Bonesupport Holding AB (publ)

Yeah, so good morning, everyone, and thank you, operator. Welcome to the bone supports quarter for 2023 result call. My name is Emil Billbeck, and sitting next to me is Håkan Johansson, our CFO. We're broadcasting from the U.S. West Coast, where we are participating in the largest American Orthopedic Congress. So we will use the next 25 minutes to guide you through the presentation of the fourth quarter results, and then we will open up the line for questions and answers. So we go to the next slide. Before we will start this presentation, we would like to draw your attention to any disclaimers covering forward potential looking statements that we might do today. So let's go to slide three and get started. So I would like to begin this presentation with some condensed highlights from the report that we released an hour ago. So overall, quarter four sales were 173 million Swedish krona, which corresponds to a reported growth of 67% year over year. In constant exchange rate, the growth rate was 60%. The operating results before incentive provisions was 11 million SEK, which is a profit improvement versus the same period last year of 21 million SEK. Reported EBIT was a negative 8 million SEK, negatively influenced by a few distinct topics, which will be covered in the finance section. The main highlight of the period was, of course, the ongoing launch of Cerament G in the US. But I wanted to draw your attention to the following topic. In the quarter, we received MDR certification for Cerament V and Cerament BVF, bringing us to full MDR certification for all our products and our quality management system. We submitted the market authorization request for a label extension with Sermon G in the US for the indication open fracture trauma. And at our Capital Markets Day in November, we announced our ambition to enter the spinal fusion segment with Sermon. Lastly, CERMA-G was granted an uncapped outpatient reimbursement through CMS transitional pass-through payment program, the TPT. I will cover these topics more in detail here in the presentation, but let's first look at the sales development, and let's go to slide four of our deck. So this is one of our standard charts for the quarterly report and investor presentations, and obviously one of our favorite charts. It shows the last 12 months sales in Swedish currency every quarter since quarter four 2016, split by region and product category. The sales numbers are really taking off. If you look at what looked as a big disruption to the top line in 2018, following the change in U.S. commercial structure and strategy, it now rather looks like a small dent on a successful journey. The strong acceleration in both geographic segments over the last 24 months becomes very visible in this slide. In the US, the performance has been boosted, of course, by the continued launch of Cerament G. In Europe, we see an improved market dynamics and strong capturing of market shares by Cerament from more traditional treatment methods. In total, The antibiotic eluting sediment globally is growing with 220% versus quarter four 2022 and 25% sequentially over quarter three 2023. Let's go a bit into the details and we will start with North America. So sales was, as you have seen, 132 million SEC in the quarter, which corresponds to reported growth of 79% year-over-year. At constant exchange rates, growth would have been 70%. The U.S. pandemic surgical backlog has been quite decisively addressed during 2023 by the healthcare systems. through stretched hours in the operating theater and increased recruitment by the hospital. This has created favorable market dynamics during 2023 for hip and knee surgeries, but also for corrective post-trauma surgeries and for foot and ankle surgeries. The Swedish krona experienced exceptional volatility in the quarter impacting both reported sales and expenses. Large impact was seen on the recalculation of operating assets and operating liabilities, and Håkan will cover this later in detail. Sales are taking off well in the US, with the largest driver being Sermont G in the US. Sales reached 76 million SEK in the quarter, which is up 13 million SEK or 21% sequentially. We have now several surgeons that have used the product and developed experience and also collect the data in a structured way. These surgeons are forming our growing base of ambassadors and we're facilitating peer-to-peer group discussions within the hospital and at hospitals in the region. We see good continuous progress with hospital systems, adding approvals at the same pace as in previous quarters. We saw one of the strongest quarters when it comes to onboarding of new surgeons, surgery centers, and orthopedic departments. This is driven by the hospital system approvals that were accomplished in quarter two and quarter three. Now, being a breakthrough device and a disruptive standard, a disruptive product to standard of care, a surgeon will not be allowed to use and apply Ceramen G until they and the operating staff have been properly trained. A large share of the salespeople's focus in the US is now to ensure that these new customers get properly onboarded, trained in application technique, and instructed on billing procedures. In December, we submitted the label extension request to FDA for the Cerament G in prophylactic use. The data for the submission is compiled out of existing, published, peer-reviewed clinical studies. And these show strong results with serology at index surgeries of open fracture trauma cases. A 400-patient demographically matched cohort control group have been used. The infection incidence for the control group was reported to be a mean 14.5%. In comparison, in clinical publications for Cerament G used at open fracture trauma, infection rates have been reported to be between 1% and 3.7%. During quarter four, in 2023, CMS approved CEREMENT-G for outpatient reimbursement through CMS transitional pass-through payment with its own reimbursement code. This payment is intended to reimburse hospital outpatient departments and ambulatory surgical centers for the incremental device cost that they otherwise might have of CEREMENT-G. The purpose of this reimbursement program is to promote new technology and provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. The TPT is uncapped and valid for three years. So I think the TPT could be said to really be a strong testament and recognition of the strong differentiation, health economic benefits and improved patient outcome shown in multiple clinical studies for ceremony. I'd like to draw your attention that since 2016 There are only 23 medical devices that have ever received the untapped TPT reimbursement. So that's on the U.S. Let's also go a bit more in detail on Europe on the next slide. So for the quarter, we saw sales of 41 million SEC, corresponding to a reported growth of 38% year-over-year and 32% at constant exchange rate. Europe has been delayed in the ability to address the large surgical backlog due to a shortage of staff and structural disruptions. Towards the latter half of 2023, we saw improved market dynamics from increased surgical capacity and also a stronger focus of the healthcare systems to address the pandemic-induced backlog. Reliable market data in this area is not readily available, but several sources imply market growth rates of around 6%. Now, within this strong dynamic, Sarament is capturing significant market shares, mainly on autographed and traditional bone cement, which is obvious by our growth rate. While we got a bit disrupted by the pandemic in setting up our hybrid structure in Spain and Italy, we are now seeing these under-penetrated markets take off nicely with strong growth rates above 70 percent in the quarter. With the medical device regulation certification for CEREMENT BVF and CEREMENT V, we have now full MDR CE certification for our entire portfolio and our quality management system. This is a strong achievement as the transition from the EU medical device directive, the formal regulatory landscape, to the EU MDR, which is the new landscape, poses a challenge to the companies within the medtech industry with significantly higher demands for clinical evidence. Data from mid-2023 indicates that less than 30 percent of submitted MDR applications have so far reached certification, and that there is still a large number of devices for which the MDR application have not even been submitted. Thus, I'm very pleased that the solid documentation, the growing pool of clinical evidence, and the skilled organization at Bone Support has brought us to the other side of this process. The level of marketing and market and marketing activities is very high. We participated in several of the regional and national orthopedic conventions. in order to meet surgeons that still have not yet heard about Saramant. At the two largest meetings that both took place during Q4, the European Bone and Joint Infection Society and the German Orthopedic Trauma Meeting, the DKOU. We held satellite symposia, and these symposia were facilitated by faculties consisting of distinguished European orthopedic surgeons with a program featuring a blend of clinical evidence presentations, patient cases, and panel discussions. In total, over 250 orthopedic surgeons attended our symposia, generating many new potential users. So that is a short wrap-up of the business in the region, and we'll now hand over to Håkan for more of a deep dive into the figures. Håkan, over to you.

Thank you, Emil. So, net sales improved from 103.2 to 172.7 million, equaling a growth of 67%, or 60% in constant exchange rate. Emil has already spoken about the strong performance in the two segments and the main drivers behind the sales acceleration. Let me comment on the currency. Changes in currencies measured in year-to-date averages into 2023 versus 2022 had a positive impact of in total 7.7 million, of which 6 million relates to the stronger US dollar. Currency movements and conversion to Swedish SEC impact expenses. As you will see in later slides, but also through realized impact from in and outgoing payments and from conversion of assets and liabilities in foreign currencies to say. Let's move to the next slide. The contribution from the segment North America improved with 34.7 million and was reported to a regional contribution of 52 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to 73.2 million compared with 52.1 million previous year, of which sales commissions to distributors and fees amounted to 4 million compared with 24.3 million the same period last year. The increase of 1.4 million excluding the sales commissions and fees was driven by currency effects of 1.3 million. The contribution was also charged by R&D costs related to clinical studies of 0.5 million in the quarter compared to 1.7 million previous year, where previous years included 1.3 million related to ongoing projects. 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 95%. In Europe and rest of the world, a contribution of 5.7 million was reported to be compared with 3 million previous year. The improved contribution relates to the increased sales after effect from increased costs. Sales and marketing expenses increased with 6.5 million and was driven by field vacancies, increase in sales representatives and high level of market activities to capture the momentum we now see in Europe, but also by currency effects of 1.4 million. From the lower graph and the orange marker, you can see the gross margin remaining stable compared with the previous quarter this year, with a minor impact from product and market mix. Next slide, please. Selling expenses increased with 12.8 million versus last year, of which 2.7 million relates to currency effects. In Europe, we have filled vacancies and increased our total Euro commercial organization to 31 people. The cost increase in the quarter relates to ramp up in activity level at Congresses, medical education, and of course, the continued launch program for ceremony in the US. As presented at our Capital Markets Day in November last year, R&D initiatives are now accelerating due to the execution of strategic initiatives such as future expansion into spinal fusion and a planned marketing authorization submission for CEREMENT-V in the U.S. In the quarter, we had the FDA submission fee for the CEREMENT-D trauma label extension and the cost for MDR-CE certification for CEREMENT-BVF and CEREMENT-V, totaling a bit more than 2.5 million. And underlying administration expense, excluding the effects from the long-term incentive programs, remaining on a stable level. The quarter included temporary impact in consultancy spend and provisions for short-term incentives, the later following the strong business performance during the year. Next slide. The adjusted operating profit was reported to 10.9 million compared with a loss of 10.1 million for the same period previous year. The 21 million improvement following a strong safe performance and despite substantial negative impact from currencies with a net negative impact of 11 million. The difference between adjusted EBIT and reported EBIT operating loss are expense provisions regarding long-term incentive programs amounting to an expense of 18.9 million this year, compared with 9.2 million previous year, as you could see on the previous slide. The reason behind this high expense is the acceleration in share price development during the period and how this affects the value on the long-term incentive programs. Of the total cost of 18.9 million, in the period. Only one million is cash flow impacting in the future. For the second consecutive quarter, a positive cash flow from operations was reported. The period involving a high build up in both semi-finished and finished products, ensuring full flexibility, the flexibility of products to future market needs. And with this, I hand back to Emil.

Thank you, Håkan. Let me then start with a short recap of the key messages from our Capital Markets Day in November and also announce a change in timing for one of the communicated milestones. So one of the key messages from the Capital Markets Day was the ambition to enter the spinal fusion segment with Cerament. And we will be entering this segment in the future with a strong value proposition, matching an existing market need. So one out of five spinal procedures actually fail to fuse due to insufficient bone remodeling. And in about 40% of the procedures, off-label antibiotics are used. Yet in 2% to 6% of the procedures, an infection develops post-surgery. There's plenty of solid data confirming the strong bone remodeling capabilities of Cerament. Most of it is in extremities, but there are also compelling evidence supporting these capabilities in spinal fusion. In autumn last year, a preclinical spinal fusion study was presented showing positive results for Cerament BBF. we have decided that there are sufficient strong data points for us to submit the application for the interbody fusion indication while we continue to generate more data related to certain application techniques. And just as a reminder, the regulatory clearance in the US for spinal posterolateral fusion called PLF for our serum and BVF is already in place. The application that we are referring to here is the supplementary spinal interbody fusion procedure. The application is already completed, and the submission will take place during quarter one, 2024. This will, however, not change our timing for potential market entry, which is slotted at the earliest for the end of 2025. As a second step, our ambition is to introduce antibiotic eluting cerament to the spinal fusion indication, but we will return on the future timing for this. Another highlight of our Capital Markets Day is that we will be submitting a marketing authorization for settlement V in the US, and that will take place in the first quarter of 2025. We also gave a guidance where we emphasized that sales growth in 2024 will be above 40 percent in constant currency. So let me, with that, go to the last page of this presentation and do a quick wrap-up. Now, we are, of course, pleased to present such a strong quarterly result that is more than confirming the high and strong traction that we see of sediment in the market, reflecting how surgeons are experiencing improved patient outcome with this therapy. We have today reported a top-line growth of 67% for Q4 2023. We reported on continued success of Sermons G in the US, regulatory filing for the extended label, and finally, the uncapped incremental reimbursement in the ambulatory surgical centers under Medicare. And that concludes our presentation. And let me then open up the floor for questions that you might have.