Acarix AB (publ)

Welcome to today's live queue that we here at Reda have together with Akadix and its CEO Amir Mahmoud and the CFO Christian Lindholm. Very welcome, stage is yours.

Thank you, Philip. We're glad to be here and excited to announce our Q1 earnings as we kind of have progressed over the last 90 days. So we'll get right into it. We'll have a quick agenda here. We're gonna go through an executive summary, high-level briefing, and then a Q1 highlight, as well as the Q1 financials and a little bit deeper dive. But really, what we wanna start off with is what we've done in the last 90 days through Q1. We've been able to implement a number of strategies. We've taken our go-to-market model and dramatically shifted it to a more adoptable model. one that has less barriers. We have a new focus on our clinical trial situation in the United States and officially have launched one of our first clinical trials in the U.S. that will identify workflows and the cost-based savings of Acarix and pushing the CAT score system as a risk stratification process at point of care. And we're also working towards a partnership that we have facilitated to expedite our processes in reimbursement, which is one of our key focuses and objectives for the future of Acarix and CAT score. So we're very pleased where we're at. We believe that we've really structured this business as well as our strategy to really procure the long term to 2024 and beyond. Some of the Q1 highlights. So the growth focus model. We evaluated in the first 60 days what we were trying to accomplish. And that's truly to get this thing adopted and drive high volume to really push the submission process that will procure us with a static reimbursement code specific to our diagnostic tool. And what we've done is we've shifted it to where we've removed the barriers surrounding what the process is to implement CAT score in practices, in emergency rooms, in hospital settings, as well as any other facet where these patients can be seen similar to PCPs. So we have removed the process of actually having to buy the CAT score system, which we were selling, and we're putting that on a consignment model because to get the adoption where we need to go, we've got to remove those barriers and increase our volume and submission to payers like the private pay insurances as well as Medicare and Medicaid. So what we've shifted to is really focusing on the patch. We're not selling the widget anymore. We're selling the patch. The patch is the future of Acarix and our top line revenue growth, as well as really significant incremental approaches towards the gross margin, as you'll see in the future slides. But what it does is you're taking the razor blade model, right? So you've got the razor, you're selling the razor blades, and that's where we see a significant trajectory and opportunity. And by placing more CAD score units, you're going to see more of a hockey stick curve regarding patch adoption and usage. So the exciting news is we did launch this new model March 4th, which is the first day of the month, last month of the quarter. We did sell 13 units in Q1. What we realized is the last 20 days, so initiation of the new sales model through 20 days of May, 20 business days, we were able to procure 10 units placed and a significant number of boxes. And in regard to this model, there's the consignment of the CAD score system also has a obligation to purchase the boxes of patches up front so that you have the utilization and ability to start tracking and then subsequent orders will come in over the next 12 months of additional boxes. One of the best KPIs that we've seen and we saw it relatively soon and we expected anywhere between 45 and 60 days for reorders And those have started coming in. So we're really cautiously optimistic about that continuing that track. We're very new into this model. However, we're seeing significant traction and we're very, very much so enthused. We have some significant wins that you recently saw some press releases on. So we've got multiple primary care clinics that have adopted our technology. One very large clinical cardiology practice in the Northeast, Capital Cardiology, over six different facilities with over 300 cardiologists. We also work towards an ER setting that is part of NewTex, which is a publicly traded organization that specifically focuses on ERs and micro hospitals. So they're very similar to what an urgent care setting would look like. but specifically and acutely focused just in that facet or demographic of the market. The team. So we've done a top-down analysis on everybody on the Acarix team. What we have done is we have really evaluated each of the commercial team members and really tried to structure it as best we could. And we have separated from some people that were underperforming. And we have brought in people that are specifically and acutely focused on cardiovascular sales. Some of them specifically into the diagnostic market and some of the larger organizations that created the disposable wearable patch market. So we feel very good about their talent. We feel very good about their acumen clinically as well as from a sales capacity. And we truly believe that the expertise will continually drive the momentum that we've created since March. Really excited to announce, just as of a couple days ago, we have now officially contracted with our new head of US sales, Jeff Thomas. Jeff Thomas and I have known each other for over 20 years, and he has really developed into a significant high-level executive sales and commercial leader. The exciting thing about Jeff is he brings 20 years of specific cardiovascular experience, And most recently, he was doing exactly what we're doing. We're building a team. We're building a structure. We're building a new culture. And we're building the entire process of growing a new team. And that's what he just recently did in his former role. But he's very excited to join us. One of the key things that Jeff brings to the table is he's actually an engineer by education. And having that ability to complement a commercial aspect and an engineer aspect, being able to deliver the consult of technical sale to the physicians as well as the administration of hospitals, as well as the team members and educating them on how to follow these processes, will truly be significant and a significant driver for us for the top line. We're really excited to announce Jeff, and he's going to be joining us on June 1st, just in a few days. Really exciting news that we got at ACC just this past month in the U.S. It was the CADScore Health Economic Analysis done by Dr. Susan Barron and Michael Gibson out of Mass General and the Boehm Institute, a highly recognized institution in the United States that truly has a number of significant clinical outcomes and studies that are ongoing. And what was truly remarkable about this is that The CAT score, when implemented in the emergency room situation, was $177 million saved per 100,000 patients. So if you do the math, that's $1,778 per patient saved when the CAT score system is implemented. And how that kind of procures is that, you know, when you show up to an ED emergency room or emergency department, There's a protocol in place when you have acute angina or you have low to moderate chest pains. There's a specific protocol that you follow and it's a very detailed protocol that involves significant checkoffs before the patient can be discharged or forwarded for a risk stratification. When implementing CAT score, you're able to basically mitigate the process for the people that truly do not have a coronary artery disease threat and can be ruled out by CAT score and moved out of the process and push the patients that truly have angina or truly have a strong likelihood of a coronary artery disease event forward through the risk stratification process. So you're mitigating the time in the ER, time in the hospital, additional testing that wouldn't need to be done, or any of those kind of opportunities where cost basis goes very, very high. As well, you can't really discharge a patient without a cardiovascular consult, and that can take anywhere from five hours to a few days. depending on the day you roll in. So significant value. It's a value proposition that I mentioned on our last quarterly call where we have a comprehensive value proposition. We're not only impacting the patient, we're impacting the physician, but also the payer. So truly comprehensive and quite frankly, part of the driver that we have in our current conversations with payers as well as Medicare and Medicaid. We have now launched our very first clinical evaluation in the United States. UC Davis, a highly acclaimed institution that is going to do something very similar and roll this out into their workflow in the ED space. We have already signed the IRB agreements. We've signed the contracts. They've been trained. We're anticipating launch at any time. This would be a 200-patient study, and we're really excited at what this could possibly procure for the U.S.-based demographic because we have had feedback. A lot of our data is from Europe. People want the exact U.S.-based demographic data, and this is going to be the start of a few more to come. The CAT score reimbursement activity. So we have engaged with a very highly reputable law firm, Arnold and Porter, in Washington, D.C. We have already had conversations with them. We have initiated a partnership with them. Really exciting is that our lead attorney, who is going to help us facilitate the strategy and conversation with CMS to drive the CPT-1 code, as well as additional codes that we'll talk about in a second, But this gentleman is a JDMD, so he's an attorney and a physician, and he also was on the board of CMS or a partner in CMS for the past few years, no longer is, but has all the connections and the know-how and the knowledge base and the acumen that really will help us to progress forward very rapidly. What we need to get to CPTP1 is the comprehensive clinical evaluations, demonstrate widespread usage, which will also be catapulted by our new risk-sharing model. And then we're really pushing towards KPIs and we've already seen it. So we've already had a very significant outcome. If you the checkbox here, United Medicare has now removed us from do not pay. Right. So in the U.S., health care is very different than abroad. So there's private pay. There's public pay. Public pay typically comes in the Medicaid, Medicare segment, which is older generation, 65 and plus people. And then the private pay section is a for profit business. There's a number of large private pay institutions that facilitate insurance for the private pay world. And those conversations are ongoing. But part of the step to get to the static reimbursement is the removal of do not pay for Medicare. So we have seen that and we actually have seen payments for Medicare. which is a truly remarkable thing, and this all was effective May 1st, so just the past few days. They've already proven, Arnold and Porter has already proven themselves as to what they can procure. Within seven days of our initial visit and execution of a partnership, they got us a visit with CMS to discuss a completely different segment, that is the ambulatory payment center. So that's basically the APC. So you're looking at anywhere like an emergency room, urgent care center, ASC, OBLs, all the patients that are coming to those kind of facilities will have a different segment of reimbursement codes. And we were able to already present to CMS and got in before the end of the deadline for a July announcement as to whether they've accepted our proposition. And what we're doing is we're setting a fixed reimbursement code for those settings. And we should know by July that'll be effective July, January 2025. So we're cautiously optimistic. We had a very good meeting with CMS and all our consultants feel like it's all trending the right direction. So we're very excited and cautiously optimistic waiting on that. And just as a note, as you can see on the slide, that opens up a population of 7 plus million patients. And just to go back one second, when you look at the opportunity that United lifting the Medicare no-pay quote, that's another population of 8.9 million. So just in those two segments, that's over 17 million patients that will become an opportunity for the CAT score system and the CARICs as we progress our initiatives in the U.S., Some really exciting things as we continue to build our reimbursement thought process. We have three new organizations that are now providing reimbursement, Peoples of United, Anthem Blue Cross Blue Shield, and Novitas. Novitas is something that really is important because Novitas is a Medicare reimbursement organization. So you can see that we're starting to get Medicare reimbursement. And what typically procures is that it tends to drive the adoption in the private pay market once Medicare is set up. So it will facilitate and help our conversations with the payers, the private payers, as this continually progresses with the Medicare side. And Blue Cross Blue Shield Anthem is 14 different states. So we're really going to start to target and segmentize where we're placing our commercial activities and try to go through concentric circles and work our way out of those cities into broader expansion in the United States. So process improvements, all while we're doing external commercial activities, we also have to focus on internal activities to ensure we can position ourselves well for scale and growth, as well as streamlining our operations and efficiencies in our processes, right? So ERPs are very important. We're a partner with Microsoft Business Central. We're fully integrated at this point, and we're working towards making sure that it's being used and used efficiently, and it should hopefully streamline our process and make things a little bit more effective and more productive. Very excited to announce we just left our annual shareholder meeting and we have elected two new board members, two gentlemen I've known for many, many years, including Ken Nelson over 20 years. And he has been a phenomenal person in the digital health world, known as an effective master of digital health and what's going on in digital health. He's played a role in some of the largest group projects. organizations, iRhythm, BioTelemetry, and Barty, all three had significant exits. He has mastered the process of understanding the commercial activity, the reimbursement activity, as well as the go-to-market models. So he has been involved, and he will now be a very core team member as a board member. Dr. Tony Das out of Dallas, who is one of the head at Baylor, Scott & White, he is one of the... very early onset adopter of digital health and has tried to procure that in his practice as well as Baylor Scott & White. Tony also sits on the board of a number of companies and has worked with a number of PE and VC firms and has raised over $150 million in funds. So he's very active in the clinical aspect, but very astute in understanding of the strategic business development aspects. So those combined truly bring our board to a place where we have significant influence, significant acumen in both commercial activities, leadership, and the clinical aspect that can merge together. And we've refined the board to be nimble, faster, and being more effective in the specific U.S. market. So we're very, very excited about what they bring to the Q1 2024 financials. Very excited to announce we've had some really great traction and made some significant strides in the last 90 days. We've implemented new updates, refined our business models, and really looked at OPEX and how we can take costs out of the system that doesn't need to be there or repurpose those funds for more commercial activities or clinical activities. But really excited not specific to the u.s we saw 170 percent u.s patch growth uh that's in units and as compared to 2023 uh our u.s gross margin jumped to 91 points uh versus 83 points uh in 20 in q123 and we've had a significant reduction in our in our opex by 16 percent now there was one a one-time charge uh in q1 that's offset from this but 16 points in opex and again We want to reassure our investors, our shareholders, our customers that we're not just reducing our spend. We are looking to reduce spend, but we're looking to repurpose those strategically and effectively in driving what we need for outcomes. And what we need for outcomes is good commercial strategy and good reimbursement, as well as clinical outcomes. So we're going to repurpose the funds we feel we need to repurpose, but we're going to keep the cost savings if that is the best option for us at the time. Now I'd like to turn it over to my CFO, Christian. My pleasure.

You can hear a lot of very good things is happening in the company and some of them have a direct impact on the P&L. And the business model, the risk sharing model is of course impacting in a good way. With the risk sharing model, we are delivering the system to the customer, but Carex still owns the system, and we depreciate the system during 24 months. So, and that is the reason why we see this decline in revenue from 1.9 million to 1.5 or 1.6 million. And that's basically because out of the 13 systems that we sold in the quarter, 10 of those were risk sharing model. That means that there is no revenues coming from the systems, but the revenues come from the patches. In the long run, that means that we have a quite steady development of placement of the systems. In a while, we are working hard to see an exponential increase of the patches. Mind if I add a little color to that? Sure.

So when we talk about the risk-sharing model, the risk-sharing model is exactly what Christian said. We're going to be able to deliver the widget, right, so the CAT score system. And the more CAT score systems we place, the more patch utilization is there. That's going to be our model going forward. We're a patch company as of today. We are focused on patch sales. We're focused on driving the volume. And when we discuss risk-sharing, what that truly means is until we have static reimbursement, we're going to be sharing the risk with our customers, actually absorbing all the risk. So when they purchase a patch for $100, if they are paid and they're reimbursed, fantastic. If they're short paid or reimbursed less than the cost of the patch, we're going to make up that delta in a credit towards a new patch. If they are denied, which happens through the process of gaining reimbursement adoption, we will replace that patch at no charge. So we're really mitigating the risk and reducing the barriers of entry by providing the CAT score at no charge on a consignment basis, which we do get to take the benefits of depreciation over 24 months. But truly what this is for and truly what the strategy is is to drive adoption, drive volume, and drive submission for reimbursement because that's what's going to procure all the things we need to get to CPT-1 but more pertinently with payers in the short term. Yep.

If we move over, another thing is that 90% of the revenues in quarter one was generated from patches. So looking into the patch sales in the US, we had a quite good development. In number of patches, we grow with 130% from 460 patches 2023 quarter one to 1,040 in this quarter 2024. Revenue-wise, there is a growth of 170%. And that's of course because the pricing of the patches that we sell in the resharing model is higher than in a traditional sale. And of course, I mean, we are now moving forward working hard to sell off this new risk sharing model to clinics with a high volume of patients with chest pain. Looking into the gross margin, we will see quite high gross margin moving forward, due to the fact that we do not revenue recognize the systems, we revenue recognize the patches from the systems that we are placing out. In the US, again, we have increased the gross margin from 83% Q1 23 to 91% in the same quarter this year. And that's an increase with eight points, which we are really satisfied with. So, just a few words about the result, the EBIT of the company. We are showing an EBIT of 14.9 million compared to 16.4 million previous year. And one of the reasons, as you know, the revenue declined, and one of the reason, or the main reason why we are showing a better result this quarter compared to the quarter in 2021 is cost saving of approximately 1.2 million Swedish crowns. And that is 10% compared to Q1 previous year. If you look into the last quarter, there is a saving of 29%. And I think that's my last slide.

driving down our cost basis, as I mentioned, and really repurpose and refocus those funds on strategic things that truly bring value. Our ability to generate the usage is the most pertinent thing for us in our go-forward model. It will not only procure a status in the U.S., an adoption in the U.S., it will procure the reimbursement for the long term. But in the short term, our expectations are really to see excitement surrounding the ASC or the ambulatory reimbursement code of 716T with an asterisk. That will procure a level one reimbursement, and that will help us to grow our top line in those specific centers while we continually expand into hospitals as well as PCP clinics all across the U.S. And we're seeing significant opportunities with IDNs, GPOs that were in the initial stages of talking. We're also talking to privately-owned multi-clinics, 40, 50 clinics of urgent cares because urgent cares is a very specific focus for us, as I mentioned previously regarding the protocol, as well as mitigating some of the cost basis in the system. So overall, I think we're very excited about where we're at, where we're going. We're very optimistic for 2024, and we expect things to continue with the momentum we're at and continually bringing on new team members on the commercial team to continually accelerate our growth through the remainder of 2024. and beyond.

In regards of the growth, we should also, we are talking a lot about the risk sharing model, but we should also be aware of that we have One of the largest customers that goes with the traditional sales model purchase both systems and patches. That's the veterans, the VAs in the company. When the budget is solved in the US, they will stand for a quite large portion of the revenues.

Yeah, and just to provide some color on that for the shareholders, what we have identified at ACC actually via some executives from the VA, with the budget situation in the U.S. as well as the political situation in the U.S., budgets have not been approved. And what's happening is in the VA specifically for newly adopted technology, which will be considered, unless it's critical to care or life-saving, they are not approving POs. We have a number of customers pushing to really get the product. We've helped them, we've assist them with the reimbursement opportunities. There's just a deadlock surrounding that unless it's critical. So we do have a couple of VAs that are pushing it through the critical pathway because we do feel we're bringing a significant critical opportunity coronary artery disease is a deadly disease. It is a disease that comes up. There's really sometimes no precursor. So we do feel we have some predicate of being a critical device. So we're in the initial stages of pushing it through that approval process. And hopefully we can get something locked down in the next few weeks. But again, it's going to be truly up to what the process looks like internally at the VA providing those POs. So with that, we'll turn it back over to you, Philip. Yeah.

walkthrough of both the report and the company as well, I think. I thought we could just start, I want some context to some of the topics that we've discussed here today. And I thought we could just start with sort of the recent press releases relating to the new clinics that you located in New York, for example, and Miami. Could you also present sort of a context on how these processes proceeds? And also sort of, is there any color on volume from these clinics that you can share?

Yeah, sure. So as I mentioned, Capital Cardiology in the Northeast is one of the press releases we made. It's a very significant institution, very well-known and recognized institution in the Northeast. And they have over 300 cardiologists in that practice with multiple facilities. So they have rolled it out in their first, you know, onset facility. And the plan is to adopt the technology and roll it out in the future facilities as they progress and adopt the technology. You mentioned the Miami one, Amavita Health, which is a Dr. Pedro Martinez facility. A phenomenal guy who's really forward thinking. He's creating his practice that is multiple centers. I think it's four. And he ordered one for each because he's a value based care provider. So he's really looking into the value value proposition of technology as well as outcomes based technology. Right. So he's implementing CAD score to really mitigate the. you know, unexpected expenses or unneeded expenses surrounding patients going through the process of a CT scan or further risk assessment of a stress test or anything along those lines and mitigating that process early in the in the point of care process with the CAT score system. So really excited about that. And then, as we mentioned, new techs, we did a A deal that's a publicly traded ER-based organization with over 30 different centers that has started, initiated the process of CatScore in, I think, two of their centers. And they're going to scale that out as they adopt the technology. So significant opportunity there. As well, as I mentioned, we've got a number of opportunities at the VA when the actual PO process is procured and the budgets are procured. But we're also having conversations with IDNs and GPOs. And I can't comment to when those will come to fruition, but we're cautiously optimistic that those come to fruition in the near term.

Right, and I mean, I have to ask, I mean, these new clinics came in a pretty short notice of time, and then I'm curious, of course, are there more of these dialogues ongoing?

Absolutely, so we are building out a team of experts, as I mentioned, so there are ongoing conversations in a number of states in the US, and we'll continually scale our commercial team to where we have more conversations going, but I anticipate that we'll continually see announcements, we'll continually see wins, You know, the biggest deal here is to be able to understand the technology and for our team, our commercial team, to truly provide the clinical outcome that this provides as well as the value proposition that this provides. And when you bring in high caliber talent like we're bringing, that ability is delivered and it's delivered quickly. In regard to Amavita Health, that was a two-meeting sale for multi-units. So once the physician or the clinic understands the value proposition of this device, as well as how it can impact the patient's life and the savings from the payer standpoint, it's pretty easily adopted technology. So what we're going to do internally is truly help to create a much larger brand awareness campaign of what we're doing. We're currently talking to a couple of PR firms, and we're going to engage here in the near term to truly help expand our reach, to truly help expand our offering to more people because that's what's needed. Because when people hear about our technology, they are like, we've needed that technology for decades because we're first in class. Nobody's had a product like this and standard of care, CT or stress test. And that's a process, you know, on average 60 days to get to one of those processes because you go from PCP to the cardiologist and then you go to the schedule for the process of a stress test or a CT scan. And then you wait for the evaluation of that test, and then you get the feedback. So it could be 30 days. It could be 60 days. And coronary artery disease, it's a clock. And nobody knows when that clock's going to strike.

Right. And I mean, you were talking a bit about this, I guess you could say, I mean, sort of word of mouth, the word of mouth effect. And it would be interesting if we can go a bit into depth how that relates into the new business model, the risk sharing model. I mean, what would you say is the near and long term implications of this?

Yeah, so we're driving significant usage of social platforms. We're driving significant usage of word of mouth. At ACC, we were talking about it live. We were just talking about I'm actually going to be attending an event, New Cardiovascular Horizons, next week. So we're really focused on going to these events where we're going to be engaging with KOLs, and the KOLs will help us to expand that reach. So we're continually looking to push this agenda and narrative because – it literally can save lives, right? And it, again, is a value proposition that's comprehensive. You have the payer, you have the physician, but it's truly about the patient. And the more patients we can help to either expedite through the risk stratification process after receiving a high CAT score or mitigating the patients that aren't, that's our purpose. That's what we're focused on. And I can see and we get feedback that this is something that's been needed for decades and we have it. And now the adoption should continually grow really, really quickly. In one of the situations we're working on right now that we're hopeful that will come to fruition soon, their anticipated usage could be 200 patches a month. That's 200 patients reviewed a month. That'd be 10 a day. That's pretty exciting.

Right. Since the implementation, it's been a few months now of this new business model. Is there anything you can share related to, do you see a higher hit rate, let's say, in terms of sales?

Yeah, so when we initiated this actual new sales model and go-to-market model and risk-sharing model, it was March 4th, so it was the very first day of the last month of the quarter of Q1. And we sold 13 units, as I mentioned, but those 10 units procured in the back half of the quarter, right, in the last 15 days, because it takes a couple days to get the model rolled out. So we're going to be hopeful, and we're seeing the traction. I can't predict it because we're so early in the process, but we feel that the adoption process will continually procure But again, as we bring on new commercial teams, they have to get trained, they have to get ramped up. So our expectation is to see the curve and see the growth. But I anticipate that we see really significant traction in the back half of the year.

Interesting. So I guess that also means you'd see sort of a good outlook for Q2 as well. Absolutely. All right. And in the report, you also mentioned, and you touched upon it here as well, the restructuring of the sales team. Could you provide some more context to that as well?

It'd be interesting. So what we really did is we evaluated every commercial team member we had. And the ones that were underperformers or not performing at all, we exited from the organization. And what we're doing now is bringing on new high-caliber talent that's specifically focused in cardiovascular disease. Many of them are specifically focused in the wearable market of cardiovascular. So think Hurtle Monitors, think the companies that I mentioned earlier like iRhythm or Bardi. There's significant value in having the right people to deliver the right narrative that will drive the commercial adoption much more significantly and a faster track.

Right. And do you think you have Salesforce of sufficient size right now or do you look to expand it further?

No, we're looking to expand it. We're going to expand it and we're hopefully going to grow it very rapidly. I anticipate quadrupling it hopefully before the end of the year.

Interesting. And I mean, could we go also into the implications of these U.S. based clinical workflow evaluation study? I mean, just to make it very clear for investors, what is the purpose of this and what will it mean?

So to get to CPT codes or fixed reimbursement or static reimbursement, however you want to say it, you have to have adoption. You have to have the clinical outcomes. You have to have usage and submission to payers, regardless of whether you're going to get paid. And that's where the risk sharing model comes in. Because these payers, as well as Medicare and Medicaid, they look at the usage. That's the very first thing they pull. When you go to sit in front of CMS, which is Medicare and Medicaid, they literally pull the usage before they even sit down with you because they want to see the technology adopted. And regardless of whether it's no, it's documented, so they see the submission. If it's widely adopted, the opportunity becomes much larger to get static reimbursement. So we're pushing on those envelopes. The clinical workflow is truly about providing the clinical outcomes in the U.S. So UC Davis is our very first clinical trial in the U.S. And, you know, a lot of people, a lot of physicians, even ACC and AHA have asked, what is our patient population in the U.S. in regard to our clinical outcomes? portfolio, and it's limited, and this will be our very first one. So adopting the actual demographic of the U.S. into our clinical outcomes will truly help to identify that this opportunity is not just great in Europe, it's great in the U.S. too. The prevalence of coronary artery disease is much higher in the U.S. as compared to Europe, so we're expecting some very good outcomes, very similar to what Mass General and Boehm and Dr. Barron provided from the workflow study at Mass General.

Great, that's clear. If we shift the scope a little bit, I'd like to hear if there are any updates on the recent interactions with the VA.

Yeah, so as I mentioned, the VA is under a lot of pressure regarding budgets. The whole U.S. is, right? So the budget has not been adopted. Two different parties fighting over the budget and what's important to each party. So there hasn't been an actual outcome, and that's kind of where I got to. The only proposition that's being approved currently at the VA is stuff that's already implemented or approved. critical to patient life. So as I mentioned, we were cautiously optimistic. We've got a center that has pushed it through the critical outcome, critical pathway. So if we're able to get that adoption and they do approve it, we'll push that through all of our VAs.

Right. I mean, I guess it's hard for you to give a definite answer, but between, you know, in the ballpark, what term of timeframe should an investor have on this process? The budget approval? No, I mean the implications for you.

The critical pathway, I think we should probably know something in the coming weeks as to whether that critical pathway could actually come to fruition. Anything with the government is a long process, including the budgets, as you can see, we anticipated last year to get some of these sales done. But it's just it's been a deadlock in our government processes to get the approvals on the budget. So I don't even know how to speculate on what kind of outcome we'll get there or when that outcome will be.

Got it. Got it. So on the other end, then, is there any news or progress related to any large scale ideas that you could share with us?

Yeah, I won't take names, but we are talking to significant IDNs. I had a meeting two weeks ago with GPO that purchases $100 billion a year. We also are talking to smaller IDNs and mid-sized IDNs. So we're having conversations on a daily basis. I'll also add that we're having conversations with actual payers. I've got three meetings with the three largest payers in the next three weeks with the CEOs and presidents of these organizations that could really procure different business segments for us. And many of them are already reimbursing in some of the areas. And so that truly brings into a warm proposition in where we feel that if they're already procuring it in one, why not roll it out to all the regions? And if we can just land a few of those, we'll continue our growth pretty rapidly.

Right, right. And this one is maybe more targeted for you, Christian. How should investors view the cost base throughout 2024? I mean, we've been talking about cost cutting, cost reductions as well, but maybe then an expansion of the sales force, but could you give some context?

So the cost base will, it's like Amir said, we will reallocate the funds that we have to more commercial activities. We will cut down costs on activity that is not really needed to the expansion in the U.S. because U.S. is is our focus and um i would say that the growth that we are counting on now will be done with existing uh cost base that we have today from quarter one There might be, if we are, I mean, we are not hiring any salespeople. We are taking so-called 1099s. That's, what do you call them? Free contractors on the market. And they get paid when they are selling. Yeah, so I think we have a good control over the cost base. We have good control over the cash flow in the company. We will build some assets in the company now if we are starting to excel this risk sharing model, of course, but it will be compensated with a really good gross margin from the patch sales. So I would... That was a long answer, but the short answer is that we will remain approximately with the level that we have today.

Good, that's clear. Thanks. And so, I mean, sort of on the same topic, Akerix a few weeks ago came with an updated financial target or financial vision, we should call it. Could you please provide some more insight into why that is and where you stand right now?

So I'll start, and then you can add some color. So Christian and I are diligent and focused on creating the model and then creating the prospectus as to where we think we're going to go. Currently, we spent all day yesterday while we were together focusing on where we see the opportunity, where we can calculate the growth, where we can forecast the growth. Because we're in the process of growing and not having fixed reimbursement everywhere, it's very difficult to kind of quantify where we're going to go or forecast where we're going to go. But I think we've got a pretty good idea and we'll provide more structured outlooks on the back half of the year. But one of the key things here, and I want people to understand, is we are focused on driving adoption and getting reimbursement and usage, right? So When you look at a company that first initially launched the diagnostic space with wearables, and that was iRhythm, right? And Ken Nelson was part of that team that procured that business and grew it. But the exciting part about it for us is with the CPT-3 code, which we currently have, iRhythm was able to develop a $250 million business, right? So we are looking at that. And if we can slowly incrementally grow, especially given our OpEx and where we're going with our OpEx and reduction in OpEx and truly looking at the platform of top line sales driving significant margin, we feel very good about where we can go with some of these conversations we're having to truly explode in the back half of this year and hopefully for many years to come. I'll let you...

No, I agree. I mean, I don't think I have anything to add to that. I mean, now we don't have any clear guidance to the market right now, and I don't think we are able to give any clear, precise guidance right now. We need to now do our best to develop the sales model that we are working with and just try to make sure that sales is picking up.

I guess this is a topic we look forward to come back to in the future, of course. I think we have actually a few questions from the audience as well. The PM from yesterday, can you describe the meaning of multi-order?

Oh, details. So it was three units and two boxes per unit, similar to our risk sharing model. So that's the M of U to health. That's the value-based care proposition that we're really excited about because we're a perfect value-based care, accountable care organization sale. We are driving down the costs in the payer system. So we feel very, very excited that this is one of our first. And I think that there's many to come from an adoption perspective.

Yeah, I think most of them coming in here, we've already touched upon them. I mean, a good Q&A session here, but we could just end off with this one, I guess then. So our Q2 of the quarter where sales will start to take off.

Well, we hope, right? So we're in the middle of launching this model, so we're just a month or two in. What I can say is we're very optimistic with the conversations we're having. As I mentioned, we're bringing on a whole slew of new commercial team leaders, as well as Jeff Thomas, as I mentioned, as a U.S. sales head. So all these people will take time to ramp up, get trained, and get in front of their customers, but we anticipate continued methodical growth over the rest of the year.

So that was the community sessions for today's live queue. Thanks a lot, Amir. Thanks, Christian, for attending.

Any finishing remarks? Well, we're here. We're going to capitalize on every opportunity. We're wildly excited about what our future looks like, and I think that we're going to get this company where we need it to go very soon.

Perfect.

Thank you. Thank you.