Photocure Asa

All right, well, good afternoon, everyone in Europe, and good morning to those in the U.S. I'm Dan Schneider, President and CEO of PhotoCure. Welcome to first quarter 2023 results. Joining me in today's presentation is Eric Dahl, the Chief Financial Officer, and David Moskowitz, Vice President of Investor Relations, who will be translating questions at the end of today's session. Next slide, please. Slide two. Just a reminder for everyone on call today, the disclaimers are in place. Slide three, please. I think the headline is return to growth for both regions, 30% revenue growth, 8% unit growth. Sequentially, revenues were up 12% sequentially, and Q4 demonstrated the anomaly that we spoke about in Q4. U.S. volume on unit was up 16%, and Europe was up 6% year over year. Hospital budgets still remain challenging, U.S., Germany, Italy, but we continue to grow the business nonetheless. I think excitingly, 30 new Sapphire towers were installed during the quarter, 18 new, 12 upgrades. In addition to new account growth, we believe the upgrade equipment is important to keep physicians engaged in blue light. It's not only the visualization, but it's also the reliability, which we believe is expected to help increase productivity per tower per account. We'll get more to this as the year progresses. It's too early to measure this with any certainty or prove it out, but we will be coming back later this year to support that hypothesis. Just a reminder, Q4, there were 24 rigid and 7 flex installed, so a total of 57. So we've had two back-to-back. huge quarters of installations, which bodes well for the future infant sales. On the citizens petition front for the U.S. in key news and events, the process continues to move forward. The potential FDA comments to Carl Storrs will come at the end of May. This is no statutory requirement. There's no requirements in terms of timing. However, we have put a lot of effort behind this. If anyone has gotten on the public comments, you'll see a lot of comments from various parties, stakeholders, manufacturers, patients, patient advocacy groups, KOLs, et cetera. So we believe we have a reasonable opportunity to encourage the FDA to address this issue of the class three PMA current status of the blue light scopes and moving it to a class two. We had great visibility at medical conferences, the largest conferences in the industry, both AUA and EAU over the past 60 days. There were a lot of scientific sessions where blue light was featured. We have a slide for you today to talk about the, you know, kind of what we did this year versus prior years. I think it was quite astounding. The reception by KOLs and clinicians was very, very good. So we'll talk about that a little bit later today. We also had two peer-reviewed publications demonstrating the benefits of VLC. All right, next slide, slide four. So let's go into segment trends. Slide five, please. So there's still market challenges. TRBT procedures appear to be stabilizing from declining trend in Q4. But the good news is that SysView and HexFix continue to gain penetration adoption, especially with new BLC equipment upgrades by all manufacturers. As you are all aware, Richard Wolff has state-of-the-art equipment. Carl Storrs has upgraded their equipment both in the U.S. and the EAU. And we expect Olympus to upgrade their blue light equipment later this year. We'll talk about that a little bit later. Staffing charges are still an issue globally. Economics are playing into capital budgets, but we expect this will resolve over time. The new blue light equipment rollout, there's broader recognition of the benefit of blue light, and that is the key driver for continued growth and combat the winds of staffing shortages. Next slide, slide six, please. Both territories backed a growth in the quarter with sequential months of solid growth. U.S. quarter was the best in history. Each month in North America was a record month. So momentum continued to build. In Europe, January started off a little bit soft, but momentum built as the quarter progressed. Staffing shortage and strikes are still an issue in parts of Europe, but we expect these to resolve. I think the good news from a year ago is we still had limited access in 2022 through May, and we now have full access to accounts here in 2023. So we're expecting a continued growth in the European market. The growth markets are up 2% over year over year in quarter one. And again, expecting this to continue to accelerate as we move to the back half of the year. I want to remind you on last year, Q2 in both US and EU were quite strong as we were rebounding from the Omicron on a worldwide basis. And the EU had limited access up until the May. So we are coming up, but we expect a strong second half to this year. Next slide, slide seven, please. So strong quarter for our U.S. business, 38% revenue growth overall, unit growth of 16%. There was a benefit from the foreign exchange. We had 30 new Sapphire installed. That's on the back of 57 in Q4. That makes 87 new towers that are out in the market. Of the 18 new towers, 17 were new accounts. One account took two towers. We also had 12 upgrades. Overall, the overall base, and I think this is something that's quite astounding, 25% of the rigid towers in North America now are Sapphira, which I think bodes well for future growth. Demand remains really, really strong. Our pipeline and the interest is very, very high. In fact, under the old system with Carl Storrs, there were only two evaluation towers. Evaluation towers are used prior to purchases, gives the accounts a chance to trial the equipment before they buy. We only had two with the old standard definition. We have had such a demand that Carl Storch has increased that for this new version, the Sapphira system, to a total of eight. That's three to four times the capacity, which bodes well to future installations and purchases. Enables more accounts to get into the pipeline, trial the new blue equipment, and purchase more. And Carl Storrs continues to assess the demand and the need for maybe more evaluation towers in the future. There are two key activities in North America that I want to speak about today. One is the reclass process in the U.S., and the second is FLEX discontinuation by Carl Storrs, which I'm sure is on everyone's minds. Let's first talk about the reclassification process in the U.S. The Citizens Petition, we've had great support, as I mentioned, from KOLs, equipment manufacturers, patients, patient advocacy groups. and actually manufacturers of therapeutics, both now and ones coming onto the market. We are approaching the 210 days from the filing, so that date is around May 25th. There is a potential for Carl Storrs to get feedback from the FDA. However, there's no statutory requirement. In other words, the FDA does not have to respond. But given all the pressure and effort we put in behind this, we feel that there is a possibility a good probability the FDA is going to respond to this petition. Like anything with the FDA, especially if it's not statutorily required, we don't have an exact timeline on when this process might take place. I think it bodes well that the FDA had already identified several years ago that the blue light cystoscope would qualify for potential consideration for a down classification. That was from them. The fact that Carl Storrs initiated the process and that we have strongly backed it along with all the stakeholders, I think bodes well. I think in addition, having Flex now being discontinued is a direct impact on patient care in the United States, especially on the eve of a lot of these second generation therapeutics coming out that are dependent upon the identification of CIS and patients who are suffering from cancer. So there's a lot kind of coming together and we feel pretty good about, but we do not have There's no statutory requirement for response from the FDA, but we will update everyone as things progress if there's anything to update on. On the flex discontinuation by Carl Storrs, as we mentioned in the Q4, they initially said there would be no installations in 2023. We did have a pipeline of accounts, a very healthy pipeline for flex. It was continuing to grow. In interest, as you know, I think on January 2nd, a paper was published by Neil Shore talking about the economics behind using flexible cystoscopy in the outpatient setting. This is, you know, this is is unfortunate situation. They subsequently after that have told us that the entire support for FLEX will be discontinued by the end of this year. They're actually targeting October. This does not mean that all FLEX will go away. We have a couple of different initiatives in place to keep the existing base going for as long as we can go, but there is an eventual termination of the current FLEX system. We are working on an alternative opportunity where we can perhaps work with another manufacturer being flexed back into North America and Europe. But we will update you as that progresses. We estimate the flex sales impact for the new installations that we anticipated this year to have a 2% impact on revenue. But the overall flex market, which is predominantly U.S., it represents about 5% of our global sales. And it's approximately 14% of the U.S. sales. So we feel that the effort we're putting behind the rigid systems and the interest, we believe we can make up a majority of all that, if not all of it. So we will work hard on that this year. So that is the key to this whole situation. Again, it is unfortunate, but it is fortunately, I guess, in a sense, a small percentage of our total business and one that we think we can make up this year in our rigid tower business. Next slide, slide eight. So speaking of towers, we had another good quarter of tower placements despite the unavailability of Flex blue light scopes. There was a pipeline growing interest for Flex, as I mentioned, to detect CIS and BCG unresponsive patients. And reimbursement had improved. It's an unfortunate situation. We will continue to exploit Flex. We do not believe there was any loss of business in the first quarter. We're not anticipating a major loss of flex business in the second quarter, but as we move through the year and into 24, there will be a phasing going on. Overall, we grew the installed base of rigid scopes by 20%, and as I mentioned, now Sapphire represents 25% of the installed base in the market. bring better visualization and reliability in the operating room. We think this is an important, you know, we think this is important as image quality and system reliability and the ease of use will support the use of blue light cystoscopy and increase the productivity of our existing accounts that upgrade. Next slide, slide nine, please. So moving into Europe, Q1 trends in Europe also show recovery from the Q4 anomaly. We had good growth at 6%, 26% sales growth with the benefit of the German price increase in mid-year 2022 and tailwinds of foreign exchange. After taking over the Ipsen territories in Europe during the pandemic, we had to relaunch these countries that were in decline for years. This is extremely difficult in its own right, let alone face COVID and the lack of care law support and data equipment. But we believe we have a good handle on this. We've got good traction, and we're expecting strong growth through the second half of this year. The challenges do remain. Europe does have strike issues, staffing issues, et cetera, but we believe we can work through those. And we also, coming in the second half, there's the German bus tour, which will run in September and October. There's been tremendous interest, and you see the picture to the lower right. It'll make 20 stops throughout Germany and Austria, and there's even more demand. This is the interest in blue light cystoscopy. They'll be surrounded with scientific programs, programs for patients and marketing activities that will take place. All right, next slide, slide 10. So as I mentioned, we regained the rights to EU in the midst of COVID and its aftermath. This is a relaunch into what was all but forgotten region suffering from the lack of support over the years. When we took over the region of Europe, continental Europe, there were no KOL support, no data, no new data, old equipment, a long sales process, capital equipment manufacturers who had no relationship with PhotoCure, reimbursements and guidelines that needed improvement. I think we made a lot of good progress over the last two years despite the challenges of COVID. We're seeing good signs of growth, especially as we look into the second half of this year. EAU, we'll get into the Congress in a moment, had tremendous support and a lot of stage time for blue light cystoscopy. The established businesses of the Nordics and DAC expect to remain steady growth. Denmark and Norway, to a lesser degree, although we believe both are tremendous opportunities, for those that are aware, Denmark and Norway are heavy Olympus strongholds. There's tremendous support by the accounts. They're very loyal to Olympus. Olympus' blue light equipment is woefully behind times. The good news is they are going to launch Viscera 3 the later half of this year. and into 2024. It is the latest and greatest in blue light technology. We think this is an exciting development for both Denmark and Norway. And we see them to returning to growth in late 23 and into 24. So that is good news. France, UK, Italy will continue to upgrade some of the old Karl Storrs equipment, also installing new Richard Wolff. And when Olympus comes into market where it matters, although lesser degree in continental Europe, They'll also upgrade to that. There's strong interest in new accounts in UK and France. We have a nice pipeline growing behind both of those countries. And we've reversed the curves in all these countries. And I'm just giving you a flavor for this. Italy through 2000, the CAGR for Italy between 2014 and 2018 was minus 7%. In 2019, it was minus 20%. We picked it up in 2020. In 2022, we grew 2%. And so far this year, we're up 12%. The UK, minus 15% through 2018 CAGR. In 2019, minus 10%. In 2022, we're minus 5%. And this year, up 30%. France, the CAGR, minus 1% through 2019 CAGR. We've got 6% in 2022 and plus 17% in 23. And again, you know, reversing the downward trends is a tremendous amount of effort and time. It takes an engagement on all levels. I think the European team has done a fantastic job of doing so. And we're expecting good growth as we move through the second half of this year and into 2024. Let's go to slide 11, please. Well, I think this slide is, the picture tells a thousand words. You see the amount of activity comparative to 2022, 2021. I will tell you in 2020, 2019, particularly in Europe, there was absolutely nearly zero, if not completely zero, mentioning of blue light cystoscopy. So we're seeing great success. It kind of indicates the level of exposure we've gotten at the recent conferences. It doesn't account for activity at our booths. or at the booths of Richard Wolff, Karl Storrs, or even Olympus, who did have the Viscera III there, plus the discussions with other companies where these collaborations could take place in this space. We expect the activity to translate into blue light cytoscopy growth. It is more powerful now that the blue light equipment has been upgraded and KLLs are activated. Should reclassification occur in the U.S., we expect this investment to gain even more attraction. So a couple details. EAU. We had the new global brand rollout. KOL interviews. There were 52 interviews recorded at the booth. Some of the who's who. Mary Alpin, Paolo, Deschman, Babchuk, Gakis, to name a few. Morgan Rupret. I was talking about the photo study. However, I was getting that in a moment as that was debunked on stage. There's more active interest in PDD and VLC than in any other EAU. The session between Morgan Rupret and Rakesh Hare was fantastic. Rupret basically debunked The entire photo trial subsequent to that, the EAU guidelines have been updated. And for the first time, they actually do list blue light cystoscopy rather than just enhanced visualization. That is a tremendous highlight for the guidelines as it's specific to our technology. So we had a fantastic EAU. Since the photo trial was out there, there have been eight editorials supporting blue light cystoscopy, and the existing evidence for PDD and non-muscle invasive remains valid is basically the conclusion. So there was no impact. In fact, it's been quite the opposite. On the AUA side, the Nordic Registry provided further evidence for blue light cystoscopy in the surveillance setting through our U.S. registry. We had a real-world evidence concept session where U.S. BLC registry highlighted us as an example of a successful real-world evidence study. So put up, you know, in terms of real-world evidence, things to study in urology, they used our product, SysView, and the patient registry in the U.S. as a real-world evidence of a really well-run registry and the data that can be pulled out of it. We had a BLC improving white light resections, and it should be used to train residents. That actually came out of the photo trial presented by Rakesh. We had the CME event reinforcing the benefits of blue light cytoscopy with videos featuring images of Sapphira. And I think what was most interesting is at the end of the session on Sunday, there was a BLC debate where two current clinical practicing physicians debated the benefits. One took the white light, why would you use white light, and the importance of the photo trial. The other one took blue light. I will say unequivocally, the person who presented blue light did a fantastic job to the point where The follow-up from the white light was, the white light defender was at the end of it on a follow-up video, basically said, I'm glad I lost. I believe in blue light cystoscopy. So it was a quite impactful AUA and EAU. And I think all of this will bode well for the future of interest in blue light. So with that, we'll move to slide 12 and I will hand off to Eric Dahl. Eric.

Thank you, Dan. Well, we'll go through a financial review now, including the consolidated income statement, segment report for the two main segments, and finally headlines from the cash flow and the balance sheet. But before we do that, let's talk a little bit about foreign exchange. Norwegian kroner has, as I guess everybody knows, depreciated significantly over the last few weeks. Year-over-year and measured by unweighted quarterly average, the US dollar increased 15.6% and the euro increased 10.5%. And looking at our financials, the year-over-year foreign exchange impact for Q1 was for revenue, positive approximately 11 million. For COGS and operating expenses, negative approximately 10 million. And the remainder, EBITDA, positive approximately 1 million. And keep in mind, as we review the financials, that unless other currency is specified, all the months mentioned in this presentation are in Norwegian kronor. So, slide 13, please. Now, we're now looking at the consolidated income statement. Total revenue was, for the quarter, 106.2 million, which is an increase of 24.6 million, or 30% from Q1 2022. Main drivers were foreign exchange impact of 11 million, as well as increased volume and average selling price. Consolidated in-market unit sales increased 8% year over year, and average selling price was positively impacted by last year price increase in both Germany and U.S., as well as country mix. Total operating expenses, excluding business development expenses, was 100.5 million, an increase of 13.6 million, or 16% from Q1 2022. The increase was mainly driven by foreign exchange, a total of 9 million, and the remaining increase, which is approximately 5%, reflects the general inflation from Q1 2022 to Q1 this year. Business development expenses were minor in the first quarter this year, Operating expenses within business development are related to the objective to increase our product offering. The expense level obviously may vary from quarter to quarter, given the one-off nature of these expenses. EBITDA in Q1 after business development expenses was negative 1.2 million. This is an improvement of 12.7 million from last year Q1, and the improvement is revenue-driven. Currency impact included in EBITDA is approximately 1 million positive for the quarter. Depreciation and amortization, 6.5 million in Q1. Main cost item is the amortization of the intangible asset related to the return of the European business from Edison. And net financial items in Q1, a cost of 2.4 million compared to a net cost of 7.4 million last year. The reduced net cost is driven by gains on foreign exchange and incurring interest income. Tax expenses, 1.6 for the quarter. The net tax expense is mainly driven by the company items in the parent company and a minor amount for taxes paid in European subsidiaries. After net financial items and tax, we have a net loss in the quarter of 11.7 million compared to a net loss same quarter last year of 22 million. Main single driver to this improvement is improved revenues combined with flat operating costs adjusted for FX and inflation. Next slide, please. Slide number 14. We're looking at segments this time. And in the segment reporting, we will focus on the two main segments, namely North America and Europe. North America now includes both US and Canada. Revenue for North America increased 38% in Q1. The drivers are an increase of in-market unit sales of 16% as well as a 3% price increase second half of 2022. Furthermore, FX movements were significant as the value of US dollar appreciated 15.6% year over year. Q1 direct cost increased year over year with 5.5 million or 15% and the increase reflects the strengthening of US dollars. The contribution was negative 2.8 million in Q1, an improvement of 5.8 million compared to same quarter last year, and the improvement is revenue-driven. And finally, EBITDA, excluding allocated business development expenses, was negative 11.6 million in Q1. Our European business experienced year over year an increased revenue of 26%. This is driven by volume, by FX, by price increase and finally by country mix. In-market unit sales increased 6% year over year and sequentially from Q4 with 9%. And the price increase of 6% in Germany middle of 2022 also had a positive impact. And finally, FX movements were significant as the value of euro appreciated 10.5 million year-over-year, or 10.5% year-over-year, sorry. Direct costs increased year-over-year with 7.5 million or 35% in the first quarter. And this increases activity-based and partly the result of a different phases or pacing of expenses this year. And finally, foreign exchange and inflation drives expenses above last year. We ended Q1 with a contribution of 29.6 million compared to 24.2 million in 2022. And EBITDA excluding allocated business development expenses for Q1 was 13.7 million, reflecting an EBITDA margin of 22% compared to 16% Q1 last year. Now let's look at the cash flow and balance sheet. So next slide, please. And that's slide number 15. So net cash flow from operations, negative 9.1 million in Q1 compared to negative 22.1 million in Q1 last year, and the improvement was mainly EBITDA-driven. Cash flow from investments was in Q1 positive 0.6 million, and cash flow from financing in Q1 was negative 13.5 million, which was driven by the repayment of 6.3 million of the term loan from Nordea, as well as the Ibsen earn-out repayment of 8 million kroner. The remaining term loan at the end of Q1 was 6.3 million, and this will be paid at the end of Q2. This gives a net cash flow in Q1 negative 22 million compared to negative 37.4 million Q1 in last year. The year-over-year improvement is mainly driven by improved EBITDA. The net negative cash flow reflects the financial cash flow related to the term loan repayment, as well as the Ibsen earn-out payment. And also the negative working capital development impacts the quarter. Working capital development is normally negative for the first quarter and improving later in the year. Final repayment of the term loan in Q2 and improved working capital will obviously improve the net cash flow second half of the year. With this net cash flow, we end Q1 2023 with a cash balance of 206 million. Looking at the balance sheet, we end the quarter with total assets of 706 million. Non-current assets was 357 million at the end of Q1, and this included customer relationship of 125 million. The customer relationship is the intangible assets identified in the purchase price allocation for the Ipsen transaction. Non-current assets also include goodwill from the Ibsen transaction of 144 million and a tax asset of 53.6 million. Inventory and receivables per 102.9 million at the end of Q1. The increase from year-end is driven by increased revenue. Long-term liabilities of 165.6 million include the earn-out liability related to the Ibsen transaction of 133 million. And finally, equity at the end of the quarter was 455 million, 64% of total asset. This concludes the financial section. And thank you. Dan, it's back to you.

All right. Thank you, Eric. All right. Let's move to slide 17, final two slides. All right. So, you know, just a reminder, overcoming some significant headwinds from 2022. You know, Carl Storrs had delayed launch on the new Sapphira towers until the end of the year. We installed a tremendous amount of towers in the fourth quarter, and we continued that pace in the first quarter with 87 Sapphira towers now in the market, 80 towers in the Sapphira in the market, which is around 25% of the base. There was a COVID resurgence in the first quarter, and, of course, the residual effects through 2022 of staffing, et cetera. Some of those residual effects are continuing into 2023, but we believe we're on top of things and more control, and we're expecting things to continue to develop in a positive way. We had revenue growth of 6%. The installed base overall grew 19%, and it was also fire in the fourth quarter. Despite the delayed launch, demand remains high this year as we move forward. There's improvement in U.S. Medicare reimbursement, which we believe will continue to support growth in 2023. And with reimbursement and funding, it's a never-ending battle. We continue to try to improve it not only in the U.S., but throughout the European countries as well, including guidelines as well. There's a lot of new data from our registries, a treasure trove of data that we believe is going to produce the continued preponderance of data that will make blue light cystoscopy the decision that all clinicians should make going forward. Carl Storch initiated the reclassification process in the U.S. If successful, invite more blue light Staspe manufacturers into the U.S. market, creating an opportunity both in improving the technology, but also the competitive pricing of these will certainly have a positive impact on the U.S. business. But again, there is no statutory requirement. There is no necessarily... clearly defined timeline to this. But I will tell you that the organization has put a tremendous amount of effort and time and will continue to do so to try to push this forward and with Carl Storrs supporting it as well, of course. We continue to strengthen partnerships, bringing Blue Light Sysoski to the rest of the world, looking for opportunities in other countries around the globe. Our cash position remains strong and we're well capitalized to fund long-term growth. We have a best of class product. The guidelines and reimbursements support us in most countries, and the US market remains the largest untapped market with less than 10% penetration. We believe, especially with the reclassification, that we can really unlock that market as time progresses. Slide 18. So just key milestones. We reiterate our guidance. You know, as challenging as it's going to be this year, we still believe the 65 to 75 Sapphire installs is our target. And these are all rigid, of course. The flexible pipeline is no longer valid. So we will make it up with all rigid. Product revenue growth above 20% and generate a positive EBITDA in 2023. We'll continue to grow the base of blue light towers in the U.S. and in Europe. It's a key strategy. We believe that upgrade of image quality and reliability will have a positive impact on the business. We look forward to reporting out that measure later this year. We are proactively supporting that citizens petition in the U.S. to reclassify blue light equipment. This is an important step to unlocking the U.S. market. We'll continue to expand geographically and also penetrating the untapped European markets. We'll continue to present a lot of data. There's been a huge investment in the medical side of our business, particularly in the registry work. And there is a lot of data, a lot of interest in pulling out some really interesting data around blue light cystoscopy and supporting it as the product of choice when you're doing your cystoscopies. And we'll continue to evaluate product and business opportunities that leverage our organizational strength. We have a global organization, a global footprint in commercial that could be leveraged, and we look forward to doing so. So with that, I think we can finish on slide 19 and go to Q&A.

Okay, am I on screen? You are. Okay, very good. Hi, everyone. So yeah, fair bit of questions. So let me kick it off. First question is, does the guidance 65 to 75 towers installed in the US for this year? Does that include upgrades? Or is that just pure new scopes? For example, the 18 placed in Q1, which were pure new?

New scopes. It's new scopes. So, I mean, thinking about it, if it was everything we put in 30 this quarter, I wouldn't claim that we have half of them in. So it is new scopes. One of the key things, though, on these new scopes for everyone is we're going to start talking more about new accounts. Scopes are great. You know, it's funny, the If you get on our website, we have the locator map out there. That was intended for patients who were looking and seeking blue light cystoscopy. It was never meant as a direct KPI to the business, although I know it's being used that way. But what's missed in that is it's really the number of accounts and the quality of those accounts is what we're focused on. So we'll continue to report the scopes. Again, 65 to 75 new scopes this year is our guidance. But we also expect a fair amount of upgrades as we move through this year and into next year. The goal is to have an entire Sapphira-equipped U.S. market over the next 24 or so months.

Okay, great. Another question is from an analyst. The med tech peers appear to be more upbeat about their CapEx and what they're hearing from the hospitals. So the question is, is urology being sort of deprioritized or prioritized at a lower level versus other procedures? Or is it blue light that's being deprioritized or at a lower level versus other procedures?

Um, I honestly, I, I, David, that might be better answered by you. I mean, I can start it off with, I can tell you in the world of urology and cystoscopy, it's not a, um, a must have procedure. I mean, it can be postponed. Um, certainly, uh, you know, you can, you can extend the, the, the period surveillance periods, et cetera. But I, I don't know, I don't have firsthand knowledge of what you're talking about.

I will add that we have seen other analyst surveys, in particular some from the U.S., which actually did show at the end of last year that the urology volumes were actually down relative to other procedures. So echoing what Dan had said is that urology has, you know, at the end of last year was being deprioritized. And our own data that we see, which are based on claims, and there's a delay in those because we have to wait for those claims to get adjudicated. We were seeing a decline in the fourth quarter last year. In fact, that's part of the anomaly that we were seeing and why we didn't finish strong in the fourth quarter. I can tell you in my conversations internally, you know, we are seeing a stabilization of that. So in terms of blue light, you know, being singled out in terms of deprioritization, I can tell you we continue, and it's in our earnings report, that we continue to gain share in both sides of the ocean. So we continue to beat the market in terms of our penetration. But yes, urology was being deprioritized at the end of the year. It seems to be stabilized here in the first few months of the year. Okay, another question, moving on to Flex, which we got a fair bit of questions there as well as Reclass. How long do you expect for the 69 existing towers to go to zero? What is the company's assumption for that?

Well, we will never know for sure until it happens, but we know Carl Storrs has is in their own right forecasting by the end of the year, they'll have run out of parts to support them and they're no longer going to service them. I'm thinking we can keep a lot, you know, some of the key guys running into 2024, but where the end is, your guess is as good as mine. But to remind you, it's 5% of the total global business. It'll slowly phase out. But we have an acceleration on the rigid side happening in both the U.S. and Europe. And we think we can offset that.

Okay, great. A question on the phase three trial going on in China for Hexfix, run by our partner, Osiris. What are the criteria for a successful trial? Maybe you can give us an update on the timeline, but what are the endpoints, essentially, that make this trial a success?

Yeah, Dave, again, this one you should answer, because I know you were in the background getting the specifics around it. But I will say, On a timeline basis, we're trying to prove that blue light is better than white light in a Chinese population. This is very typical in life sciences. Both Chinese, Japanese, Asian communities will want a specific Asian trial. So we're mimicking past trials, but in the Chinese population. Timeline-wise, they have indicated that they believe they'll finish enrollment this summer. They hope to be able to pull the data by the end of the year and submit in early 24 with a 24 approval. But that's the latest we know from them. They're running the trial.

Right. So potential phase three data toward the end of the year. And in terms of the endpoints, essentially the patients serve as their own control. So they'll analyze the patient under white light and then under white light plus blue light to see if they're identifying additional lesions and As most of you know, blue light typically does catch a number of lesions that white light alone doesn't catch. Secondary endpoint that is key, I think, is the number of CIS lesions, which also most of you know is the most aggressive form of bladder cancer. And blue light is really important. important for catching those cancers. Not only is it aggressive, but it's also sneaky and lays down flat on the bladder wall, so very hard to identify. So that would be a key secondary endpoint for the trial. And of course, safety, which also we have a very good track record of safety, but safety is, of course, an important primary endpoint. Okay. I think you've answered this before, but when do you expect a... a response from FDA on the down classification. Can you give us a little bit more of a timeline? And a tail end to that that comes from another question is, can you give an indication of the potential impact on Photocure's business once reclassification happens along with the timeline?

Yeah. Well, as I mentioned, 210 days from filing. So that puts us in and around May 25th. There's no statutory requirement by the government, FDA, to respond. Down classifications to give you guideposts, eight months to 11 years is what has been the history on these. We don't believe we're anywhere near 11 years. We believe we're, we got an opportunity to be closer to the eight month mark, which means if they were to respond favorably, it could be by, you know, potentially by the end of this year, we could get a favorable decision. But that is, you know, that is completely uncertain. And that would probably be a best case scenario. the impact on the U.S. business would be significant. And I think in the sense of you would have then competition both on the technology, so all the capital-equipped manufacturers would be competing against each other to outsell each other in the category, whereas right now we have Carl Storrs by itself, so there's no external competition. pressure on them to make the best blue light equipment in the world, although I think this latest version of it is really a good step forward. But you'd have that technological competition, and then you'll have price competition. And it's not without saying, Carl Storrs realizes it's a monopoly position in the US. It prices it like a monopoly position in the US, both on the cost of the equipment and also the servicing of the equipment. And I believe that those that pricing would come down in a competitive marketplace. So that would be, you know, in our estimate, what would the impact would be? Obviously, you have the majors coming in, you know, the Richard Wolffs and the Olympuses, et cetera. But there was also a host of other manufacturers coming. secondaries, et cetera. I call them the secondaries. It's probably not fair. They probably wouldn't like me calling them that, but not the big, big guys, but guys who really want to make a difference in cystoscopy would also come in and put additional pressure on the three big manufacturers. So that's it. But again, time-wise, we're just only going to be able to inform you when we get information there. It could go void of any communication from the FDA for some time, but we're hopeful. And we think all the right things are in place for this from the effort we put into it, you know, to the FDA's pre-submission. You know, if you go back to 2016, 17, they identified blue light cystoscopy as a potential down class device. So they've already pre-identified it. Carl Storch has initiated. That's another key step. And we started the citizens petition and we rounded up All the stakeholders from all categories, not just one category, but patients, patient advocacy, KOLs, equipment manufacturers, and therapeutic manufacturers. I mean, that is a tremendous swell of support from a variety of people who care about patients. And also, finally, to underscore this, the termination of Flex in the U.S. is a great podium for us to speak from. talking about now Carl Storrs in a monopoly position, unable to support their own equipment, has withdrawn from the market at a time when patients need the best technology possible to identify CIS and BCG unresponsive patients in the surveillance setting, and now that equipment is no longer going to be available to them by the end of this year. That's a travesty, to be honest with you, and I'm hoping the FDA sees it the same way the rest of us see it.

Perfect. Question on cervical cancer product, Savira. What is the market potential? Can you also give us an update on the potential timeline for seeing phase three data? Are you talking about Savira? Savira, yeah.

I wasn't prepared for that question, David. I would say from a phase three, I can tell you that they have completed the phase three enrollment process. The last patient's in, I think, towards the end of last year. They're still pulling data together. They're hoping to have a readout later this year.

Right. So there's a substantial several months of follow-up to see if the cancer has been eradicated. So, yes, toward year-end is what we're hearing. Market potential, as Dan said, it's not our product. We don't have the data. The forecast on that, but potential to be large.

Yeah, I'm pretty sure we could go back to press release a few years ago and probably had it in there. Someone wants to reference it. I just don't have it with me today, guys. It's not top of mind. I got to be honest with you.

Here's a question. Why are we not seeing a massive buyback of own shares at these low prices? And the answer is, you know, we continue to run the business, right?

I'll take that one. I mean, we are a growing business. We need to invest in our future. It's my target and my wish always for this company and for the other companies I work for that we are able to give dividend or buy back shares depending on what's best. But right now, I think the right thing to do for us is to invest in our future.

Okay. We just covered this one on the reclass, another question there. What is your action plans to address the flex opportunity in the U.S. and potentially worldwide?

Our action plan right now is try to support the ones that are out there by finding third parties that hopefully can repair or sustain them. And then find a partner. I think I said it in the presentation and find a partner out in the market who will produce a blue light flexible system. We'll update everyone when we're successful.

Getting down to the bottom here. So currency adjusted growth was 17% in the quarter, despite easy comparables. Are you still comfortable with achieving the 20% plus currency adjusted growth this year?

I don't know if that was for Eric or me. He didn't say who.

Yeah, I put that to Eric first.

Okay.

Okay, that's fine. I mean, what we're looking at here, let's start at Q1. We have a 30% increase of revenue for the company. That's 24.6 million NOx. If you look at FX alone, that's 11 million out of the 24.6. So that will that's about 13 to 14% of the growth is FX driven, which leaves organic growth to somewhere between 16 and 17%, which is pretty cool as a start for the year, I think. I think that's a good start of the year. And I believe that forms the basis for us to achieve the 20 plus percent that we're talking about. Now, in terms of fixed currencies, I think When we go back to the guidance, we said 20 plus percent as a headline number with no predictions on FX per se. And still, you know, and we were still also at that point in time facing significant market challenges such as, you know, staffing shortages, strikes, loss of flex. But we stand by our guidance here, we do.

Okay, excellent. And here's actually the last question. How locked in are the physicians to the tower manufacturers? Is it possible for them to switch from Sapphira? And if reclassification happens, how likely are they going to want to switch to new manufacturers?

Well, the physicians are one piece of it, but they're part of hospital systems. And hospital systems have strong relationships with oftentimes what they call prime vendors, key manufacturers that they want to work with. They'll push it and emphasize it and get tremendous discounts. So there's a level of loyalty to it. Also, physicians get used to using certain equipment. They just like the ergonomics on it. But having said that, if you believe in blue light technology in the surveillance setting and what it means to patient care and identifying patients with CIS, BCG unresponsive, then you will push as a physician your institution, because if it's a one and only, that's not generally a problem for institutions to make that exception. And I think I also want to underscore, you know, this surveillance setting with blue light cytoscopy. If you think about the fact that Merck's Keytruda is out there now, it's, you know, for BCG unresponsive. Faring is wanting to come out with its genetic gene therapy bladder cancer product. Immunity Bio is coming up on its PDUFA date here in the next couple of weeks. Again, another line. Urogen is out there finishing off its phase three. I mean, there are manufacturers. who are looking for patients who are CIS or BCG unresponsive. And there is no better technology in the world than blue light. And that's why it's an imperative. It's a major initiative for us to find a answer for blue light flexible. Uh, and we aim to do it, you know, whatever it takes. Uh, and quite frankly, um, ideally I'd like to have a proprietary system that we sell the razor and the razor blade. So that is our, that's our aim. I don't have any, uh, any conclusion or anything to announce today, but that is exactly what we're looking for is to be, uh, to, to sort of control our own destiny in the, in the surveillance setting.

Excellent. Okay. Well, that's the bottom of the list of questions. Uh, thank you all for the great questions and, uh, thanks Dan and Eric. So, uh, turn it back over to you, Dan.

All right. Well, great. Thank you everyone. Uh, look forward to speaking to you at, uh, at the Q2 in August.