Bonesupport Holding AB (publ)

Good morning, everyone. Thank you very much, operator, and welcome to the Bone Supports Quarter 1, 2023 results call. My name is Emil Bilbeck, and sitting next to me is Håkan Johansson, our CFO. So we will use the next 20 to 25 minutes to guide you through the presentation of the first quarter results, 2023, and then open the line for a question and answer session. So before starting the presentation, I would like to draw your attention to the disclaimers that might be covering any forward-looking statements that we will do today. We go to slide three in the presentation. So first, I would like to begin by sharing some condensed highlights from the report that we released this morning. Overall, quarter one sales were 120 million SEK. which corresponds to a growth of 80% year over year. In constant exchange rate, the growth was 66%. The operating results before incentive provision was 4.6 million SEK. This is an improvement versus last year of 17.1 million SEK. The reported EBIT was at 0.8 million SEK, making Quarter one, 2023, our first quarter of profitability. The main highlight of the quarter was, of course, the ongoing launch of Sermon G in the U.S. Sermon G reached sales of 35 million SEC in the U.S. for the quarter, driven by increasing use and a good pace in hospital system approvals. As an example, we have signed the very prestigious Johns Hopkins Hospital during the quarter and have immediately seen strong interest and orders from their surgeons. We were also granted access to the Veterans Affairs Administration. This concludes about 171 hospitals. In Europe, we're now finally seeing a gradual recovery of procedures after the pandemic. And I will come back and describe these highlights further in my presentation. But let's get into it and go to the next slide. So slide four, please. This is one of our standard charts for the quarterly report. I think many of you have seen it before. It shows the last 12 months sales every quarter since early 2016, split by segment and product category. I think purely graphically, it's visible that a new chapter of sales acceleration has been entered. Sales growth is strong in all segments, with the largest driver being Sermon G in the U.S., reaching a sale of 35 million SEC in the quarter. We're starting to see some cannibalization between Sermon G and Sermon BVF in the U.S., but despite this, Sales of cerament BVF in the US grew with 25% in the quarter versus quarter one 2022. In Europe, antibiotic eluting cerament, that is the G and V version combined, grew with 40% in the quarter versus last year. So in the next slides, we will look at the details of each region or segment, as we call them, as we will share additional observations on sediment G in the US. So let's turn to the next slide and start with the US. So slide five. Sales of 86 million sec corresponds to a reported growth of 109 percent year over year. At a constant rate, the growth would have been 87 percent. Sequentially, growth was 17 percent, and that means the comparison to quarter four 2022. The strong sales traction with both products is attributed to Cerament gaining strong preference of the customers and hence taking market share from all other treatment options. Let's turn to the next slide and cover some more details on Sermon G, slide six. So first, just a few words about the market dynamics. A small clinic or a small practice, a small orthopedic practice in the US have large discretionary selection in the authority of choosing new therapies. For medium and large clinics, and for medium and large hospitals for that matter, a regular and continuous use of a new product is preceded by a contract inclusion and hospital system approval. In our case, with a breakthrough device, the hospital system approval process is usually running in parallel with a few prominent surgeon pilot users. These surgeons are building concrete experience with Saruman G that is being fed into the hospital system approvals process. As reported earlier, we have succeeded with GPO inclusions slightly above our initial expectations. We have also seen more hospital system approvals and many more ongoing pilot trials. Sermon G has a clear positioning as well as unique, appreciated and recognized benefits. In the US, there are 420 hospital systems relevant for orthopedic procedures. Up to the end of March, Sermon G has received approval at 50 of these with a gravity towards the medium and large ones. Where approved, We can see that the use of the product is taking off at a steady pace, yet at a low level since it's very early days of the launch still. We have sales registered in 26 states and all sales that we have reported is related to consumption. There have been no bulk sales. The average selling price we can again confirm to be around five thousand seven hundred US dollars. So far, we have had positive feedback on product handling as well as the transition to a one stage procedure. All in all, the recognition of the clinical benefits have been positive. The surgeons have had the first follow ups of patients treated in November and December last year. Outcome is positive. in line with the clinical studies on which the FDA approval is based. This was, of course, expected, but it's nevertheless positive to get a strong validation from the surgeons that have decided to switch to sediment, where they see that the clinical benefits are also as promised by previous clinical studies. are progressing the data collection with our label extension application and expect to submit our 510k in quarter three of 2023. So that's on the US and on Sarman G. Let's go to slide seven and cover Europe. So for the quarter we saw sales of 34 million sec, which corresponds to a growth of 34% year over year, which is then 32% at constant exchange rates. We have seen a steady recovery in general surgical procedure volumes in quarter one when comparing with quarter two and quarter four last year. However, healthcare staffing shortages remain challenging and capacity is still some five to eight percent below pre-pandemic levels. Even though surgical capacity increased during the quarter, the inflow of patients seeking care remains higher than what the health care system can cope with. In the UK and Sweden, we have access to public data, making them valuable data points in understanding the market dynamics. In the last 12 months, the UK backlog increased with 1.2 million people, meaning that 1.2 million people were waiting to get their surgery done. More than 1.2 million are waiting this year in March 2023 versus March 2022. With Sermon playing an important role to influence and reduce this specific backlog, especially those people in line for waiting to get procedures on skeletal injuries, we see a favorable market dynamic ahead as the healthcare systems have a need to catch up and reduce the backlog. We have now filled all previous vacancies in the sales team, and we've also chosen to increase our marketing and sales activities to further drive market penetration as we are anticipating a continued pickup in surgical capacity going forward. We've just received information from the French CREAC network regarding the conviction study. And as with many other studies that started during the pandemic, there has been slow onset in the recruitment pace. We have received information that the last patient into the study will be in quarter four 2024. With a follow up of 24 months, the study is then expected to close in quarter four 2026. So the study is somewhat delayed. I would also like to provide a brief update on the Solario study. This study was launched in 2019 to address the growing threat of antibiotic resistance. Despite delays in recruitment caused by the pandemic, we are pleased to report that the recruitment phase is now almost complete. There is 464 patients of the targeted 500 that have already been randomized and included in the study. The study objective is to determine whether the use of local antibiotic eluting bone grafts as an adjunct therapy can help to shorten the duration of systemic antibiotic treatment, reduce antimicrobial resistance, minimize adverse events, and lower cost. If successful, this research could have significant impact on regional and global treatment guidelines. Completion is expected for early summer 2024, so the patients have a 12-month follow-up. Now with that, I hand over to Håkan for a bit more of a deep dive into the financial statements. Håkan, over to you.

Thank you, Emil. So let's move to slide number nine. The net sales improved from sixty six point three million to one hundred and nineteen point seven, equaling a growth of 80 percent or 66 percent in constant exchange rate. Emil has already spoken about the strong performance in the two segments and the major drivers behind the sales acceleration. So let me comment on the currency changing currencies. measured in year-to-date averages in 2023 versus 2022 had a positive impact of a total of 9.5 million, of which 8.9 million relate to a stronger US dollar. The depreciation of the Swedish currency versus other currencies also drives expenses, as you will see in the latest slides. Let's move to the next slide. So, the contribution from the segment North America improved with 18 million and was reported to a regional contribution of 24.9. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to 55.7 million compared with 30.1 million previous year, of which sales commission to distributors and fees amounted to 29.5 million compared with 14.3 million the same period last year. The increase of 10.4 million excluding sales commission and fees was driven by currency effects of 2.6 million and an increased activity level. As we have announced previously, the US booster positions are up and running And there is a strong focus on medical education and increased market presence also contributing to the cost in the quarter. The contribution was also charged by R&D costs related to studies. These decreased from 1.9 million last year to a million this reported quarter. From the lower graph showing net sales as bars and gross margin as the orange marker, It can be noted that the gross margin is improving compared to previous quarters following a favorable product mix. In Europe and rest of the world, the table on the graph to the right, a contribution of 7.3 million was reported to be compared with 5.6 million previous year. The improved contribution relates to increased sales after effect from increased costs. Sales and market expenses increased with 4.2 million. The increase is attributable to field vacancies and to a generally higher level of market activity. As Emil mentioned, we are pushing for a higher market penetration in the anticipation of the health care systems clearing backlogs eventually. From the lower graph and orange marker, you can see a drop in gross margin following market mix, but also minor increase in manufacturing costs. The latter is anticipated to be mitigated by increased sales price, having gradual effect during the remainder of the year. Let's move to the next slide. Selling expenses increased with 13.8 million versus last year, of which 2.6 million relates to currency effects. As we mentioned before, the US booster is up and running, and we start to see the first results on top line. In Euro, we have increased with two headcounts on the sales side, and our total Euro commercial organization is now 30 people. The increase in the quarter relates to a ramp up in activity level at congresses, medical education, and of course, the launch program for CRM&G in the US. We see strong customer response to our programs as apparent from the top line development. R&D. remains largely in line with previous year and administration remaining on a stable level, excluding effects from the long-term incentive programs equaling 11.7 million compared with 10.6 million previous year and 12.1 million in the previous quarter. Next slide, please. The operating profit was reported to 0.8 million compared with a loss of 16.5 million for the same period previous year. a 17.3 million improvement following a strong sales performance. The profit also includes expense provisions regarding long-term incentive programs, amounting to an expense of 3.8 million this year compared with 3.9 million previous year. Of the total cost of 3.8 million in the period, only 0.3 million is cash flow impacting in the future. The operating profit improvement before the long-term incentive programs was 17.1 million, confirming a strong underlying positive trend. The reduced provisions for incentive programs in the quarter compared with the end of 2022 relate to the share saving program LTI 2019 that closed in the end of 2022 and reported the cost of 9.3 million in the second half of 2022. And with this, I hand back to Emil.

Thank you very much, Håkan. So we're going to wrap up this morning presentation. We'll go to slide 14, please. So I think for everyone seeing our report this morning or listening to this call, that it's obvious that there is a strong acceleration in our sales growth and that bone support is only in the beginning of a very exciting journey. The sales uptake in the US for Sermon G is faster than what we saw when the product was launched in Europe a couple of years ago. The clinical evidence available now that are displaying superiority in outcome are many more than what existed at that time point. The fact also that CERAMENT-G is the only approved antibiotic eluting bone graft on the U.S. market. That helps. We also see that there's a very strong match between the health economic benefits that CERAMENT-G offers and the immediate prioritization in the U.S. healthcare system and the U.S. orthopedic clinics. 2023 and 2024 are going to be a very exciting year. We have several milestones coming and there are more solid evidence on the way, which we are confident will support the therapy standard transformation that is taking place in the US, in Europe and in other markets. So with that, I would like to conclude our presentation for the first quarter of 2023 and open the line for questions.