Bonesupport Holding AB (publ)

and welcome to the bone support quarter three 2023 result call. My name is Emil Billbeck and sitting next to me is Håkan Johansson, our CFO. So we will use the next 25 minutes to guide you through the presentation of the third quarter results and then we will open up the line for questions and answers. So if we start by going to slide two and before I start the presentation. I would like to draw all of your attention to the disclaimers covering any forward-looking statements that we will make today. And then let's start the presentation and go to slide three. Thank you. So I would like to begin this presentation with some condensed highlights from the report that we released this morning. Overall, quarter three sales were 158 million SEK, which corresponds to a reported growth of 87% year over year. In constant exchange rate, the growth rate was 76%. The operating result before incentive program was 25 million SEK, which is a profit improvement versus the same period last year of 29 million. Reported EBIT was 15 million SEK, which marks our third consecutive quarter with positive operational result and the first quarter with positive operational cash flow. Let's speak a bit about the highlights of the quarter. And of course, the ongoing launch of CEREMENT-G in the US was one of them. We're noticing a strong U.S. approval traction and market penetration, bringing U.S. sales of CERAMON-G to 63 million SEC in the quarter. The use of local antibiotics play an important role in the global antibiotic stewardship program. And in the quarter, further confirming and validating data on CERAMON-G has been presented. In August, The Solario study included a final patient, which means that the study is expected to be closed in quarter three, 2024. Håkan and I will cover each of these topics in more detail during the presentation. So let's go into the details and go to slide four, please. So let's start out looking at the sales development. And as you see, this slide is one of the standard charts. displaying the top line trajectory for the business. And the graph shows last 12 months sales in Swedish currency, every quarter since quarter two, 2016, and split by segments. Quarter three displayed the biggest ever quarter over quarter growth. And of course, this was boosted by the 63 million SEC contribution from Sermont G in the U.S. In Europe and the rest of the world, the antibiotic eluting Ceramant, that is Ceramant G and V combined, grew with 38% in the quarter versus last year, with a noted market share gains on other therapy options, mainly autographed and traditional bone cement. So one year after launching Ceramant G in the US, The total global sales in LTM of antibiotic eluting sediment is close to two hundred and ninety million sick. It holds a share of the total sales in LTM of fifty five percent and is currently growing at two hundred and ten percent. But let's instead go into the details of the US and go to the next slide. So in the US, sales were 121 million SEC in the quarter, which corresponds to a reported growth of 115% year-over-year. At constant exchange rate, growth would have been 102%. Sequentially, growth was 17%, meaning the growth over the sales numbers reported in quarter two. We're starting to see some cannibalization between CEREMENT-G and CEREMENT-BVF in the US. But despite this, CEREMENT-BVF in the US grew slightly in the quarter versus the quarter three 2022. On the next slide, we will speak a bit more about the details on the CEREMENT-G law. So let's go there. So we have previously spoken about the market dynamics for the introduction of a breakthrough orthopedic device and the necessity to get GPO contracts sequentially followed by hospital system approvals and then to get moving on the promotion to surgeons and on clinic level. We early on displayed the number of hospital systems where ceremony got approval as we wanted to give a flavor of the rather fast approval pace. But now I would like to emphasize that a hospital is the facility where a patient is being treated and the hospital system is an administrative and logistic association or a contracted cluster of many hospitals. So a hospital system, which sometimes also is called integrated distribution network, has a group of member hospitals. There are about 420 hospital systems in the US, and the number of member hospitals varies greatly. As an example, there are more than 200 hospital systems that have only between one and five member hospitals. And the biggest hospital systems in the US have between 150 to 200 member hospitals. Since the launch of CEREMON-G, we have focused on the most important hospital systems. And in the quarter, we added about 22 hospital systems approval for CEREMON-G, leaving a total of 82 hospital system approvals. These 82 hospital system approvals provide us with a total listing access for CEREM-NG to over 1,000 hospitals. So we have really only scratched the surface, and we've only started our journey in terms of penetrating the full potential for CEREM-NG in the hospitals to which we now have access. Meanwhile, the pace of securing additional hospital system approvals is continuing. The metric of hospital system approvals was relevant in the very first quarters of the launch to demonstrate that the strong benefits of 7G also translated into positive approvals. We will not report all of these details going forward, but rather focus on sales, which we believe is a good reflection on how many products are actually being used in the market in each quarter. Part of the explanation for the strong market penetration so far is that we can show both superior clinical data and also relevant and positive health economic effect from a one-stage procedure, lower infection rate, and reduced amputation rate. This has paved the way for high success rate with private payers. And in the orthopedic clinics where early adopters have started to use Serum and G, we conclude a positive follow up on patients treated. The benefits noted and registered are matching what has previously been shown in clinical studies. The early adopters of 7G are also becoming ambassadors and sharing their successful patient cases with colleagues in the clinic, in the region and at congresses. As previously stated, we are currently putting the last pieces in place to be able to submit our label extension application on open trauma fractures to the FDA during the quarter. Now, let's turn to Europe and UROV on slide seven. So, for the quarter, we saw sales of 37 million SEC, corresponding to a reported growth of 31% year-over-year. and 26% growth at constant exchange rates. The third quarter is usually a bit slower in terms of overall surgical volumes in Europe. Staffing issues were expected to exaggerate and slow down the surgical rate even further during the vacation period. In addition, there was again a physician strike in the US, sorry, in the UK, of course. which is one of our largest market. Despite this, settlement sales developed very well with plus 26% in constant currency. And the year-to-date growth of also 26% in constant currency represent a development which is about five to six times higher than the year-to-date market growth for bone grafts, testifying to the strong and continuous market share gains Looking at some of the highlights, the schedule for conferences and congresses is completely back to normal after COVID. This is important for bone support as we are early on our journey and congresses are an important way for us to reach new surgeons. The most important European meeting is the European Bone and Joint Infection Society meeting was held a few weeks ago. The meeting attracted close to 650 participants, mostly orthopedic surgeons and infection disease specialists. Bonesport hosted a satellite symposium with a panel debate on the theme limb salvage. With a record 120 participants, it was the most visited symposium of the meeting. At the EPGIS, the European Bone and Joint Infection Society meeting, several new clinical findings were presented as posters and stage presentations. One of the more important ones were the findings from Bernadette Young et al. where 125 patients with a recurring infection originating mainly from failed prosthetic joint implantations or trauma were investigated at two centers in the UK. 72 patients had their initial surgery performed with CERAMON G or V. And patients were then followed up several years later where there were recurrence of infection and this is to our knowledge the largest study of microbiology of recurrent bone and joint infection reported to date. Culture-based diagnostics were used and the authors conclude that quote treatment of orthopedic infection with local antibiotics was not associated with emergence of antimicrobial resistance, end of quote. This, in adjunct to previous data, confirms and validates the benefit of local antibiotic elution as an important tool under the antibiotic stewardship program. The European Bone and Joint Infection Society is also the originator and the facilitator of the Solario trial, a final patient was included in August, which means that the study will close in quarter three next year. And with that, I will hand over to more of a deep dive of the numbers to Håkan.

Thank you, Emil. So, net sales improved from 84.6 to 158.2 million, equalling a growth of 87% or 76% in constant exchange rate. Emil has already spoken about the strong performance in the two segments and the major drivers behind the sales acceleration. Let me comment on the currency. Changes in currency, measured as year-to-date averages in 2023 versus 2022, had a positive impact of in total 9 million, of which 7.5 million relates to a stronger US dollar. The depreciation of the Swedish currency versus other currencies also drives expenses, as you will see on later slides. The contribution from the segment North America improved with 35.3 million and was reported to a regional contribution of 46.5 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to 67.6 million compared with 37.7 million previous year, of which sales commission to distributors and fees amounted to 42.2 million compared with 21.1 million the same period last year. The increase of 8.8 million excluding sales commissions and fees was driven by currency effect of 1.5 million and the remainder from an increased activity level. As we have announced previously, the US booster positions are up and running, and there's 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 clinical studies of 0.3 million in the quarter compared to 3.2 million previous year where previous year included 2.5 million related to ongoing projects. From the lower graph showing net sites as bars and gross margin as the orange marker, it can be noted that the gross margin is remaining strong and reported to 94.6%. In Europe and rest of the world, a contribution of 9.3 million was reported to be compared with 7.3 million previous year. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses increased with 5.6 million and was driven by field vacancies and an increase in sales representatives. From the lower graph, the orange mark and the orange marker, you can see an improved gross margin compared with the previous quarter this year, following an improved product mix, with a high sales ratio of antibiotic-eluting products in the quarter. Selling expenses increased with 14.7 million versus last year, of which 1.5 million relates to current effects and 2.5 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 Europe, we have filled vacancies and increased our total Euro commercial organization to 31 people. The cost increase in the quarter relates to a ramp up in activity level at Congresses, medical education, and of course, the continued launch program for 7G in the US. As you can see, 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 11.9 million compared with 11.3 million previous year and 12.2 million in previous quarter. The operating profit was reported to 14.9 million compared with a loss of 13.9 million for the same period previous year. A 28.8 million improvement following a strong sales performance. The profit also includes expense provisions regarding long-term incentive programs amounting to an expense of 9.7 million this year compared with 9.5 million previous year. The total cost of 9.7 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 29 million, confirming a strong underlying positive trend. For the first time, a positive cash flow from operations was reported, reaching 21 million and yet another confirmation on the strong momentum in the business. And to round off, I would like to pay attention to two one-offs reported in the quarter, one related to deferred tax income and one relating to a self-correction of ECVAT. With the strong and positive underlying trend in the business and with prudent but realistic assessment of the future, a value has been assigned in the balance sheet attributable to the tax losses carried forward, as well as other temporary tax differences. A total deferred tax asset has been reported amounting to 230 million. 30 million posted directly as equity and 217 million as tax income. Selling expenses in the quarter included 2.5 million regarding a self-correction of ECBAT for earlier years. The background to this self-correction is complicated prerequisites relating to the production process and has been initiated by the company. The self-correction also led to interest expenses of 1.9 million and an exchange rate loss of 0.6 million in the period. And the net cash flow impact from this self-correction totaled 7.1 million. And with this, I hand over back to Emil.

Thank you, Håkan. So, we are, of course, pleased to present such strong quarterly results, and we believe that the results are more than confirming the high expectations on what sediment can do to drive improved patient outcome. The journey to reach the full potential for... Oh, okay. We're jumping a little bit back and forth. Okay. I was just saying that the journal has to reach full potential for Saramant within its current market. It's only in its infancy. In addition, there are more and further indications and geographies to eventually be explored. Almost every quarter, there are new data arriving, confirming the strong benefits of Saramant. This solid foundation of evidence has led to a fast-paced adaptation, especially in the US. In the US, the number of surgeries is fully back and even above pre-pandemic levels. In Europe, while not yet back on previous levels, we believe that the market dynamics will continue to develop positively. The European surgical backlog is at all-time high, and CYRAMED is in a good position to replace an outdated standard of care. Finally, we would like to inform you that we're planning to hold a capital market in late November in order to provide further details on the development of the settlement journey. And with that, we conclude our presentation and would like to open up for questions and answers.