to collaborate with specialized sleep labs to have an acceleration in getting PSGs done where we have the patients that are waiting in the funnel. So if you combine all this, the focus on already locking all our time, getting more sleep labs to perform PSGs, and having the patient base already in the funnel, passing the first screen out where we lose them on dyes, on BMI, also on not being moderate, that gives us a lot of confidence. that we will be able to close by the end of Q2.

Okay, that's really helpful. And maybe just to clarify, it sounds like in terms of baseline PSGs and securing OR time, it sounds like you have some visibility as we look ahead, and that kind of informs the confidence and expectation that you'll be able to complete implants in Q2. Am I thinking about that, or did I hear that right, Olivier?

Well, that is correct. And when we look at the different centers that we are having, our team is, of course, in close and daily contact with them, and we also are introducing some dashboards on when we secure the work time, what patients will go into this funnel, so there is a concrete execution focus on getting them implanted.

Okay. Okay. Very helpful. Thank you. And then for my next question, I wanted to ask just a little bit more broad strokes on On the back half, commercial performance, back half 21, and then thus far into 2022. Just curious to get more color on how that trajectory has looked. I think it would just be helpful to get some baseline for our models. We think about forecasting here in 2022. So any color there you can provide, Olivier or Luis, would be very appreciated.

First, I would like to really point out that our commercial proof of concept, we have a full focus on Germany. When we are talking about numbers, about implants, it's really focused on Germany, and that's also how we have defined our future success, by becoming market leader in the German market. Coming back, second half of the year, more specifically Q4, we were really impacted by Omicron, and I think I'm not the only one who is making that statement. I hate to use it as an excuse, but Sometimes when it's a fact, it's a fact. What we saw during this time is that the team really did a strong job in continuing identifying and positioning our technology in new sites. And that will result that we will have up to 25 sites before summer this year. Today we have 12. We will be doubling the number of sites in the coming four months. All those sites are identified, and the conversations are ongoing, and we are setting them up to do successful Genu implants. That's the first thing. The second thing is, without disclosing any implant rates or revenue, but we see a very strong traction in Q1. And as I mentioned, we are now aligning, also doing Q1 or quarterly earning calls. So on May 10th, I will be more than happy to further update you with precise numbers on the Q1 activity. But we are really feeling confident and we're also seeing that specifically in Germany again, the COVID days are really behind and things are returning back to normal. So that's the second thing. The third thing is we significantly invested in digital marketing activities and in really fine-tuning and further filling the funnel of referral patients. So those are the three things we are doing, and I will be very happy to come back to you, Q1, in telling you the progress we made with specific numbers.

Okay, understood. We'll stay tuned, Aaron. encouraging to hear. It sounds like Q1's off to a good start, so appreciate that commentary. And then maybe just one last one for me, and I'll jump back into Q, but was hoping you could talk a little bit about the accounts that you're in today in Germany, just any early learnings there, Olivier. How are clinicians utilizing Genio? How are they splitting? Are they splitting between devices? Are they picking one device over the other? You know, I know it's relatively early still, but just curious about how your customers and physicians are utilizing the product at their respective practices. Thanks so much for taking the questions.

No, first of all, what we hear back overall is that physicians are extremely pleased to have an alternative or to have a choice within hypoglossal nerve stimulation. So far, there was only one option they could propose to patients. And today, they have two options. And this is really something that we are hearing back as a great win, also to address more patients and some patients that maybe in the past would be lost for lipoplasmic nerve stimulation. That's the one thing, having the option to choose. Second, what we also are hearing back is by not having the battery implanted, it gives them also a lot of, or shall I say, a lot of convincing power with patients who are a little bit afraid of surgery, Here we stay with a single incision procedure, 60 minutes skin-to-skin time. It goes fast, and patients that are afraid of surgery are more open also to accept hyperlossal nerve stimulation. And then last, what we are hearing back is the scalable software platform that we are offering with patient application, with the opportunity to interact without seeing the patient physically. So I think those are the three major learnings. We are broadening the number of patients eligible to treat by hyperlossal nerve stimulation by giving physicians a choice. We see that by making it less invasive, only one procedure, it helps also convincing patients that are a little bit afraid of surgery. And last, with a scalable technology platform, this is also, and being able to monitor patients without seeing them physically, it's really a big win.

Very helpful. Thanks again for taking the questions.

With pleasure.

Thank you. Our next question comes from John Block with Stiefel. Your line is open.

Great. Thanks, guys. Good morning. Olivia, maybe the first one for you, and I'll start on Dream as well. The 104 in active screening, and then I think you said 70% in active screening usually go to implants. And I just want to focus there for a second. Is there any color, you know, thinking about like the timing of those in active screening to get to implant, where then the 12-month clock starts? Is that a one-month process, a three-month process, just as many details that you can give? Because that's a big number, the 104. That's a high percentage, the 70%. But maybe if you can talk to the timeline that usually accompanies that process would be very helpful.

No, John, this is really an excellent question. And to answer this, First I have to say this is really site specific, so when we look at some sites, it's a question of a couple of weeks to push them through, where in other sites it's a question of a couple of months to push them through. But on average, we are seeing that in order to do this, we are talking about five to six weeks. So after doing the baseline PSG to the implant, it's five to six weeks on average. But no, as I mentioned before, of course, the challenge of our team and the focus of our team is to shorten those push-through timelines to a maximum and to also incorporate the learnings from sites that are doing this in a couple of weeks. But on average, five to six. Five to six weeks, the fastest one, a couple of weeks. The slowest one, they go all the way up to two months.

Okay. That's very helpful. So maybe to your point, the five to six weeks, it gives you the high conviction that you're you're across the goal line, so to say, by the end of the second quarter. Well, we extrapolate that back to the 104, the 70% of the 104. Got it. And then just to pivot a little bit, you know, I believe, and I might be mistaken, but I believe your filings calls out four SAEs in DREAM. And, you know, I think, one, is that correct? And two, much more importantly, are any of those device-related issues or any color that you're able to provide on those SAEs? And I ask because I want to be clear, you know, per INSPIRE STAR study, we know that SAEs are not uncommon at all, but they're, call it, a lot less common for device-related. So maybe if you could comment on that, you know, the number and then any color you can provide on those would be helpful.

No, it's correct. So having SAEs is not uncommon, and I think it's like, It's something that also surgeons and companies are learning from. In our study, we see that there is no higher number of SAEs than you would expect with other studies. So the four that you are referring to, at this moment, there are still, I think, and let me try to be precise, I think there are still two that need to be further determined, whether it's device-related or procedure-related. So, so far, what we saw was not device-related, the two that are still under examination. It will become more clear in going forward, but I also would like to go back to the better sleep study and even to our blast OSA study when it comes to SIEs and pointing out that also there we saw nothing abnormal to say it like this. We had a low number. Most of them resolved after time or related to the procedure, and if you put this into perspective with other studies, it was completely comparable. So we expect no difference at all in the dream study.

Okay, and I'm sorry, just for clarity purposes, of the four that we know of, two have been defined as not device-related, and two are still called TBD to be determined. That is correct. Okay, great. And last question, just, you know, to go over to the commercial side of things, maybe just, look, you've got, you know, the expanded indication for CCC or the contraindication taken away, and it's a big move and you can treat a whole other subset of patients and you can do it without the dice. Just at a high level, if you can talk to what those active centers, you know, those 12 centers are telling you how maybe the feedback has changed since you've been able to treat that whole other subset of patients and, you know, how you think you can build upon that momentum into 22 and beyond. And that's it. Thanks for your time, guys.

So first, it was great to be able to talk and interact with over 50 implant surgeons during the World Sleep Congress in Rome, and also talking about this question. And I'll take until February before we have the first CCC patient implanted commercially in Germany. It has simply to do with the fact that we had to wait for the IFU to be adapted, and also to give some time to talk and position this with physicians. I think we can go to the next line. because I thought John was saying it was his last question.

Okay, our next question comes from Laura Roba with DeGroof Petercam. Your line is open.

Yes, good afternoon. Thank you for taking my question. Thank you for the presentation. One question from my side regarding a bit the OPEX trend going forward. You mentioned in the press release this morning further investments to be made in accounts ahead of the U.S. commercial launch. Could you provide more granularity on that in terms of timing, for example?

I will give this one to Oceafo. Yes, absolutely. So in 2022, this year, we expect to increase headcount, mainly in clinical and R&D. We are starting with pre-commercialization in the U.S., but fairly lightly this year, as you can imagine. And we would accelerate only when we would have more visibility on the DREAM data and the 12 months, which is planned mid-2023. So You can expect OPEC's increase for the next 12 months, and then, based on dream data, we will see what level of investment is required to make a successful launch in the U.S. in the second half of 2023. That's how we're looking at this.

Okay, thank you. And then another question regarding the number of active sites. So am I wrong here? Because I think that in H1, you already announced 12 active sites. Does it mean that there were no new active sites in H2?

So I think you're referring to Germany. Exactly. Yeah, no, and that is correct. That is correct, Laura. So we opened the first 12 sites. We focused on what we called Tier 1 or high-volume sites. In the second half, we identified further sites but then the Omicron variant came in in Q4, and we really dedicated our focus, in fact, on the ones that were activated. And that's also why you will be seeing, but Noah, you make me say things that I want to say for Q1, but that's why you will also see the acceleration in the first quarter in opening more new sites active in Germany.

Okay, good to know. Many thanks.

Thank you, and we have a question from Ross Osborne with Hunter Fitzgerald. Your line is open.

Hi, good morning, and congrats on the progress. So I guess just a couple questions on cost. So I know you haven't set formal gross margin guidance, but could you walk through some of the headwinds and tailwinds you saw during the second half of 2021 and just how that's progressing year to date and how you think that's going to shape out for the rest of the year?

Yeah, so... So we have a gross margin in 2022 of 64.4 million. Sorry, 64.4%. This was broadly in line with H1. We are not providing guidance for 2020. We are not providing guidance for 2022, but as we reach greater scale in terms of volumes, basically, we expect the gross margin to increase substantially. and be in line with all the neurostimulation companies. So progressively, 23, 22, 23, it will increase gradually as our volume increases.

OK. Sorry, go ahead.

Sorry, and I want to just add something to this one as well. If you look at our technology, where we do not have an implantable pulse generator, which is the highest cost if you look at the total implant. Also, there we are really feeling confident that we are aiming and we will be ending up more in second, let's say, 85 plus percent gross margins. So that's where our aim is in going forward, in line, of course, with gross hand-in-hand with the volume increase.

Okay, great. That's helpful. And then I guess just on OpEx, Could you just walk through some of maybe the marketing activities that you currently have going on and maybe any new ones that are going to come out in 2022? And then lastly, we just talk about maybe some rep hires planned for this year.

Yeah. So in terms of marketing costs, this is mainly related to our activities in Europe, specifically in Germany. So we have our team of 13 heads. in Germany and we have digital marketing sorry directly visiting customers and we are digital marketing as well so we will be expanding slightly in other countries in Europe but this is the majority of the team we have in headcount and in Europe for the time being maybe on addition to this do we plan to further hire new headcount

This goes hand in hand with the market access or the reimbursement in countries. As I mentioned before, we are waiting Belgium, Netherlands, Nordic countries. We saw that we also made our first hospital budget securitization in Spain. So important for Niksoa is that we have a dedicated sales force. And the moment we have a good view on obtaining reimbursement in a specific country, of course we start hiring and we will further expand. So concrete, yes, you can expect, let's say, five to six additional headcounts in Europe. And what we've already touched on also in the pre-commercialization for the U.S., there we want to make sure that we're also making the needed investments in headcounts, like, for example, a market access director in the U.S. preparing and already preparing the landscape for future reimbursement in the U.S. as well.

Sounds great. Congrats again, and thanks for taking my questions.

Thank you.

Thank you, and that's all the questions I have. I would like to turn it back to Olivier Talman for closing remarks.

Yes, thank you. And the closing remarks will be very short. So first of all, thank you for joining us again. Thanks for the great questions. Thank you very much. I'm looking forward to update you again in the near future. And the near future will be our Q1 early call that we will be hosting on May 10th. So within six weeks, if I'm not mistaken. Thank you and enjoy the rest of the day.

This concludes today's conference call. Thank you for participating. You may now disconnect.