Bactiguard Holding AB (publ)

Thank you, operator, and welcome to the presentation of VactiGuard's Q2 2024 report. I will go through the presentation together with our CFO, Patrick Buck, and open up for questions towards the end. Thank you all for dialing in today. I have just completed my third month as CEO of VactiGuard, and my reflection from this time is that we have a lot of the building blocks in place to execute on our new strategy. We have been through a transformation. However, the team in place is very experienced and highly motivated to make the world a healthier place. While we still have transitional activities from the transformation to complete throughout the remainder of 2024, we are one team collaborating closely together with a solution-oriented approach and a performance mindset. Now turning to the developments of the second quarter. Let me start with the figures on an overall level. Our total revenues for Q2 amounted to 60.9 million SEC, an increase of almost 19% compared to the same period last year, and for the first half to 119.7 million SEC, which was an increase of 6.5% versus last year. Our license revenues are stabilizing thanks to our good partnerships with BD and Zimmer Biomets. We also report a positive EBITDA for Q2. Our EBITDA came in at 1.2 million SEC for the quarter and at negative 0.3 million SEC for the six-month period. Patrick will dig deeper into the financials later in the presentation, but I want to note that we have embarked on our path towards profitability, and I am cautiously optimistic while realizing that we still have a lot to deliver. As for the highlights of the quarter, I assumed my role as CEO in April, and at the annual general meeting in May, Thomas Van Gogh was reelected as chair of the board. In addition to Thomas, we are privileged to have the board that we do supporting Back to Guard with relevant experience and knowledge, both from our industry and the medical sphere, as well as in growing profitable companies. Another important theme from the quarter is the expansion of back-to-guard coded products to new markets with BD, but also with Zimmer Biomet, including the introduction of ZNN back-to-guard in Japan. I will come back to that shortly. In July, we strengthened the organization with the appointment of Nathaniel Bachrach as interim head of R&D, and he is now a part of the back-to-guard executive management team. Tani is a product development executive with more than 25 years of experience in innovating, developing, and launching advanced medical products for global commercialization. He has been executive vice president and chief scientific officer at 3D Bio and previously vice president research and technology at Lifestyle Corporation, where we served together on the Lifestyle leadership team. Prior to that, he held various leadership and technical roles within Lifestyle and organogenesis. Tani holds a PhD in mechanical engineering and biomechanics and has an impressive record of publications and innovative patents. He is based in New Jersey in the U.S. and will spend his time driving our R&D strategy and in new business development. We are all excited to have Tani on board representing Back to Guard and our technology to potential partners as part of our journey towards bringing infection prevention to patients worldwide and profitability to Back to Garden. The back-to-guard infection prevention technology, which is the essence of our company and the foundation of our licensed business, is an ultra-thin coating of the noble metals gold, silver, and palladium. The quantities of the metal are tiny. To put the quantities in perspective, an amount of noble metals equivalent to the size of a pea would coat an entire football or soccer field. When in contact with fluids, the galvanic effect created results in the inhibition of microbe adherence to the surface of medical devices. In the pictures to the right taken with an electron microscope, you can see the difference in bacterial colonization between an uncoated surface to the left and a back-to-guard coated surface on the right. The back-to-guard side shows significantly fewer bacteria colonizing, reducing biofilm formation over time and thus leading to lowered rates of infection. Importantly, we believe in evidence. Over the years, a wealth of data has been amassed, all pointing to the effectiveness and safety of our technology. More than 100,000 patients have been part of over 40 clinical trials covering case reports to randomized control trials, and the results have been published in renowned peer-reviewed publications. Our studies cover various patient cohorts, continents, and regions, and different therapeutic areas. As we look at the global healthcare trends, our offering is more relevant today than ever. The demand for more effective and safe healthcare solutions is clear, driven by economic and demographic developments, as well as the unfortunate increased political unrest, conflicts, wars, and natural disasters. There are clear unmet medical needs with the pressing global societal challenges we experience, including healthcare-associated infections and antimicrobial resistance. Notably, prevention strategies are, according to the World Health Organization, one of the most important factors to solving these issues. The therapeutic areas we have decided to focus on in our core strategy present huge commercial opportunities for back-to-gards. We see increasing interest in infection prevention strategies even with our existing partnerships as examples, urology with BD and orthopedics with Zimmer Biomed. The more we educate the market about our technology, its ability to mitigate infection risk, and how it differentiates partner medical devices, the more confident we are about the joint commercial opportunity. ActiGuard's aim is to seize the significant opportunity presented within each of the strategic therapeutic areas, both with our infection prevention coding technology and the products within the wound management portfolio. The core of our go-forward business model is, as already mentioned, the licensed business. The most fundamental shift in our 2023 transformation as an organization was going from being production and sales oriented to knowledge and specialist focused. The stabilized revenues from our partnerships with BD and Zimmer Biomed reflect more collaboration between our organizations, working together as experts, bringing and sharing knowledge with each other. There are still a lot of activities to work on, but we are on the right track. When it comes to exploring new partnerships and new applications, we are active across our therapeutic areas with multiple conversations and early testing of our technology with leading med tech companies in the relevant fields. Another crucial part is continuing to build the knowledge and specialist organization. Our core competence areas are in R&D, medical, and regulatory. These all represent critical expertise in the collaboration with partners. In essence, the skills and competence needed to bring coded medical devices to the market. With the addition of Tani to our R&D organization, we enhanced the combination of innovation and science with business development and have boots on the ground in the U.S. This is a meaningful step in strengthening our capabilities. Wound management remains an important part of the business, having delivered revenues of approximately 15 million SEC for Q2 and continuing profitable growth. Now into the details of our partnerships and moon management during the second quarter. BD remains our longest and strongest partner. During the quarter, the transition process for additional markets for coded folies continued according to plan, including activities such as training for BD sales and marketing teams across Europe and the Middle East. In these sessions, we shared our knowledge on how to explain the benefits of VactorGuard's technology to healthcare providers and medical professionals. VactorGuard announced in December 2023 that we signed an interim agreement to license additional markets and that a long-term agreement covering all licensed markets would be signed during the first half of the year. However, BactiGard and BD have jointly agreed to focus primarily on the transition activities, and I want to emphasize that our existing agreements remain in full force. Turning to the Zimmer Biomet collaboration, we are pleased to see the continued market activities across Europe. But the true highlight of the quarter was the introduction of the ZNN BactiGard trauma implant at the annual meeting of the Japanese Society for Fracture Repair in Sendai, Japan. This follows the regulatory approval by the Japanese PMDA obtained in 2023. Together with the Zimmer Biomed APAC commercial team, our chief medical officer and Zimmer Alliance lead were onsite to introduce our infection prevention technology to leading orthopedists within the medical community in Japan. We engaged directly with nearly 40 key opinion leaders, both in one-on-one sessions and group meetings and the back-to-guard technology was included in a presentation by KOL Professor Watanabe to a room of hundreds of delegates. The interest in our technology was clear and underlines the growing recognition of the importance of infection prevention solutions to address critical medical needs in fracture management. While we do not expect significant contributions to revenues from the Japanese market during 2024, this is an important step in the partnership with Zimmer and the long-term potential is promising. Within the wound management portfolio, we featured our wound healing product line, Hydrosyn Aqua, in London at the European Wound Management Association Conference in May. Yuma is recognized as the premier international conference for wound care, attracting leading experts, researchers, and healthcare professionals from around the world. Some 5,000 attendees were registered. On the opening day, we hosted a session on the latest advancements of infection prevention within wound care. The theme was Clean to Heal, Paradigm Shift Made Easy. The interest in the product line, Hydrosyn Aqua, is increasing. The more clinicians understand its motive action and how it promotes healing and the quality of life for patients with severe wounds. With that, I hand over to Patrick Buck, our CFO, to review our financials in detail.

Thank you, Christine. I'm very happy to present our financial results for Q2 and the first half year with license revenues and EBITDA stabilizing. And to iterate what Christine mentioned in the beginning of the presentation, we have embarked on our path towards profitability. Now let's turn to the split of revenues for Q2 and the first half of the year. Our total license revenue amounted to 37.8 million, an increase of 13 million in Q2. Revenues from BD, our long-term partner, amounted to 27.6 million, an increase of 9.1 million in Q2. Here is worth noting that Q2 last year was a record low quarter for BD, who was reducing their stock levels, as previously mentioned. For the first half year, BD in total, we saw revenues amounting to 55.6 million, and adjusted for currency effects, revenues increased 1.1% for the first six months. Revenues from SimoBioMed amounted to 10.2 million for the quarter, an increase of 5.2 million. These revenues consist of exclusivity revenues related to the orthopedics agreement, as well as license revenues, including minimum royalties related to the trauma agreement. Revenues from wound management in Q2 amounted to 14.7 million, an increase of 3.5 million in Q2. And for the first half year, revenues from the wound management portfolio amounted to 27.4 million, an increase of 5 million, corresponding to 22.5% growth with and without currency effects. As Christine mentioned, wound management continues on the path of profitable growth. Revenues from BIP amounted to 4.8 million, a decrease of 3.3 million for the quarter. And for the first half years, revenue from the BIP portfolio amounted to 10.9 million, decrease of 2.3 million, As mentioned, the BIP revenues will continue to decrease as our inventory deplete and we cease production. Other revenues for the quarter amounted to 3.5 million. Within this, we saw currency effects of positive 1.5 million. Other revenues for the first half year amounted to 8.4 million, and currency effects within this amounted to 4.2 million within the first six months. So in total, second quarter revenues amounted to 60.9 million, adjusted for currency effects of 1.3 million. Revenue increased by 16.3% in Q2. And for the first half year, total revenue amounted to 119.7 million, Adjusted for currency effects of 4.7 million, revenue increased by 2.3%. Now turning to our operating expenses and our cash flow. Cost for raw materials and consumables amounted to 11.9 million, a decrease of 13.3 million. Other external costs amounted to 19.3 million, again a decrease of 12 million. Personal costs amounted to 27.2 million, a decrease of 19.4 million, and other operating expenses amounted to 1.4 million, a decrease of 2.5 million. In total, our total OPEX amounted to 47.8 million, a decrease of 33.9 million. All in all, we are on track to deliver on the cost savings previously announced, exceeding 25 million Swedish kronor on a yearly basis following the strategic transformation announced last year. Now turning to the cash flow. In Q2, we saw cash flow from operating activities amounted to 16.8 million. Within this, we see change in working capital for the quarter amounting to 22.1 million. Cash flow from investing activities amounted to minus 4 million for the quarter and cash flow from financing activities amounted to minus 3.3 million for the quarter. In total, cash flow for the second quarter amounted to 9.5 million and for the first half year to minus 22.1 million. All in all, cash and cash equivalents at the end of June was up at 105.3 million. With that, I hand back to you, Christine.

Thank you, Patrick. To conclude our Q2 presentation, we have a bold, demanding, and inspiring vision to be the global standard of care for preventing medical device-related infections. Achieving this vision requires focus and determination, and these are our priorities ahead. We continue to work on enhancing the business with our current licensed partners, which include BD, Zimmer Biomet, and WellLead. Simultaneously, we increase interactions and early stage testing of our infection prevention technology together with leading med tech players across our strategic therapeutic areas. We aim to grow our wound management portfolio profitably. As I alluded to earlier, we will continue to build our knowledge and specialist organization further to support our partners and deliver on our vision in the best possible way. Tani Bhakrak is the most recent example, strengthening R&D and business development. We have embarked on the path to sustainable profitability, and we are clearly pleased to deliver a positive EBITDA for the second quarter. License revenues are stabilizing, Operating costs are well under control and the anticipated cost savings related to the strategic shift from 2023 is on track to be delivered on a full year basis. While we still have a way to go to deliver on the promise that the back to guard technology holds, we can conclude this quarter by being cautiously optimistic about the future for the new back to guard. And with that, we would like to hand over to the operator to open up for questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Matthias Vadsten from SEB. Please go ahead.

Hello, this is Mathias from SEB. I have a few questions today. First one, if you could please update us a bit more on the B2B partnership. I'm not sure I fully got what is happening there. So when do you expect sort of long-term agreement to be in place and how are negotiations proceeding? And also to that question maybe, any sort of insights to when you expect BD Revenants to pick up in these expanded markets would be helpful for us. That's the first one.

Hi, Mattias. Good morning. Thank you very much for your questions. I appreciate them very much. In the BD partnership, we have continued to focus in the last quarter and over the last multiple months now, the first six-month period, on transitioning the additional markets, which were part of the interim agreement to BD. So there is quite a lot of activity there. And one of the examples is certainly that we spend time on sales training, marketing training to ensure that our commercial teams are collaborating on the best possible market differentiation and articulation to medical and healthcare professionals to ensure good uptake of our products in those regions. And our focus here has been primarily the European and Middle East regions where back to guard sold directly prior to our handing over those markets to BD. That has been the focus here. I do not, however, want to underestimate the value of the BD existing markets. And while we have jointly agreed to focus on the transition activities over the last couple of quarters and our existing agreements do remain in full force, so we're not at all concerned about the timing of a new agreement as the agreements that we have in place do continue in the periods. We are quite enthusiastic and remain quite strongly committed to the BD collaboration as they are to us. They continue to be our strongest partner and deliver the most revenues to our top line.

Good. Can you share any insights to when you expect the BD revenues to pick up in this expanded market like Europe, Middle East?

Hi Matthias, this is Patrick. Thank you for your question. I appreciate that. As we report now, as you see, we report a solid revenue number from BD now for the third consecutive quarter. So as Christine mentioned, we're very confident about the collaboration with BD. You're right that with existing markets we should sorry, with existing and new markets, we should over time see growth in the revenues from BD. And we do expect that, as we have previously mentioned, the new markets will grow, but it will take some time before we will see that in the numbers. So we have a positive view on the future for sure. But as we have communicated before, It will have limited impact in the numbers for this year. However, we do remain confident and optimistic going forward.

Good, thanks for these answers. The next one is Zimmer Biomass contributing quite strongly here in Q2. If you could go through the magnitude in its income item from Zimmer in this quarter and if you can share anything about how you see contribution developing in the second half of the year here. Because I'm expecting the larger sort of volume coming in maybe 2025, but maybe mostly in 26, 27.

Yeah, I appreciate that question. Thank you, Mathias. You're right. We did report an increased amount of revenue from Sima Biomed for Q2 in the first half year now. In total, 10.2 million, which is a significant increase. um in this number we report both the exclusivity revenues and the and the license revenues which pertain to royalties but also minimum royalties within the trauma agreement so as we've communicated before and as we've tried to split out in the report as well is that We do have a revenue stream from CIMR that pertains to the exclusivity partnership we have regarding the orthopedics agreement. Here we do not yet have any products in market. And we have communicated earlier around when we expect to see any change on that. In addition to that, we have the trauma agreement where we do have products in market. uh across europe um and for that we receive royalties and we also as we've communicated before uh have an agreement around minimum royalties and that is what we see in the numbers for the first half year and for q2 good uh i will limit myself to three questions to begin with so next one is you know opex quite stable q1 to q2 down slightly as it looks so

I guess you look for further decrease in OPEX ahead as it sounds to deliver on the 25 million. So what are the savings here incrementally into the second half and maybe a bit on the timing as well?

Yes, I appreciate the question. We are, as we said, pleased and on track on on the development of our total operating expenses. As we saw last quarter and this quarter, they continue to decrease. And as we communicated earlier, you can say the result of the transformation will be in full force after the first half of this year. So we do expect continued positive developments on our costs, meaning reduction of the total operating costs. into the coming quarters. At the same time, as you can see, we are still investing in the business and we're still strengthening our team. But overall, we are on track on our promise to reduce costs exceeding 25 million on a full year basis.

Okay, thank you very much for the answers. Thank you, Mathias.

The next question comes from Christopher Liljeberg from Carnegie. Please go ahead.

Thank you. I also have some question related to the Zimmer and BD collaboration. So if you take Zimmer first, could you give any sort of update on what they are doing here in Europe, if they are entering in new countries, if they have yet broadening the rollout, including other products being coated?

Hi, Christopher. Thanks for the question. Great to hear from you. With the Zimmer collaboration, certainly the rule out across Europe continues. It is a full region that they are certainly ensuring that we have continued sales into and that does continue and progress as expected. This is the key market area, I guess I will say, where they continue to work. And we do see certainly promise in the future from both Europe, but certainly as we get past the end of 2024 as well. additional new markets such as Japan. We do expect Zimmer to continue to focus on new market approvals for the trauma products, which is, of course, the ZNN, which is the primary approved product in the regions today. And even beyond the trauma collaboration, but also in the recon, we continue to work there in a development agreement. And this, of course, alludes to the exclusivity revenues that Patrick mentioned earlier in that collaboration. So we do continue to work forward on new product development underneath our existing agreements with Dimmer and the primary approved product is of course the trauma nails.

So is it possible for you to comment how far away you are from reaching the minimum royalties?

Hi, Kristoffer. Patrick here. Thank you for your question. We report both royalties and minimum royalties within the licensed revenues when it pertains to products that are in market. It will depend from quarter to quarter. So I cannot say specifically, you can say how much pertains to minimums and how much pertains to actual royalties.

Okay, and then for BD, would you really need a new agreement with BD or how long can you operate on the old one and would that be sufficient for you also in new markets?

Thanks, Christopher. Great question. And I was saying that we're quite confident, of course, in the current collaboration and that our agreements do remain in full force. So that does continue to be true currently, that we have actually the full markets on all of the global regions, with the exception of China, covered under the existing agreements with BD. So we can continue to focus on the actual activities of commercialization of transitioning the markets that were under the interim and extension agreement signed in December, as well as enhancing our efforts together to help them increase activities in the existing markets and primarily U.S. and Japan. without any hiccup in terms of the contract. So it is a very good question. Indeed, the agreements do remain in full force and we can focus on the collaboration.

Great. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

Okay. Thank you everyone again for participating. Thanks for the great questions today. They are crucial to us, both in terms of our desire to be transparent with the market and to understand what is top of mind for all of you. Please do not hesitate to reach out to Patrick and I even after the call with any questions or comments you may have on the business. We are, as I mentioned, very optimistic about the future of Back to Guard, and we look forward to seeing you on the next quarter's call. Thank you.