Nyxoah SA

Good day, and thank you for standing by, and welcome to NCSAW Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-on mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. Now, like the hands I would now like to introduce your host for today's call, Michaela Kirkwood, Investor Relations and Communications Manager. Please go ahead.

Thank you. Good afternoon and good evening, everyone, and welcome to our earnings call for the second quarter of 2023. I am Michaela Kirkwood, Investor Relations and Communications Manager at Nixella. Participating from the company today will be Olivier Tillman, Chief Executive Officer, and Lalique Moreau, Chief Financial Officer. During the call, we will discuss our operating activities and review our second quarter financial results released after U.S. market closed today, 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 event section of the investor relations tab of our 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 material differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current 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 of descriptions of the risks and uncertainties associated with our business, please refer to the risk factors section of our Form 20F filed with the Securities and Exchange Commission on March 22nd, 2023. With that, I will now turn the call over to Olivier.

Thank you, Michaela. Good afternoon and good evening, everyone. And thank you for joining us for second quarter 2023 earnings call. The evolution of Nixovas enlarging its US footprint is well underway, with our current focus on patient follow-up in our US pivotal study dream. As a reminder, we completed all 115 implants in the study earlier this year and expect the report 12-month results in the first quarter of 2024. We are highly confident in DREAM outcomes based on the over 500 implants in our prior clinical and commercial settings globally, and the DREAM efficacy and safety data released in a late-breaking poster session at Sleep 2023 in June. In the poster, we reported efficacy data on the first 34 DREAM patients reaching 12-month follow-up, which demonstrated a 65% AHI responder rate and a 76% ODI responder rate, and safety data on all patients enrolled in the study, which were in line with our expectations and compared favorable to other neuromodulation studies. As a reminder, for the trial to be successful, of the 115 patients, at least 63% need to be AHI and ODI responders at the 12-month follow-up. The modeler PMA submission continues to progress, with the second module being filed during quarter two. We continue to anticipate submitting the third module later this year and the fourth and final module, which will include 12-month safety and efficacy data shortly after the follow-up period is completed early next year. We remain on track for FDA approval before the end of 2024. The U.S. Access Pivotal Study focused on complete concentric collapse patients continues to enroll, with implants expected to be completed in 2024. As a reminder, CCC patients represent approximately 30% of hyperglossal nerve stimulation eligible to treat OSA patients who are contraindicated to commercially available AGNS therapy in the U.S. and do not have suitable treatment options other than major palate surgery. The excess primary endpoints are similar to the dream study primary endpoints, as Genio has demonstrated similar results in both CCC and non-CCC patients. This already resulted in a label expansion in Europe, where the first commercial triple C patients are being treated. Commercially, this quarter, we reported sales of 1.1 million and increased the number of German centers implanting Genio to 42. This is the result of both strong underlying demand for Genio and commercial investments, including direct-to-consumer online campaigns launched in March. As a result of these DTC efforts, we are seeing approximately 50,000 monthly website visits and nearly 1,700 obstructive sleep apnea patients call the helpline in the second quarter, compared to 292 in the first. Guiding these patients to the appropriate therapy and shortening their time to treatment will contribute to our future success. AGNS in Germany remains highly under-penetrated, with 1.1 million CPAP patients, yet only 620 AGNS implants last year. Identifying CPAP refractory patients is the key to unlocking the market's potential. And we are working closely with sleeve physicians and other industry participants to ensure these OSA patients receive appropriate therapy. We continue to position ourselves as an innovation leader in the OSA space, with always putting patients first and listening to our surgeons. As a result, Genio is a different approach to AGNS than existing implanted battery with leads solutions. Genio offers patients a leadless, full-body MRI-compatible, non-implanted battery solution, powered and controlled by a wearable. Independent patient market research confirmed preference for a system with Genio's features. Thanks to the fully upgradeable wearable component, Genio patients can always have the most advanced technology without needing a new surgery. Next-generation Genio systems will provide patients with real-time feedback through data collection and offer remote monitoring that will improve the patient experience and provide physicians the ability to more efficiently optimize patient care. Concretely, we are currently rolling out Genio 2.1, enabling greater stimulation adjustability, while Genio 3.0 will have a design change integrating patient feedback and positive impact on gross margins by integrating the coil into the wearable component. All this should further increase patient access to AGRS technology. We're also working on regulatory approval to activate existing sensors in the wearable that will adjust stimulation based upon sleeping position. Our European commercialization experience Early dream data and Genio's differentiated design reinforce our confidence in a successful US launch next year. We recently commissioned independent clinician and patient service, which demonstrates significant demand for Genio and supports our view that we can more than replicate our European performance when entering commercially in the US. To ensure we are fully prepared at launch, we have accelerated investments in our U.S. commercial infrastructure. Christophe Eigenman joined as chief commercial officer during the second quarter, and our market access team is making steady progress. We are working closely with the AAO, the American Academy of Auto Laryngology, to define which CPT code would best support Genio at launch. While there are multiple CPT codes being evaluated, they all provide reimbursement that, at the minimum, is in line with current AG&S payment levels. We anticipate having Medicare coverage at launch, with commercial payers following shortly thereafter. Finally, we are making steady progress with our ANSA Certicalis program to our exclusive licensing agreement with the Vanderbilt University. Under the lead of Professor David Kent, in close collaboration with the Nixoa RMD team, we are evaluating stimulation of the antacervicalis nerve to address current AGNF non-responders. The antacervicalis preliminary design work has ended, and we have begun the detailed design phase. We continue to anticipate beginning a feasibility study later this year. In summary, we continue to advance our key objectives for 2023, which are to focus on patient follow-up in the dream study, resulting in reaching the primary endpoints, begin preparations to enter the U.S. market with regulatory, manufacturing, and commercial market access readiness, and drive further revenue growth in Germany while opening new European markets. With that, I'm pleased to turn the call over to our CFO, Louis Moreau, who will provide a financial update.

Thank you, Olivier. Good day to everyone, and thank you for joining us today. Revenue for the second quarter ended June 30, 2023, was €1.1 million. Total operating loss for the second quarter was €11.9 million versus €7.4 million in the second quarter of 2022, driven by an acceleration in clinical activities, notably the start of the ACCESS study, as well as commercial investments in Europe. Last quarter, we raised €3 million, pursuant to the company's $50 million at-the-market program. As of June 30, 2023, cash and financial assets totaled 84.5 million euros compared to 96.1 million on December 31, 2022. During the second quarter, our monthly cash burn was 4.8 million euros. And based on our current cash position, we have a runway into late 2024. With that, I will turn the call back over to Olivier.

Thank you, Loic. We are entering the most exciting time in IXOA's history. We are less than nine months away from the dream clinical data readout, which should result in obtaining FDA approval and initiating US commercialization. The uniqueness of Genio's system resonates well with both physicians and patients, confirmed by independent market research. I look forward to continue to scale the company in anticipation of entering the U.S. market and continuing to grow in Europe. This concludes the formal part of our presentation. Operator, I will turn the call over to you to begin our Q&A session.

And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And one moment for our first question. And our first question comes from John Block from Stiefel. Your line is now open.

Hey, everyone. This is Joe Federico on for John. Thanks for the questions. To start, I know you gave some color on the reimbursement details. I just wanted to ask, I think in the past you had said that you expected to hear from the AMA before the end of the year on some of the coding clarity. Can you give us an update on where that sits?

Yes, no, definitely. So we are working, as I mentioned, with ENT Society AO, and they are collaborating with the AMA and making recommendations. There are two options that are fully and further discussed, and we are still sticking to the same timeline that we believe that before year end, there will be clarity on which of the two options will be the one that we can use for the junior system and going forward.

Okay, great. Thanks for the color. And then just to follow up, I wanted to ask about gross margin in the quarter. It looks like it came in a little bit below our estimates. Can you kind of expand on some of the drivers there? and maybe how you expect that to play out over the remainder of the year? Thanks, guys.

I will hand over this question to our CFO.

Yeah. Hi. Thank you for the question. The gross margin for the second quarter was 62%. That's 64% for the first quarter. So there is a 2% decrease in terms of margin, which is due to the additional site we now have in Belgium. So, this said, with the acceleration of the business and the ramp-up of the volumes, we expect the gross margin to increase over time, specifically in the second half of 2023 and then in 2024, based on volume and absorption of fixed costs.

And thank you.

And one moment for our next question. And our next question comes from Ed White from HC Wainwright. Your line is now open. Good evening.

Thanks for taking my question. So with the increase in the use of GLP-1 drugs, I just wanted to get your thoughts on the potential impact to the HGNS market.

Thank you for this question, Adnan. It's really a hot question at the moment. So the way we are looking at this at Nixoa is the following. If you look at both published data and commentary from leading KOLs indicating that to have the highest AGNS response, it's best to lower BMI to 35 than to treat high BMI patients. So our view is that lowering BMI from high BMI patients, thereby increasing the number of AGNS-appropriate candidates will more than offset any patients that might drop out of the funnel. In other words, we are really welcoming GLP-1 into the market, and we do believe that the effect can be meaningful and benefiting in increasing the AGNF eligible candidates.

Great. Thank you. And just another question. You were in 41 accounts in Germany in the first quarter, 42 in the second quarter. I just wanted to get your thoughts on how many accounts you're expecting to be in by year end. And your competitor was in over 50 accounts, I believe, in the first quarter. Just where do they stand now and what's your overlap with them? Thank you.

Yes. So first of all, I want to compliment the German team in driving and opening new accounts. They are doing really a great job on this. Today we are at roughly 42 accounts. In going forward, I do not want to provide specific guidance on exactly how many accounts we will be opening, but it's also clear that we will continue to anticipate a steady increase in the number of implanting centers over the course of the years. And just as some kind of reference, in our view, our competitors, they are having slightly above 50-55 accounts in Germany. We have 42 at this moment, and as I mentioned, we want to steadily increase also the number of implanting centers over the course of the year.

Okay, great. Thanks for taking my questions.

My pleasure.

And thank you.

And one moment for our next question. And our next question comes from Adam Mader from Piper Sandler. Your line is now open.

Hi, Olivier. Hi, Loic. Congrats on the progress, and thank you for taking the questions. maybe just uh to start wanted to ask about some of the pre-commercialization us activities that you're um uh engaging on right now uh i think i heard the word accelerated mentioned once or twice so can you just level set us kind of exactly you know where does the infrastructure stand how are you thinking about headcount at uf launch and maybe just remind us of of kind of the the initial go-to-market strategy in the U.S., and then add a follow-up. Thanks.

Thank you, Adam, for the question, and I'm joining the call. So when it comes to a go-to-market strategy, as I mentioned before, we will gradually increase our investment in U.S. pre-commercialization, going hand-in-hand also with our increased confidence in the Dream Study data outcome. What I can say is that, first of all, we hired already our CCO, Chris, Next to this, we have our market access director. We also recently have refocused our VP of operations fully dedicated also to help preparing the pre-commercialization. In going forward, of course, we will further expand And also we are preparing an internal plan where we are anticipating having a full sales force of 100 to 150 people hired and trained by the time of launch. These reps will target both implanting ENTs, but also referring sleep clinicians. supported by a relatively modest DTC investment. At this moment, we are doing the targeting of accounts, how many we aim to come and also to enter. But on all this, I will come back during quarter three, the moment we get even more close to U.S. commercialization.

Okay, totally fair. And thank you for the additional color there. Maybe just for the follow-up, You know, obviously you guys don't provide revenue guidance. It looks like the street's modeling around 5 million euro or so for full year 23. Curious if you have any reaction to that figure and just any thoughts around kind of the back half cadence, Q3 versus Q4, that you can share regarding your business. Thanks again.

Thanks for the question, Adam. I will take it. So as you said, we're not providing revenue guidance. But we're very confident in the momentum of the business, and we're confident in terms of the high growth in Germany. This is the only thing I can comment on. Thank you.

And thank you. And one moment for our next question. And our next question comes from Roz Osborne from Cantor Fitzgerald. Your line is now open.

Hi, thank you for taking our questions. Would you please provide an update on how some of the headwinds you called out during the first quarter played out year to date? Specifically, has hospital capacity and staffing improved, worsened, or stayed the same? And how have new accounts dealt with administrative burdens you mentioned? Thank you.

Thank you all. Thank you for this question. And then you recall this very correct. So in the first quarter, we were impacted with what we call transitory factors, mainly driven by proctor availability and reimbursement approvals in new open centers. So the resolution of these issues combined with our patient focused initiatives drove the sales rebound in the second quarter. And that's also explaining how we landed at more than 1.1 million euros in quarter two.

Got it. Thank you for that. And then just one more for us. Would you be able to disclose what percent of total revenue Germany accounted for and how accounts outside of Germany performed?

So at this moment, the German revenue is really driving our revenue business with more than 90% of all international revenue coming from Germany. We are really pleased that we also see Switzerland having no full DRG code in place. We recently also generated our first revenue in Austria. So besides Germany, we have Switzerland, Austria. We had Spain already, and we expect more revenue to come in the second half from Spain. And in going forward and further expanding, we are aiming at Italy, where we expect first revenue generation next year. And we're also looking at the UK.

And thank you. And one moment for our next question.

And our next question comes from David from Baird. Your line is now open.

Oh, hi. Thanks for taking the questions. I wanted to start on the DTC campaign in Europe that you called out. I think you mentioned maybe 50,000 monthly website visits. Just wonder if you had any more color on, you know, if and how that's translating to revenue growth, toward patients going into centers, towards patients translating into, you know, ultimate implants, any color on the ROI you've seen there. And I think you mentioned in the U.S. you're expecting a modest kind of DTC campaign associated with the commercialization. Just wondering if that's something you're expecting to invest in ahead of the launch, maybe at the time of launch or something that rolls out thereafter.

So let me start by answering the first part of your question on DTC in Europe. So our direct-to-consumer advertising campaign was launched in March in Germany. and has raised awareness of AGNS and Genio. As a result, we are seeing and we have seen rapid growth in appointment requests through the helpline. The current time from patient identification to Genio implant, it's between six to eight months, so we would not anticipate appointment requests translating to implant until, in fact, Q4 this year. But we are seeing that there is a really increased interest. Now, jumping and taking this learning into the U.S., I think it's obvious, and also if we just see what is happening with other companies or with a leading company in AG&S, that DTC is really showing its effect and its positive effect on recruiting patients. So also, when Nixola will launch in the U.S., we will invest in DTC. However, we want to do this in a more selective way that we know that in line with the centers that we are opening and the centers that we call center of excellence, that we can do really focused DTC investments, driving patients to these centers, resulting in an increased implant rate for Genio.

All right, great. That's helpful. And then just on the cash balance, I think you called out maybe $100 to $150 or so in U.S. reps potentially in the Salesforce pre-commercialization. I think you also called out cash balance gets you to, you know, toward the late end of 2024. Do those comments or does the cash balance getting you there account for potentially bringing on this Salesforce in, you know, the middle part maybe of 2024? Or should we be thinking about, you know, you know, any type of incremental, you know, investment in the cash position of the business ahead of that launch as well. Thank you.

Yeah, no, no. And this is a really, really interesting question. And it's also a question that we are debating internally. I think it should be, I will just start the answer and then I'm sure that we can also follow in on this. In short, at this moment, we are having a really healthy cash position that will bring us to end 2024. You know that the major inflection point is coming with the 12-month green data readout in Q1 next year, in 2024. At that moment, it's also, I think, clear that in order to prepare a real successful commercial launch in the US, where we will be making a big splash when entering, that we will also need to raise more money to finance this. What the exact numbers are and will be, I don't think this is the correct moment to disclose this, but we have currently a healthy cash position, we have a big inflation point coming up, and we also know and we are preparing an aggressive pre-launch in the US, trying to make a big splash when we enter. And therefore, most likely, we will be raising more money, but the exact amount, again, it's not this moment that we want to comment further on this. Loic, if I forgot something, please.

No, this is totally complete. So the cash burn until end of 2024 covers all the pre-commercial activities. And since we are looking at the launch plan, the detailed plans, and the phasing of those plans, this will be incremental investments. Okay, great. Thank you.

And thank you. And one moment for our next question.

And our next question comes from Suraj Kalia from Oppenheimer and Company. Your line is now open.

Hi, Olivier. Lloyd, can you hear me all right?

We can hear you perfect, Suraj.

Perfect. Olivier, congrats on all the progress. So, Olivier, a number of questions have been asked. Maybe let me ask you a slightly different flavor. uh in germany what are the average procedure times for genio and is our math approximately right that we are you know in q2 we are talking about roughly one implant per site or a little more than one okay so what we are seeing from implant procedure in germany

We are having, we are seeing a range that is varying between 45 to 60 minutes. So, depending a little bit on the surgical technique, the handiness of surgeons, but we see roughly that 45 to 60 minutes. That is what it's taking the surgeons to do an implant procedure. No, when it comes to one implant by site, if you look at it purely mathematically, yes, you could come up with this calculation. However, the sites that we are opening are not at the same stage as the sites that were opened before. So we also have a variability between sites. There are sites that are doing 10 implants. There are sites that are doing one or two implants. But our aim in going forward is also making an increase in the overall implant number. And to this one, we recalculate it further and that's what we're aiming for with our most experienced site that we can come with weekly implants or even multiple implants on weekly base depending on the org availability that they're having.

Got it. So, Olivier, when you look at Germany, I remember you had talked about a 50% market share by your end. Love to get the status update if possible on that. And Olivia, as you'll think about launching in the U.S., how do you envision this hand-to-hand combat with Inspire? Do you think it'll be determined by DTC spend? Do you think it'll be determined by outcomes, feet on the ground, price differential? You know, just kind of give us some additional color on how you guys are thinking about the U.S. market especially.

Yes, and before I answer the question of German and the market share, I would like to answer the second part of your question, if that is okay with you, Siraj, because I think you touched on something that is really, really important in how can we differentiate with Inspire and how can we drive success in the U.S. in going forward. So first of all, yes, we do believe and we are convinced that the product differentiation will Convince the majority of patients to choose for Genio over a pacemaker platform technology. That is our belief. That is what we are seeing. That's what we are seeing confirmed when we do independent market research. So we do believe that patients suffering from OSA will choose the less invasive technology, the safer technology, where you have, for example, the full body BMI compatibility, where you have one incision, where you will always have access to the latest and greatest technology update without having to undergo a re-operation. That's already one part. On the other hand, we also do believe that in going forward and in launching, the effect of DTC cannot be underestimated because it's directly also linked to the patient choice of technology. And we will also be investing in this. Another differentiating point is when you speak to surgeons and you listen also with the bilateral stimulation effect and the option to also have the label expansion treating CCC patients, which would make it for surgeons less cumbersome. They don't have to think about dyes or a similar identification model to select or identify CCC. If you combine all these things starting with a clear product differentiation, with a patient acceptance ratio, with a less invasive technology, in combination with surgeons who do not need to exclude or come with cumbersome pre-investigations before they know if they can implant. I think those will be the winning arguments for Nixoin going forward. Now jumping to the first part of the question, it's the performance in Germany and the market share. You know, I do have to give credit to who belongs, who needs to get credit, and it's clear that INSPIRE delivered a very strong second quarter. They did. No, this is what we are telling already. It's precisely how competition entering a monopolistic market can increase overall HGNS penetration and where patients will benefit from a need for treatment. So our presence in Germany is clearly driving therapy adoption and capturing patients that would be lost for AGNS treatment. However, AGNS still continues to be strongly underpenetrated and to unlock the market and the potential patients have to be captured at the moment when they become refractory to CPAP and should not be left without therapy. And that is one of the reasons why we increase our investment in DTC in Germany. It's also one of the reasons why we increase our sleep physician presence. And it's also one of the reasons why we are exploring strategic partnerships to identify those patients. Now, answering also very, very precise on the market share, at this moment, in our estimate, we have a little bit more than 20% market share in Q2.

Got it. And, Loic, one last question for you, if I may. What do you anticipate is going to be the spend on access, assuming it gets wrapped up by next year? Gentlemen, thank you for taking my questions.

Yeah, so a study like access will cost around $15 million. And we will incur this year close to $4 million. So the reminder will be for next year.

and thank you and i am showing no further questions i would now like to turn the call back over to olivier tailman ceo for closing remarks yes thank you and again thank you all for joining thank you for the interactions we had and also the good questions

I would like simply to close by repeating what I was already saying. We are entering the most exciting time of Nixoa, being less than nine months away from U.S. data readout. We are looking also in further expanding of European revenue and commercialization. And of course, with that hand in hand, we are further scaling up the organization. We are getting ready also from a manufacturing perspective. So it's really all excitement at Mixol at this moment. And we are really looking forward into the coming months and the end of the year. So thank you all for participating and for your questions.

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