Bonesupport Holding AB (publ)

Thank you, operator, and welcome everyone this beautiful morning to the bone support quarter two 2023 call. My name is Emil Bilbeck and sitting next to me is Håkan Johansen, our CFO. So we'll use the next 25 minutes to guide you through the presentation of the first results that we released this morning in the quarter two report, and then we will open up for a question and answer session. So before I go into the presentation, we would like to draw your attention to the disclaimers that will cover any forward looking statements that we might do today. So let's get right into it. And I would like to begin the entire presentation with some condensed highlight from the report. And of course, we're very pleased to report the quarter two sales of one hundred and forty million Swedish krona. This corresponds to reported growth of 88 percent year over year and in constant exchange rate, the growth rate was 75 percent. The operating result before incentive provision was 14 million Swedish krona. This is a profit improvement versus the same period last year of more than 23 million SEK. The reported EBIT was 6 million SEK, which marks now our second quarter as a profitable company. The main highlight of the quarter was, of course, the ongoing launch of CEREMENT-G in the US. We saw an increase in CEREMENT-G sales of 16 million SEC quarter over quarter with surge in using CEREMENT-G on a broad set of applications within the indication and a high level of pilot use in the quarter. So we are continuously improving our products and the user experience. And in the quarter, we announced the launch of the next generation of CEREMENT-G, which increase ease of use and also reduce an environmental impact. In the quarter, data from long term follow up, meaning four and a half years after using CEREMENT-G with open trauma fracture was published. So I will cover all of these topics later on more extensively in the presentation. But let's first look at the sales development. We go to the next slide. This is one of our standard charts for the quarterly report and investor presentation. It shows last 12 months sales in Swedish currency and it shows every quarter since quarter two 2016 split by region and product category. Sales is taking off really well with the largest driver being CERAMENT G in the US reaching sales of 51 million Swedish kronor in the quarter. In Eurov the antibiotic eluting CERAMENT which is the CERAMENT G and CERAMENT V combined Sales grew with 32% in the quarter versus last year. We conclude that a note that we make market share gains on other therapy options mainly autographed and bone cement on almost all markets in Europe. We see a general improvement in surgical volumes across all geographies. In Europe, we have to summarize, it's still behind pre-pandemic levels in terms of surgical volumes. There is some emerging cannibalization between Ceramen G and Ceramen BVF in the US, and I will share some more details about this also over the next coming slides. Let's start now with the US and go to the next slide. In the US, sales of 104 million SEC in the quarter, which corresponds to a growth of 126% year-over-year at constant exchange rate, the growth would have been 107%. Sequentially, growth was 21%, meaning the growth in quarter two versus what we reported in quarter one, 2023. We're starting to see some cannibalization, as I mentioned before, between Sermon G and Sermon BVF. But despite this, Sermon BVF in the US grew 14% in the quarter versus quarter two last year. In fixed currency, the growth was 8%. for the first six months of 2023 on CEREMENT BVF. So this can be compared to the growth that we saw in the second half of 2022 when CEREMENT BVF grew with around 40 percent in constant currency. So the difference between these two numbers is, of course, partly attributed to the cannibalization effect of CEREMENT G. So let's go a little bit further into details on CEREMENT G, which we prepared on the next slide. So we're on slide six. With this quarter sales of 51 million SEC, we can conclude that the quarterly sales of CEREMENT G that we have in the US is now actually larger than our entire European sales in the quarter. I believe that this shows the large unmet need, but also the efficiency of our commercial structure in the U.S. and also the huge potential that we're tapping into. Our hospital approval process is progressing well, and we have added some 10 approvals since quarter one. Among the added approvals in the quarter are the very large Atrium Health, and the prestigious Stanford Healthcare. Thus, so far, we have signed some 60 out of the approximately 420 hospital groups covering in the US. And we must say we've been off to a very good start with approvals. And now, and in the most recent period, focus is on securing implementation and driving account penetration where approvals have been given. Educating and training the orthopedic surgeon and the hospital staff is part of the contractual commitments when introducing a breakthrough therapy device like this. This is also an essential part of creating therapy ambassadors among the surgeons. The amount of pilot uses which precedes approvals and continuous use was high during the quarter. I have shared with you before that the performance and the market penetration of a completely new product like this goes in waves. Go, stop, go, as it's called in the orthopedic industry. We continue to get positive feedback on the product handling and the transition, especially to a one stage procedure. All in all, Caretakers and hospital administration see clear and visible clinical and health economic benefits. Very similar to what has been previously displayed in various clinical studies. In order to systematically build a database of experience with CRMNG and also consolidated patient data, we're starting a structured collection of data, a so-called registry study, the use of CERAMENT-G in the US. We're now selling in 38 states and during the quarter we saw our first CERAMENT-G order from Orthopediatrics. Orthopediatrics have been successfully selling CERAMENT-BVF to pediatric hospitals and they're now adding CERAMENT-G to this customer segment. Several layers of data has been processed regarding the ambition to get label extension for CERAM-NG in the US to also include prevention of infection as an example related to open fractures. The last batch of data has not yet arrived from the university hospital that we have partnered with. So with previous insight and knowledge of the time it takes to analyze and process such amount of data and also to put it together into submission, we have moved the target date for the FDA submission to the end of quarter four this year. Now, let's turn to Europe and go to the next slide, please. So, in Euro for the quarter, we saw sales of 36.5 million SEC, and this corresponds to a growth of 28 percent year over year and 24 percent at constant exchange rate. We continue to see a steady recovery in general surgical procedure volumes. However, healthcare staffing shortage remain a challenge and we will continue to pose a challenge in quarter three as strained healthcare workers will try to manage during the European vacation season. For the third quarter, we thus expect a certain accentuation of the normal seasonality. In the quarter, we announced modifications to the sediment G. This was the third major upgrade to the product. So we called it the third generation, even though the changes are not maybe that dramatic. So let's take a further look on what those changes actually are. So we're on slide eight. So important to note, first of all, is that There's no change to the formula, the composition or the mechanism of action for Cerament G. There is no change to the active ingredients, but all the components for mixing and applying Cerament G now comes in one surface sterile tray. For those that have been in a surgical theater, you know that every component must meet the requirements of the different and specific surgical zones in the theater. The improved handling and the reduced waste are factors that will matter a lot to the staff performing the surgery, as well as to procurement officers and, of course, to our continuous sustainability work. We'll go to the next slide. So continuing on the highlights, we are constantly assessing the organization in perspective of overall ambitions and deliveries. We've decided to change how we lead our efforts of indirect markets. And that means the distributor markets in Europe and the rest of the world and also the European hybrid markets. And we set up a new structure here. We've also in the quarter done some organizational upgrades and the changes that I'm mentioning now were required in order to take our performance to the next level. However, these changes have triggered severance cost and other expenses in the quarter of about 3 million SEK. Changing the structure like this and upgrading the organization is, of course, part of running a fast growing company. But to the magnitude we saw in quarter two, I think this has to be considered as non-recurring cost, of course. Also in the quarter, there were two really important studies that were published. The first one, a study by Cavartapo et al. from King's College, showed strong results on infected diabetic foot ulcers that were treated with sediment G or V. And all patients in the study were able to avoid amputation. From the University Hospital of Manchester, Withenshaw, Henry et al followed 81 patients with open trauma fractures for a median of 55 months, confirming excellent and sustainable benefits from a single stage procedure of CEREMENT-G. So on the next slide, just looking a little bit further on what the patients look like that were part of the trauma study by Henry. So this picture shows the open trauma fractures and how they're assessed on a scale from one to three in terms of severity. And the study from Henry et al was made on 81 patients in category and you see the categorization there with a red square around it. This means that the bone is really in fragments and that there is material soft tissue damage. Several previous publications have shown infection rates on these category of trauma fractures of up to 52% and then amputation rate of 16%. In the study The infection rate was three point seven percent and the amputation rate dropped to three point seven percent as well. And this is when the patients were followed for four and a half years. This is the longest follow up data ever published on use of a synthetic bone graft on 3B open trauma fractures. So very strong results also clinically delivered in quarter two. And with that, I leave over to Håkan to do a bit more of a deep dive in the numbers.

Thank you, Emil. So let's jump to slide 12. So net sales improved from 74.6 to 140.4 million, equaling a growth of 88% or 75% 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. Changes in currencies measured in year-to-date averages in 2023 versus last year had a positive impact of in total 9.6 million, of which 8.6 million relates to a stronger US dollar. The depreciation of the Swedish krona versus other currencies also drives expenses, as you will see on later slides. So let's move to the next slide. The contribution from the segment North America improved with 24.6 million and was reported to a regional contribution of 31.7 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to 65.4 million compared with 34.8 million previous year. of which sales commissions to distributors and fees amounted to 36.7 million compared with 16.7 million the same period last year. The increase of 10.6 million excluding commissions and fees was driven by currency effects of 2.3 million and the reminder from 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 of one million in the quarter, same level as previous year. 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 remaining strong and reported to 94.5%. Sales to orthopediatrics in the period impacted gross margin negatively in comparison to the first quarter this year. In Europe and rest of the world, a contribution of 7.6 million was reported to be compared with 7.1 million previous year. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses increased with 6 million and was driven by currency effects of 2.3 million, but also attributable to fee vacancies and to a generally higher level of market activity. From the lower graph and the orange market, you can see an improvement in gross margin compared with the first quarter this year, following an improved market mix. As mentioned in our first report, we have a minor increase in manufacturing costs. The latter is anticipated to be mitigated by increased sales prices, having gradual effect during the remainder of the year. In the period, finally, we also had non-recurring costs impacting sales and marketing in North America and Europe with altogether 2.9 million. So let's move to the next slide. Selling expenses increased with 17.6 million versus last year, of which 3.3 million relates to currency effects and 2.9 million in non-recurring costs. As we mentioned before, the US booster is up and running and we continue to see results on top line. In euro, we increased early in the year with two head counts on the sales side and our total euro commercial organization is now 30p. The increase in the quarter relates to a ramp up in activity level of congresses, medical education, and of course, the launch program for ceremony in the US. R&D remains largely in line with previous year, but was picking up from a low Q1 this year. And administration remaining on a stable level, excluding effects from the long-term incentive program, equaling 12.2 million compared with 10.9 million previous year, and 11.7 million in previous quarter. Next slide, please. The operating profit was reported to 6 million compared with the loss of 14.9 million for the same period previous year. 20.9 million improvement following a strong sales performance. The profit also includes expense provisions regarding long-term incentive programs amounting to an expense of 7.7 million this year compared with 5.8 million previous year. Of the total cost of 7.7 million in the period, only 0.2 million is cash flow impacting in the future. The operating profit improvement before the long-term incentive programs was 22.7 million, confirming a strong underlying positive trend. The increased provision for incentive programs in the quarter relate to the strong share price appreciation in the period. Cash flow in the period was impacted by the strong growth resulting in an increase in accounts receivable of 51.1 million. And with this I hand back over to you Emil.

Thank you very much Håkan. So let's wrap up this presentation. We're, of course, very pleased to present such strong quarterly results, and we believe this is more than confirming the high expectations on what Sarment can do to drive improved patient outcome. In the first six months of 2023, we've seen a gradual recovery of overall surgical volumes, and Sarment is rapidly capturing market shares on all markets present. Our growth rate in the first six months in constant exchange rate was 72%. Some of you have followed the company for a few years, but I must reiterate, we've only begun our journey in terms of market penetration and to deliver the full value of the CEREMON platform. Håkan and I will take a bit of vacation now, but later in the summer, we will start to plan the details and prepare for a capital markets day in the autumn. One of the focuses will be on how our continued journey will look like and also how continuous new clinical discoveries goes hand in hand with progress on further innovation based on the sediment platform. We do believe that we have quite a unique position in the market with favorable market dynamics ahead, being the only FDA approved antibiotic eluting bone graft in the U.S. with evidence supporting superior and sustainable clinical efficiency and health economic benefits. And on top of that, a very competent and passionate organization. So with that, I conclude this presentation and look forward to open up to a question and answer session.