Nyxoah SA

Good day everyone and thank you for standing by. Welcome to NICSOA second quarter 2024 earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To participate you will need to press star 1 1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question simply press star 1 1 again. Please be advised that today's conference is being recorded. I will pass the call over to your first speaker today, Michaela Kirkwood.

Thank you and good afternoon and good evening, everyone, and welcome to our earnings call for the second quarter and first half of 2024. I am Michaela Kirkwood, Investor Relations and Communications Manager at Nextella. Participating from the company today will be Olivier Tellman, Chief Executive Officer, and Elise 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 events 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 materially 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 and a description of the risks and uncertainties associated with our business, please refer to the risk factors section of our Form 20-F filed with the Securities and Exchange Commission on March 20th, 2024. 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 our second quarter and first half of 2024 earnings call. 2024 is a pivotal year for Niksola, with an increased focus on preparing for U.S. market entry. In March this year, we announced our dream U.S. pivotal study, achieved its primary endpoints, and demonstrated that Genium has the potential for best-in-class outcomes Subsequently, our regulatory team filed the fourth and final module in our model of PMA submission, which has set the stage for FDA approval as early as the end of 2024. We strengthened recently our balance sheet with over 85 million euros in new capital raised, which extends our cash runway into mid-2026. and are actively building our US commercialisation organisation, led by our recently hired new Chief Commercial Officer, Scott Holstein. Commercially, we reported first half 2024 European sales of 2 million euros, representing an increase of 29% from the first half of 2023, and ended the second quarter with 55 active implanting accounts in Germany. To recap DREAM, the study had co-primary endpoints of AHI responder rate per the shared criteria at 12 months and ODI responder rate at 12 months. At baseline, subjects had a mean AHI of 28 and an ODI of 27 and a body mass index of 28.5. On an intent-to-treat or ITT basis, The DREAM study showed an AHI respond rate of 63.5% with a p-value of 0.002 and an ODI respond rate of 71.3% with a p-value less than 0.001. With these strong results, the DREAM study met its primary endpoints. Additionally, subjects demonstrated a median 12-month AHI reduction of 70.8% with similar AHI improvements in supine and non-supine sleeping positions. The safety results were favorable, with 11 severe adverse events, or SAEs, in 10 subjects, resulting in an SAE rate of 8.7%. Out of the 11 severe adverse events, 3 were device-related and there were 3 explants. We will present the full DREAM data at a lunch symposium at the ISSS conference in Miami, end of September, on September 27 to be precise, and look forward to see many of you there. The DREAM results further differentiate GMO, as it was the first hyperglycemic nerve stimulation study to require patients to sleep at least 60 minutes in the supine position and demonstrates strong efficacy with patients sleeping supine and non-supine, just like mimicking a normal night of sleep. This is of particular importance since published data show increased OSA severity when a patient is on his back or in the supine position, with AHI doubling in the supine versus the lateral position. On average, people sleep 35 to 40% on their back during normal night or standard nights, which was in line with our PSG findings in green. This means that irrespective of a patient's sleeping position, Genio maintains its efficacy, and that is unique. Based on feedback from the physicians, this will be very impactful on therapy selection. It supports our mission to make sleep simple again, and we have applied for the inclusion of the supply and efficacy results into our label. With the positive DREAM results, we have completed our Modular PMA submission. We have responded to all the FDA questions on the first three modules thus far and submitted the fourth and final module. Based upon Modular PMA review cycle times, we anticipate FDA approval in late 2024. As we do not control FDA timelines, early 2025. In anticipation of the FDA approval, we are actively building our U.S. commercial organization. In July, Scott Holstein joined NICSOA as Chief Commercial Officer after 26 years in the medical device industry. In addition to Scott, key leadership in sales, marketing, and market access are in place, and we are actively kicking off the recruitment of top sales and marketing talent. At launch, we will target the Tier 1 or top hyperglossal nerve stimulation implanting sites in the US that account for 85% of all procedures done in the US. The organization will be composed of territory sales managers, supported by field engineers and field field specialists, each with their own responsibilities. The territory sales manager will be the owner of the territory revenue. interacting with surgeons and sleep doctors. Field engineers and sleep specialists will be focused on high-quality implants and patient outcomes on the other hand. The advantage of this structure is that it's focused and scalable, providing territory managers the ability to drive increased integrity penetration without the distraction of covering implants and performing titrations. Consequently, we can have more focused DTC, helping territory managers locally increase patients' referrals for a Genio implant. Independent market research and feedback from 31 top hyperosomal stimulation implant surgeons in the US who participated in our recent usability study reinforced Genio's differentiation versus current AGNS technology in terms of invasiveness, patient-centricity, safety, and the simplicity to treat or save patients regardless of their sleep position. Genio offers patients a leadless, full-body 1.5 and 3 Tesla MRI-compatible, non-implanted PET-free solution, powered and controlled by a wearable component. Our vision of an implant-for-life concept, powered and controlled by a wearable component, allows patients to always have the most advanced technology without the need for another surgery. Given these characteristics, we expect Genio to be market-expanding in the US, as a significant number of hyperlossal nerve stimulation candidates currently are declining pacemaker-based platform technology due to concerns over invasiveness and having an implantable battery in their chest. This view is supported by independent surveys demonstrating that over 20% of U.S. hyperlossal nerve stimulation candidates are turning down existing technology and strong interest in system with genio features and form factor. Going back to Europe, first half 2024 sales were 2 million, representing an increase of 29% from the first half of 2023. and we ended June with 55 active implanting accounts. As a reminder, Germany is our commercial proof of concept. Although the German market has some different characteristics than the US market, there are key learnings that will help us in developing a successful US commercialization strategy. Similar to the US market, the German market is highly concentrated. and Genio was embraced by doctors and patients in those Tier 1 or top accounts, resulting in an acceleration in the hippococcal nerve stimulation market growth. Of the top 10 accounts, 9 are currently implanting Genio, and in 5, we have at least 30% market share after 24 months. This is a strong property for the US launch, where we will initially focus on the top implanting Tier 1 To continue to drive growth into these accounts, establishing a referral pathway with top sleep specialists focused on CPAP quitting patients and converting them in a timely manner will be a key to sustained success. The ResMed-NYXOA collaboration should confirm this strategy in the coming quarters. In summary, with strong dream data, a differentiated AG&S system, and a cash runway into mid-2026, it could not be more excited for the future at Mixora. With that, I'm pleased to turn the call over to our CFO, Loïc 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, 2024 was 780,000. Total operating loss for the second quarter was 13.3 million euros versus 11.9 million euros in the second quarter of 2023, driven by an acceleration in commercial investments in US as well as in Europe. During the second quarter, we raised over €85 million in gross capital through a €48.5 million equity offering and a loan facility agreement with the European Investment Bank for €37.5 million. This extends our cash runway to mid-2026. As of June 30, 2024, cash and financial assets total 78 million euros. This excludes the first 10 million euro trench of the EIB launch, which would drop down in July. Finally, our monthly cash burn was 4 million euros for the quarter. 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. And as a reminder, if you would like to ask a question, simply press star 1-1 on your telephone and wait for your name to be announced. To remove yourself from the queue, press star 1-1 again. Please stand by for our first question. And it comes from the line of Suraj Kalia with Oppenheimer.

Hi, Olivia and Luis. Can you hear me all right?

Yes, we can.

Pardon the background noise. It's raining pretty heavily here. So, Olivier, congrats on all the progress in the Modeler PMA submission. Let me turn the direction to Germany, Olivier, if I could. You know, it's been more than four quarters you'll have been in Germany. What are the lessons learned from Germany that are translatable to the U.S.? Is it or has it been a market that has met your expectations? And maybe if you could talk about other discussions about supine versus non-supine in Germany.

Okay, thank you for the question, Suraj. So, first of all, when we look at Germany, our launch goals were to demonstrate proof of concept by, one, breaking the monopoly that there currently is for hypoglossal nerve stimulation, and two, expanding the prolossal nerve stimulation market. Those two objectives we have accomplished. Now, other things, to your point, where we see the European experience is showing our ability to take share. Just as a reminder, we had 27% German market share for the second year of the launch. I think that is also something that exceeded our expectations. Nine out of the 10 German accounts are implanting Genio. and we estimate that we go minimum above 30%, and in some of those top centers, you're even market leader after 24 months. So that is also a very concrete learning that is giving us confidence for the U.S. launch. And also the fact that we see in Germany, based on independent survey data, but also done and talking and interacting with patients, that we see that there is over 20% of it also non-stimulation candidates that are declining a pacemaker due to the invasiveness of the procedure and the system. And therefore, Genio can further expand the market. So, so far so good. I think those were the learnings. That being said, let's also be very open on this. Germany still is a very small revenue market, and there is still the potential for quarter-to-quarter variability, driven by limited number of accounts implanting and implant volume. But if you look and we feel that it's more accurate looking at a performance in the first half of the year where we still were up to almost 30% versus the first half. So I do think overall we are pleased with what we see in Germany. We take the lessons, helping us prepare for a successful US launch. And also as a last reminder, the positive feedback in Germany since we were able to release the dream data is definitely helping us in driving future growth. So I think that was the first question. Yes.

And, Olivier, for my follow-up question, maybe I missed it in your prepared remarks on the status of the ACCESS trial. And also for the U.S., as you all plan out for your commercial launch, the 31 sites that you referenced, how would you characterize the volume that these 31 sites do and the reps you would need? Thank you for taking my question.

yes so the 31 sites to start with with the end of your question those are all high volume implants or implants that are part of what we call the tier 1 agns implanters in the us so that is that is the first part second part when it comes to access so we continue to make progress with the study we are not disclosing the number of patients implanted but that said we plan to close implants by the end of 2024. i do not wanna i go back to germany on this but And the response that we are getting there is that also physicians are confirming similar results for CCC patients as for non-CCC patients. So this also is giving confirmation that bilateral stimulation is a key differentiator when it comes to treating successfully CCC patients.

Thank you. One moment for our next question. It comes from the line of Ed White with AC Wainwright.

Good afternoon. Thanks for taking the question. Olivia, maybe you could just tell us about your U.S. reimbursement strategy.

First of all, I'm really excited that we are having these questions because it also means that we are getting extremely close to launching in the U.S. Now, as I already mentioned in a previous early call, we are partnering with the American Association of Auto Learning Geologists, the AAO, which will make a formal recommendation on an established what they call Bridge Category 1 CPT code for use at launch. And I think this is so important. that at launch we have our CPT code in place. That is not the final code, but it's the bridging code. And in parallel, of course, we are pursuing a GENIUS-specific CPT code over time. But based on precedent, we know that this likely will take a little bit longer, even up to a couple of years. Now, that being said, at launch, and I keep coming back to this and insisting, doctors will submit Medicare claims using the Bridge Category 1 CPT Code, which is currently covered by all Medicare Administrative Contractors, or the MACs. Reimbursements will be in line with current AGNS payment rates. And I think that this is the most important update for today. Now, to be really complete, and we have to give credit to our competitors, because they have done a terrific job educating the commercial payers about the benefits of Hippoglossal Nurgstim, resulting in all having AG&S coverage policies in place. We have enrolled in the FDA Early Payer Feedback Program, and we are conducting payer advisory interviews. We are already engaged in an informal discussion with the payers, and we expect to be able to leverage those policies at launch.

Okay, thanks for taking my question. Thank you.

Thank you. One moment for our next question. that it comes from the line of John Block with Stiefel.

Hey, everyone. This is Joe Federico on for John Block. Thanks for taking the questions. I guess just to start maybe on the revenue result in the quarter, that was a bit below what we were modeling. And that follows stronger revenue results in the fourth quarter of last year and last quarter. During that time, your competitor was also having some regulatory dynamic issues. And I just wanted to ask for some additional clarity. Now that they've kind of sorted that out this quarter, REVS took a step back. Do you think that played a role in kind of the revenue dynamics for this quarter?

Yeah. So first of all, let me start by saying that competition is good for the market. It's always nice to have two options to choose for physicians and for patients. And it also keeps everyone sharp. you know, and then really making sure that we can provide the latest and greatest technology and then upgrade to patients. Well, I have to repeat a little bit what I was offering to Suraj. Germany still stays overall a very small revenue market if you look at the total AGNS market. So that is one aspect. And therefore, potential quarter to quarter variability driven by limited numbers of an implant volume is the case and it's a fact. That is correct. Now, going back and assuming that because of product shortage or issue with competition in Q4, this would have strengthened our Q4 results. I think it's not completely true because if I'm well informed, I do think there was quite some inventory of products in Germany, especially with the top accounts to continue having also competition in Q4. Overall, we see that the market of AG&S keeps growing strong. I think that's a confirmation of all this. And of course, without providing real guidance, it's also clear that we anticipate revenue in the second half of 2024 to increase over the second half of 2023. But as mentioned, quarter-to-quarter sales are harder to forecast, but given the process in the third quarter thus far, also the collaboration with ResMed on identifying new patients that are quitting their CPAP and actively converting them, it's something that maybe took a little bit longer than we expected, but we do see the results and we are more than excited also to see the impact.

Okay, great. That's helpful, Culler. And then just a quick follow-up. You had said that FDA approval for Genio could come as early as year-end 24. Is your expectation to get approval by year-end 24? Could that maybe flip into early 2025? And then could you remind us just the number of sales reps you're targeting upon the eventual U.S. launch and maybe train centers in the first 12 months? Thanks, guys.

Yes, definitely. So to your point, we have a model of PMA. You know that after you submit the fourth and final module, there is the 180 days time clock that is currently activated. I can already share that there is a lot of activity from FDA that we have very positive engagements with them so far. And if you then do simply the math, we should be good to have FDA approval by the end of 2024. confident that this will happen however I want to be a little bit prudent in the sense that I'm not controlling FDA timeline completely so that's why sometimes we also mentioning up to over 25 but if you just stick to the map we see the interaction all the work has been done the files have been submitted everything interactive reviews ongoing site visits taking place so we are very confident that by the end of this year we could have FDA approval Now, the second part of the question is like, how would we launch? I think I already elaborated a little bit how important it is for us to work with territory managers fully focused on revenue and patient referral. And next to them, we would have field engineers fully focused on high-quality implants, sleep specialists fully focused on post-implant patient follow-up and titration. So numbers, we will start and we will make our approach scalable since we are focused on the tier one accounts. in the US, the high volume sites, and we will start with 15 territory managers. They are under the lead of one sales vice president that we already have on board. Then all 15, there will be another 15 in total, field engineers and sleep specialists focused on the patients. So in summary, our sales leadership is in place. We will go for a scalable approach with 15 territory managers only focused on revenue and driving new patients, and they will be supported with, in total, 15 field engineers and sleep experts.

Great. Thank you.

Thank you. One moment for our next question, and it comes from the line of Ross Osborne with Cantor Fitzgerald.

Hey, guys. Thanks for checking our questions. So starting off, we'd be curious to hear how your manufacturing ramp efforts are progressing ahead of U.S. launch. Do you believe you will have sufficient scale to meet demand in 2025?

So the short answer is yes, we do believe we have significant demand. As you also know that we have currently a Genio 2.1 version. That is the one that we are using commercially in Europe. And it allows us to have simulation trimming. to be adjusted at smaller increments to provide patient-sensitive to stimulation more options. And it also offers patients daily feedback using an app and even the autonomy to adjust stimulation amplitude with predefined boundaries. That is our current product that we have and that we are using commercially in Europe and that we also use clinically in our studies. Now we already have our 3.1 generation with a ceramic encapsulation of the internal component making genuine implants for life. a more ergonomic activation chip that will contain the coil, improving gross margins and eco-friendliness, and a patient hub, which will be the base for cloud connectivity and advanced feedback. With this product, we are planning to launch in the U.S. right after the approval, and also there we have manufacturing lines set up in the U.S. with a service provider, and also in Europe and going forward, so that we have also the risk of manufacturing and increased stock capacity in the U.S. and also outside of the U.S.

Okay, great. And then one modeling question, you know, looking at OpEx and anticipating an inflection ahead of the U.S. launch, should we think of that as more of a 3Q or a 4Q activity?

Yeah, if you look at the shape of the cash flow, we expect an inflection. That will start in Q3, because as Olivier was saying, we have started to recruit the management for the U.S. organization, and we will add the first red. So yes, the cash burn will start to increase in Q3 and continue to increase in Q4. So it will be a for the sales start in Q1 next year.

Okay, great. And then lastly, and I realize it's early on, but following the hiring of Scott, how has he shaped your commercialization plan for the U.S. launch?

So next to Scott, we have also hired our sales leader. We have hired our marketing leader, our reimbursement, our market access leader, We are finalizing a search for a human resource, U.S. or global leader. We are also looking at a non-operational director. And then we also started actively recruiting our sales force. And what really, really gave me great confidence is just seeing the high number of spontaneous applications that we are getting. I mean, start throwing in numbers, but it's a really high number of people reaching out that want to be part of the Niksova team that will be launching in the US. Great.

Thank you for taking our questions. Thank you all.

Thank you. Our next question comes from the line of David Rescott with Baird.

Great. Thanks for taking the questions. I want to clarify a couple of pieces. I heard some numbers being thrown around and I've been up around calls as well. So I want to make sure I'm hearing everything correctly. I thought the last call you had talked about maybe the 75 to 100 higher volume centers. Again, I may have totally heard it wrong this quarter, but I heard the number 31 kind of called out there. Also heard, you know, you're looking to go after where about 85% of the volumes in the U.S. are occurring. So can you just help kind of clarify what maybe the near, intermediate, and then kind of longer term numbers you know, go-to-market account opening strategy as in the U.S.?

Apologies if things were not completely clear, but let me try to make it clear. So the 31 Tier 1 accounts that I was referring to were the surgeons that participated in our usability study and that provided us feedback. Just as a reminder, they were trained on the product. from an anatomic perspective, from an implant perspective in both animals and cadavers, and then within 24 hours they had to reproduce an implant in a cadaver independently. And their overall feedback was extremely positive, and they were really waiting and asking when this technology would be available for them to be used in their accounts. That's the 31 number. The other numbers I was referring to, I'm always saying we focus on tier 1 accounts. If you look at the tier 1 accounts, in total they are representing 85% of all the per loss and large stimulation revenue. We are talking about 200 to 250 accounts in the US. Out of this number, we will be focusing on 150 from the beginning. We will be doing this in a scalable approach, meaning with our 15 sales reps in quarter one of launch, they will go after the first, let's say, 50 to 75 accounts. And every quarter, the number of accounts will increase until we reach also the 200 plus tier one top implanting accounts. And in parallel, of course, we will increase also our number of territory managers, field engineers, and sleep specialists. I hope, Rose, this is more clarifying your question.

Yeah, that's great. Thanks. Maybe just on, you know, heard some of the comments on the P&L, the cash balance where you're at today, and how the ramp maybe should look over the next couple of years, that mid-26 cash runway. Have you kind of thought about what that longer-term kind of break-even profit number should look like? I know it's still pretty far away, but just wondering... you know, if we were to model out over the next three to four years how we should be thinking about the rest of the P&L. Thank you.

Thank you for the question. So as discussed during the call, our U.S. launch strategy will be focused at scalable. We will initially target the top GNS account and selectively invest in DTC to drive patients' referrals. With our commercial structure, the territory manager will be supported by field engineers and field specialists, which will enable a highly productive commercial organization. That's what we have in mind. So with this approach, we anticipate achieving profitability at around $250 million of sales in the U.S. So that's what we have in mind.

And I think, in addition to Eric's comment, if I can add, for us it was crucial also to have a healthy balance sheet that is fully funding the US launch. We have this because of the accuracy rates in combination with the loan facility. We are now having more than 85 million euros added to our existing balance sheet. I think it is also giving us some comfort to fully focus on the execution of the launch.

One moment for our next question, please. And it's from the line of Adam Meader with Piper Sandler. Please proceed.

Hi, this is James on for Adam. Thanks for taking the question. Just one. I wanted to give you guys the opportunity to comment on the Surmount OSA study that was recently released at ADA. We were just curious to get your reaction to that data and if there's been any change to how you guys are thinking about GLP-1s and the impact on your business. Thanks.

...saying from CPAP that we welcome GLP-1s overall because it will definitely help increase also the total OSA market and patient numbers to treat. What we learn, if I go a little bit more in depth, is that if we look at the data, we see a placebo-adjusted 50% reduction in AHI and an 18% reduction in BMI coming out of the Sermont OSA data. The recent data demonstrated a placebo-adjusted reduction in OSA severity and magnitude of OSA reduction that was below those shown by epiglossal nerve stimulation. I think that's also very important to point out. And then last, both published data and commentary from leading KOLs indicate that to have the highest hyperlossal nerve stimulation response or therapeutic effect, it is best to lower BMI and bring it below 35 than to treat high BMI patients. And in that perspective, the surmont data reinforcer view that GLP-1s will increase the hyperlossal nerve stimulation patient funnel as in the GLP-1 only arm AHI went from 15 to 22 with a BMI from 39 to 32. And that gives us great confidence, as I was saying in the beginning, and we welcome, therefore, also GLP-1s into the market.

Thank you. As I see no further questions in the queue, I will conclude the session and conference for today. Thank you all who participated, and you may now disconnect. Thank you, everyone.