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Nyxoah SA

Q42024

3/13/2025

speaker
Operator
Conference Call Operator

Hello, and welcome to NXIV Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the 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. I would now like to turn the conference over to John Landry. You may begin.

speaker
John Landry
Chief Financial Officer

Thank you. Good morning, everyone. And I welcome you to our earnings call for the fourth quarter and full year 2024. Participating from the company today will be Olivier Talman, Chief Executive Officer, and myself, John Landry, Chief Financial Officer. During the call, we will discuss our operating activities and review our fourth quarter and full year 2024 financial results released before U.S. market opening 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 on 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 description 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 13th, 2025. With that, I will now turn the call over to Olivier. Thank you, John.

speaker
Olivier Talman
Chief Executive Officer

Good day, everyone, and thank you for joining us for our fourth quarter and full year 2024 earnings call. 2024 was a transformative year for Nixola. With tremendous progress made throughout the year, we are extremely well positioned to bring Genio to market in the U.S. by the end of this month. We have proven that Genio can deliver best-in-class outcomes for obstructive sleep apnea patients. Our pivotal study, DREAM, met both its primary and secondary endpoints. The DREAM study demonstrated a strong AHI responder rate of 63.5%, and an ODI responder rate of 71.3%, with an overall median AHI reduction of 70.8%. Importantly, through the study, we demonstrated that Genio is the only therapy with explicit clinical evidence-based data proving its ability to maintain its efficacy irrespective of a patient's sleeping position. This is a critical differentiator as people sleep on average between 35 to 40% of the night on their back. And based on published data, the number of times per hour that a patient stops bleeding can double while in a supine position. Genio stands alone with clinical trial data specifically validating this claim, making it the most consistently effective solution for patients throughout the entire night of their sleep. While our dream study uniquely required the minimum of 60 minutes of supine sleep time, on average, all subjects slept 114 minutes in a supine position. The study measured position-specific outcomes and demonstrated a 66.6% median AHI reduction while sleeping in a supine position. despite the fact that the number of airway obstructions can double in this position. This reduction compares favorably to the 71% median reduction shown while sleeping in a non-supine position. And this consistent efficacy across sleep positions make Genio the most effective solution for patients throughout the entire night of sleep. unlike competing technologies where supine sleep efficacy data have not been disclosed. Additionally, on-dream data revealed another significant clinical advantage. Genio produces a remarkable percentage of what we refer to as super-responders, patients whose AHI scores is dropping below 15. effectively returning their mortality and cardiovascular risk to levels comparable to individuals not suffering from OSA. 82% of all DREAM subjects achieved this result. This represents a profound clinical impact that goes beyond symptom management to potentially extending patient lives. The combination of the supine and super-responder data makes Genio a differentiated and unique solution for patients with OSA. In addition to these strong efficacy results, Genio also demonstrated a favorable safety profile with an 8.7% severe adverse event rate. We believe that this efficacy and safety profile will have a positive impact on therapy selection by physicians and therapy acceptance by patients compared to the current available AGNS solution. Let me now switch to the regulatory perspective. We have submitted the fourth and final module of our PMA submission in June 24th. We continue to have a very interactive dialogue with the FDA and have successfully completed the remaining requirements, including this Belgium site visit, which has previously been delayed due to circumstances unrelated to NYXOA. Based on our current interactions with FDA, where the focus is now on labeling, we continue to expect to receive FDA approval by the end of March of 2025. In preparation for our U.S. commercial launch, we have built a world-class team in support of our U.S. go-to-market strategy and commercial readiness plan. Notably, I moved with the family to the U.S. to be on the ground during this critical period. In addition, we have built our U.S.-based senior management team, including hiring John Landria's chief financial officer, Dr. Moritz Boone as Chief Medical Officer, and Scott Holstein as Chief Commercial Officer. In addition, we have industry-leading talent in place with a track record in OSA and our neuromodulation across our sales, marketing, reimbursement, and medical affairs teams in the US. Our strategy for penetrating the US market revolves around two-pronged approaches. First, as a smart follower, we will target high-volume AGNS implanting centers where physicians and patients are actively seeking an alternative solution to current therapy. In addition to these patients, we have also identified significant demands from patients who are hesitant about receiving a pacemaker like Implant4OSA. and whose physicians have been eagerly awaiting a compelling alternative to offer them. Importantly, as a result of our clinical trials in the US, there are already 75 physicians that have been trained on the Genio technology and are familiar with its unique features and patient outcomes. Second, through focused commercial investments, we will develop strong referral networks with sleep physicians who manage a large population of moderate to severe OSA patients where AGNS is not yet fully embedded in their treatment pathway. As a company that prioritizes clinical evidence and patient outcomes over simplified marketing messages, we believe in setting realistic expectations and partnering with physicians to find the optimal treatment for each patient. as this is part of our mission in putting the patients first. We plan to launch in the US with 50 commercial team members, comprising sales, marketing, and market access professionals, who are currently all hired and trained, with plans to scale quarter after quarter. This team will be supported by focused direct-to-consumer initiatives and dedicated reimbursement support. Regarding reimbursement, we have identified and established CPT code that we plan to utilize at launch. The CPT code, to be very precise, is 64568. This CPT code has been recognized by commercial and government payers for OSA indication and is the same CPT code used for the current FDA-approved AG&S technology. We expect this will allow us to align on pricing while we will be differentiating on our unique technology and clinical outcomes. We are working closely with the American Academy of Otolaryngology and participating in the FDA's early payer feedback program to educate CMS and major commercial payers on Genio on the impact it can have on their patients. While our primary focus as a company has been on preparing for a US launch, we also continue to be encouraged by our growth and what we learned in Europe. Our commercial proof of concept in Germany has provided valuable insights that we are actively incorporating into our US launch strategy. Our growth in Europe was primarily driven by the continued execution of our commercial strategy in Germany. As John will detail in his remarks, we are now recording a portion of our disposable patch revenue as deferred revenue. Our revenue would have been 1.9 million in the fourth quarter of 24, excluding the impact of this deferral. This represents a 46% sequential growth over Q3 2024. For the full year, we have delivered revenue of 5.1 million euros, and an 18% increase over 2023. We have also continued to expand our geographic footprint in the region. In December, we launched Genio in the United Kingdom. The Genio system is covered under the NHS Specialised Service Device Programme, which makes us believe that the UK has the potential to become one of our largest international markets. Based on the first successful implant at University College London's hospital, there was a lot of excitement created for Genio in the UK. We look forward to further expanding into other hospitals across the country and scaling our sales force. In addition, we have launched in the United Arab Emirates with the first commercial implant done in Dubai's German Saudi hospital. This represents a unique milestone as Genio was the first AGNS implant performed in the Middle East. Collectively, all of our accomplishments in 2024 brought us at this point. We are now on the verge of bringing a truly innovative OSA solution to the U.S. market where there still exists a massive patient population in need of treatment that can benefit from our Genio solution. Both we and the clinical community are incredibly excited about what the rest of 2025 has in store. With that, I'll turn the call over to our CFO, John Landry, for a financial update.

speaker
John Landry
Chief Financial Officer

Thank you, Olivier. As Olivier mentioned in his earlier remarks, we deferred revenue related to disposable patches in the fourth quarter of 2024. As part of our contracts with customers, we deliver additional disposable patches on top of those included in the initial delivery of a Genio system. Beginning in the fourth quarter, the portion of the selling price for a Genio system related to these additional disposable patches will be recognized as deferred revenue. This deferred revenue will be recognized as revenue over time as the disposable patches are delivered to the customer. We recorded deferred revenue of 600,000 euros in the fourth quarter of 2024. Recognized revenue is 1.3 million euro in the fourth quarter and 4.5 million euro for the full year 2024. Total operating loss for the fourth quarter of 2024 was 18.3 million euro versus 10.8 million in the fourth quarter of 2023, driven by the acceleration in the company's R&D spending, ongoing commercial and clinical activities, and an acceleration in commercial investments in the U.S. Cash position remains strong at 85.6 million euros at December 31, 2024, compared to 57.7 million at the end of 2023. This includes proceeds from our 24.6 million euro ATM equity raise early in the fourth quarter and reflects our disciplined approach to managing cash burn as we prepare for FDA approval and U.S. commercialization. With that, I'd now like to hand the call back to Olivier to discuss his thoughts on 2025. Olivier? Thank you.

speaker
Olivier Talman
Chief Executive Officer

Before we conclude, I want to emphasize that this is a truly an exciting time for NICSOA. With all of the fantastic work by our organization during 24, we are incredibly well positioned for the future. Looking ahead to 2025, the US will be our key focus. Based on our current interaction with the FDA, where the focus is now on labeling, we continue to expect to receive FDA approval later this month or by the end of March in 2025. We have been able to identify a CPT code well known by payers in the OSA indication, which will allow us to establish competitive pricing compared to the current FDA approved HGNS technology. Second, we hired and trained a US commercial team that is ready to launch upon FDA approval. with a two-pronged strategy, acting as a smart follower focused on high-volume AGNS sites in combination with focused commercial investments in developing referral networks for sleep physicians who manage large population of OSA patients. Our success will be measured in entering these new accounts and driving new patients to Genio coming from this referral network. ultimately resulting in market share gains lastly in international markets we will further increase genius penetration within germany but also within the uk and we will selectively expand into new targeted international geographies such such as the uae 2025 will be a transformative year in Nixoa's growth as we make significant progress towards our mission of making sleep simple by bringing the Genio solution to OSA patients in the U.S. and further expand internationally. With that, I would now like to open the lines for Q&A.

speaker
Operator
Conference Call Operator

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone. then wait for your name to be announced. To withdraw your question, please press Start11 again. Please stand by while we compile the Q&A roster.

speaker
Q&A Coordinator
Call Moderator

Our first question comes from the line of Adam Mader with Piper Sandler.

speaker
Operator
Conference Call Operator

Your line is open.

speaker
Adam Mader
Analyst, Piper Sandler

Hi, good morning, Olivia and John. Thank you for taking the questions, and great to hear you still expect approval here by the end of the month. A lot of different questions that I could ask here, but maybe just to start on reimbursement, the new update there, you said you're going to use the 64568 code. There is some investor consternation that that level of reimbursement associated with the code is not overly attractive or sufficient for hypoglossal nerve stimulation, in particular to the physician. You know, what's your response to that, and do you believe this coding strategy is sufficient to drive strong updates of Genio? And then I have a follow-up. Thanks.

speaker
Olivier Talman
Chief Executive Officer

Thank you, Adam. So, first of all, I do agree with you that, from a physician's fee perspective, this is not the strongest code. On the other hand, if you look at Nixoa, When we will enter the market, I think it's so important for us to be able to enter and having directly a CPT code that can represent payment for technology. So from our perspective, we are extremely pleased that we have identified the code because I realized that this was one of the open topics in our preparation for US launch. Now, on the other hand, I do think there is still a lot of work that needs to be done in this coding and also reflecting a stronger pricing and making it even more attractive for physicians. Last, what I would like to comment on this, we will also explore in order to optimize the uniqueness of Genio and the technology offering a bilateral simulation compared to a unilateral simulation so that we can maybe make it even more attractive linked to our product differentiation. But as a summary, we are happy that we have a code, and we also would like to point out that the code is the same for a physician for both the existing, the current AGNS technology that is available, and the Genio technology that will be available.

speaker
Adam Mader
Analyst, Piper Sandler

Understood, and really helpful color there. Thanks for that, Olivier. For the follow-up, you know, maybe just one on how you're thinking about, you know, the trajectory of U.S. launch. I'll ask the question kind of this way. So I think I heard you mentioned 75 docs. I think those are U.S. docs are trained on the Genio technology already. You know, how do we think about the pace of new account openings this year? I know the strategy is, you know, concentrated deep, not wide. But just, you know, is there a target number in mind for 2025? Just help us understand the strategy there. Thank you.

speaker
Olivier Talman
Chief Executive Officer

First of all, when we are talking about 75, it's a little bit more than 75. All physicians were part of the clinical study dream access and also the usability study we did. And I think what was enormous rewarding for us was hearing that all physicians are actively asking and reaching out when we will be available and that they want to have Gino integrated in their treatment path to treat OSA patients. That's the first step. Second one is, as I mentioned, we have a 50-headed sales team that is currently fully trained and ready to launch. So now how will we approach this? Remember that the current AG&S business is very concentrated with roughly... 300 to 350 sites representing, let's say, 70 to 75% of total AGNS revenue. So those will be the targeted accounts, the 300 to 350, with the 50 people, every quarter we will further scale up. And we also have a playbook for scalability in adding additional sales reps quarter after quarter. So our first challenge will be, let's get the first physicians trained, then we start expanding quarter after quarter. And I do think that in a period of 12 to 18 months, we will be able to cover all those tier one high volume aging outcomes.

speaker
Anonymous Analyst
Analyst

Very helpful. Thank you.

speaker
Q&A Coordinator
Call Moderator

Thank you. Please stand by for our next question.

speaker
Operator
Conference Call Operator

Our next question comes from the line of John Block with Stiefel. Your line is open.

speaker
John Block
Analyst, Stiefel

Great. Thanks, guys, and good morning. Olivia, it seems that the dialogue with the FDA, you know, per your comments, has been consistent and thorough. You know, however, just when I look at the calendar, the end of March is relatively soon. We hear about all these cuts at the agency that are taking place. Maybe if you can give us a little bit more color on why still the confidence by the end of this month, the end of March. And then maybe even more importantly, what are your thoughts for the label? Because again, it seems like you're in the final stages. Your thoughts for the label and the likelihood that those supine claims that you talked about are included upon approval. And then I'll ask my follow up. Thanks.

speaker
Olivier Talman
Chief Executive Officer

Thank you, John, for the question. And first of all, indeed, it has been very challenging times for government lately. When it comes to our file and the review, I am pleased, and I stay very carefully when I'm saying this, but I'm pleased that so far we have not seen any negative impact of the ongoing political change that are impacting the government procedures. So that is already one step. So on the other hand, we are still good. Over the last weeks, it has been extremely interactive with the FDA, going back and forth, closing and unanswering the last questions, and also entering the labeling discussion. When you talk about timing and why we still feel confident by the end of this month, I think I mentioned earlier that there is something like a 90-day clock, and the 90-day clock is ending of this month. So that's why I was still confident with no changes in our review, but entering the last stage with the labeling discussion and also knowing that the clock is ticking, that it makes sense to still say that we expect to have an approval by the end of this month. that is hopefully answering the first part of the question now the second one more specific on the labeling i mean it's clear that we would like to have also the uniqueness with our supine data being reflected in the label and that is also the part that we present to fda It also has to be clear that with our existing clinical evidence on CCC patients and also the work that we are seeing in the US in excess study that we also do not see any reason to have CCC as a contraindication as compared to the current available AGMs technology that has

speaker
John Block
Analyst, Stiefel

feel strong that this will not be the case but maybe conclusion I do not want to jump to any conclusions until FDA made up its final month but in a label discussion to answer your questions those are two things that we are currently discussing that was great that was very color thank you and then second question sort of follows up on where Adam was going maybe from a little bit of a different perspective just on that ramp or on the trajectory how do we think about the commercial payers coming on board Do you feel confident you have at least one here in 2025? Do you have a handful? And do you need some of these studies peer-reviewed to help sort of stimulate or move that process forward? Thank you.

speaker
Olivier Talman
Chief Executive Officer

Yeah. So first of all, and I mentioned this already a couple of times, our competitor has done a terrific job educating commercial payers about the benefits of AG&S. And sometimes it's nice to be second. I mean, I can only compliment and applaud this. Now when it comes to our strategy, also here we will work with pre-authorizations. We will have already patients lined up and we will have a lot of pre-authorizations in place the moment we have FDA approval and moving forward. We do think it's very realistic to expect the first commercial pairs during quarter three, quarter four this year. And of course, next to them, we have the government payers like CMS, Medicare, where we do expect to have payment right from the beginning.

speaker
Anonymous Analyst
Analyst

Thanks, guys. Thank you, John.

speaker
Q&A Coordinator
Call Moderator

Please stand by for our next question.

speaker
Operator
Conference Call Operator

Our next question comes from Milana Ross Osborne with Canna Fitzgerald. Your line is open.

speaker
Matthew Park
Analyst (on behalf of Milana Ross Osborne, Canna Fitzgerald)

Hey, guys, this is Matthew Park on for us today. Thanks for taking the questions. I guess just to start off, can you walk us through any manufacturing supply chain that you guys currently have in place? And do you think it's sufficient to meet existing demand upon approval?

speaker
Olivier Talman
Chief Executive Officer

Yeah. Well, thank you. Thank you for the question. And you're pointing out such an important question. I mean, this is what every company wants to have. When you launch, you need to make sure you have product and you have sufficient manufacturing and inventory available. So also for Nixowa, this is one of our key points. The team has worked so hard. And I'm happy to say that also there, we feel really confident. Now, one more topic. What I also would like to point out is that we are manufacturing products. products for the U.S. market also in the U.S. This was a decision that was made already a couple of years ago, and I think I see also the current landscape that this was also the right decision. So not only we have significant inventory, we also do not have to ship inventory around the globe. It is manufactured in the U.S. for the U.S., also being part of our U.S. focus as a company that we are having.

speaker
Anonymous Analyst
Analyst

Got it. That's super helpful.

speaker
Matthew Park
Analyst (on behalf of Milana Ross Osborne, Canna Fitzgerald)

And then just one more from me, kind of to bounce off what John was getting at earlier. Would you just, do you anticipate needing any real-world data upon approval? And what would any potential timelines look like there to drive incremental adoption? Thanks for taking the question.

speaker
Olivier Talman
Chief Executive Officer

My apologies, but the first, you were not clear on the first part of the question. We had a bad line. Can you please repeat?

speaker
Matthew Park
Analyst (on behalf of Milana Ross Osborne, Canna Fitzgerald)

Yes. Would you, do you anticipate needing to generate any real-world data upon approval, and what would any potential timelines for this look like?

speaker
Anonymous Analyst
Analyst

Yes.

speaker
John Landry
Chief Financial Officer

Yes. Yes. Yes, I think, you know, we'll probably continue. This is John here. So, as we continue to go forward, we'll definitely want to collect, you know, real-world data, real-world experience. so we can better articulate the clinical and economic justification of our technology. So as we go forward, that will be an important part of our process in place.

speaker
Olivier Talman
Chief Executive Officer

And I'm sorry, because it was difficult for me to understand the question. But, of course, as part of the PMS post-market study approval, it is mandatory also to start collecting real-world data once we are launching. So, yes, this is definitely of attention.

speaker
Anonymous Analyst
Analyst

Got it. That's super helpful. Thanks, guys. Thank you.

speaker
Operator
Conference Call Operator

Please stand by for our next question. Our next question comes from the line of Siraj Khalil with Oppenheimer & Company. Your line is open.

speaker
Siraj Khalil
Analyst, Oppenheimer & Company

Hey, Olivier. John, congrats on all the progress. Can you hear me all right?

speaker
Olivier Talman
Chief Executive Officer

Yes, I can.

speaker
Siraj Khalil
Analyst, Oppenheimer & Company

Perfect. So, Olivier, obviously you guys have had quite a bit of experience in Germany. As your prep US launched the 75 or so docs that y'all are targeting Olivia to the extent that lessons learned from Germany how do you think what do you think is the key catch for genio versus inspire is it the supine versus non supine is it bilateral is it just physicians looking to diversify is it your CCC angle is Just help us understand where do you think the hook is going to be for these quote-unquote initial low-hanging fruit of 75 physicians?

speaker
Olivier Talman
Chief Executive Officer

Yes, and thank you for this question. So now going back to Germany and our initial learnings, offering physicians and patients a choice in AGNS implants, and stepping away from an invasive space maker solution into a single incision procedure has been key in the first introduction with the technology. Then, of course, they explore the further product differentiation. They see the benefits from bilateral stimulation. They also see the uniqueness with patients in order to upgrade their system without the need for resurgery and also, of course, avoiding the risk I2 for another surgery for replacement of a battery. That's what we saw initially. Now, while we are further scaling in Germany and Germany, we're also seeing that physicians more and more also tend to understand how important it is that patients are very compliant with their technology. And also there we are seeing that with our wearable component that creates a habit of before you go to bed, having your wearable ready to get a good night's sleep expressed in a compliance ratio of more than 85%. This is also something that is driving the physician next to the result that they are seeing in treating this and to continue choosing Virginia.

speaker
Siraj Khalil
Analyst, Oppenheimer & Company

Got it, got it. And as my follow-up, Olivier, maybe I missed it in your prepared remarks. Any update on timing of DREAM publication and also status of enrollment and access? Gentlemen, thank you for taking my questions.

speaker
Olivier Talman
Chief Executive Officer

Yes, and that's an excellent question on the DREAM publication. So submission has been made. It's currently under review, and we expect publication in the leading medical journal. We expect this publication in the coming months. I mean, we cannot define how fast the review process is going, but the submission has been done, and we really expect to have it out definitely before summer. So when it comes to access, so there we continue to make good progress. We will not disclose the precise number, since we never did this, but we do expect to complete enrollment by mid-25. And then the next capsule, as you know very well, it will be a PMA supplement. And after this, therefore, we expect that we will have late 26, beginning 27 of potential label expansion.

speaker
Anonymous Analyst
Analyst

Thank you.

speaker
Operator
Conference Call Operator

Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the questions. Please stand by for our next question.

speaker
Q&A Coordinator
Call Moderator

Our final question comes from the line of David Reskoff with Baird.

speaker
Operator
Conference Call Operator

Your line is open.

speaker
David Reskoff
Analyst, Baird

Oh, great. Thanks for taking the questions here. Olivia, I heard your comments on the, you know, what's given you confidence in the the March approval time frame and the 90-day clock that you have. First, I wanted to clarify, I think you said the Belgium site visit did happen, so I wanted to clarify that, but second, I'm not sure if you have any events scheduled between now and April, but Let's say we do get to April 1st and we, you know, haven't seen a press release at all from the team around approval. You know, what would you maybe suspect, not necessarily could have gone wrong, but could have been a cause maybe for you not to meet that window, just, you know, essentially trying to help you get out in front of what could be a question, you know, arising in a couple weeks or so?

speaker
Olivier Talman
Chief Executive Officer

Yeah. So, first of all, David, we are still planning as I was mentioning to have really a press release out before the end of March based on the arguments I used. If we want to go completely in detail, there is something like a 10-day grace period that FDA has that exists. We have no indication, whatever, that this would apply to us. So we are still and we remain confident that before the end of March, we will have more communication coming out. And to your point, if we do not have any further news, I think it's highly unlikely for us. So in conclusion, we remain confident. There is a gray spirit that exists. No indicator pointing in that direction. So short answer is, I do expect that I will be back before April.

speaker
David Reskoff
Analyst, Baird

Okay, very helpful. Maybe on reimbursement, again, heard the comments there already on the code that you plan on using. But, you know, from the commercial side, or sorry, from the, you know, Medicare kind of CMS side, I guess, can you help us think about maybe how you're sizing up the potential opportunity of patients that would fall within the, you know, Medicare reimburse bucket versus those that could be potential, you know, patients when you expand the commercial coverage? And when you think about the progression of this rolling out essentially on day one, you know, do you have, I don't know if you'd call it confirmation, but do you have, you know, some visibility from CMS that they definitively, you know, will accept, you know, using that code for your device? And do you expect maybe some, you know, hurdles as you roll out in the early days around the maybe prior auth pathway to get those covered? Do you think that pretty much for all of 2025, you should have a pretty similar, you know, type of prior auth, you know, approval pathway for the system with this code? Or do you think, again, maybe there's some hurdles early on that pushes more of the, you know, ease of adoption and the reimbursement pathway more toward the second half of the year? Thank you.

speaker
Olivier Talman
Chief Executive Officer

So I do think we can state that roughly 20 to 30% of payment is done by Medicare, specifically related to OSA patients, also knowing the average age. On the other hand, we know that there are local decisions that need to be made, and then we also ask, and we are updating also the local MACs due to using the FDA early payer program. Now, we do not have the full influence on how fast things will go, or I could not really comment in detail from a commercial payer perspective, you know, how fast the authorization process is going and who will be the first picking it up. But I hope you agree as well that when there is an established CPT code that they recognize for OSA payment. And since we fall under this code, if you look at the technicalities of our product, we do feel very confident that this will happen quite fast. And we continue working closely with the AIO on supporting us.

speaker
Anonymous Analyst
Analyst

And of course, the education through the early payer program is definitely also helping us in the report. Okay, thank you.

speaker
Operator
Conference Call Operator

Thank you. Please stand by. We do have another question in the queue. Our next question comes from the line of Paige Chamberlain with research. Your line is open.

speaker
Paige Chamberlain
Analyst (on behalf of Mike Pollard – Research)

Hi, good morning, guys. This is Paige on for Mike Pollard. First question, on the code, CPT code 64568, the description we believe includes pulse generator. So that's obviously different than Henio form factor. Why are you guys confident that Henio fits into this code category?

speaker
Olivier Talman
Chief Executive Officer

Because we do have a pulse generator. I mean, you need to have a battery, and the only difference is that we have an external pulse generator, and with Pacemaker, you have an internal pulse generator. And to your point, as you mentioned, very precise, the code category of the pulse generator, and we do have one.

speaker
Q&A Coordinator
Call Moderator

Awesome. Thank you.

speaker
Paige Chamberlain
Analyst (on behalf of Mike Pollard – Research)

And then just one quick follow-up on the deferred revenue recognition change. Can you guys help us understand what portion of a new patient implant will be deferred in the future? And then does this mean that a patient needs to be compliant and use the patches over the period of use to be able to record the deferred revenue down the line? Thank you so much.

speaker
John Landry
Chief Financial Officer

Yes, thank you, Paige. So in terms of the percentage, it's a small percentage of the total selling price of the Genio implant. So it's a small percentage that we'll be deferring over time at this point. And that percentage will continue to decrease over time for a couple of reasons. If the cost and the ascribed value of the disposal patches decrease, they'll reduce the amount of the deferral that we have going forward. And then in terms of compliance, there's specific compliance requirement associated with deferred revenue. So the deferred revenue will be recorded and recognized as revenue as the patient utilizes the devices and we ship the devices out to the patient.

speaker
Anonymous Analyst
Analyst

But there is no requirement for some sort of compliance metric similar to CPAP usage.

speaker
Q&A Coordinator
Call Moderator

Thank you.

speaker
Operator
Conference Call Operator

Ladies and gentlemen, I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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