Bonesupport Holding AB (publ)

Thank you very much, operator, and good morning, and welcome, everyone, to Bone Support's Quarter 1, 2024 results call. My name is Emil Billbeck. I'm the CEO of Bone Support, and sitting next to me is Håkan Johansson, our CFO. So we will use the next rough 25 minutes to guide you through the presentation of the first quarter results, and then we'll open up the line for questions and answers. So, next slide, please. So, before starting this presentation, I would like to draw your attention to the disclaimers that might be covering any forward-looking statements that we will make today. Let's move forward. So, I would like to begin the presentation by drawing your attention to some of the highlights that we have displayed in the report released this morning. So overall quarter one sales were at 184 million SEK, which corresponds to a reported growth of 54% year-over-year. In constant exchange rate, the growth rate was as well 54%. The operating results for incentive provision was 42 million SEK, which is a profit improvement versus the same period last year of 37 million Swedish krona. The reported EBIT was 32 million Swedish krona, marking our fifth quarter as a profitable company. The main highlight in the period has been the continued strong market penetration of Ceramon G in the US. Sales reached 93 million Swedish krona and we see a good momentum in the business within most of our geographies and indications. The market dynamics are positive and at a growth rate of more than 10 times market growth we are taking large chunks of market share. There were two important US regulatory milestone achievements in the quarter. We received FDA market authorization for CYRAMENT G for open fracture trauma. And we received FDA market authorization for CYRAMENT BVF for spinal interbody fusion. These market authorizations are enabling the future execution of our strategy. And I will come back to the possibilities we see with the CYRAMENT platform. But first, let's look at the sales. development on the next slide. So you're probably familiar with this chart. It shows the last 12 months sales in Swedish currency every quarter since quarter one 2017 in stacked bars per region and per product category. The top line is advancing with a solid and steep trajectory. It is mainly the antibiotic eluting Cerament, which is driving the development with 103% growth in Q1 2024 versus Q1 2023. Cerament G has been in the US market for about six quarters and there is some cannibalization on BVF, but I anticipate much less than anyone expected. We have come out of the pandemic with full speed and we see strong progress in both geography segments with an almost linear development since quarter one 2022. So I will offer one more slide on this theme, actually, where we can see this a bit clearly, where we have looked at sales per quarter in constant currency. So to go to the next slide. Would you see here that in the most recent quarter, quarter one, 2024, with the sales of 184 million Swedish krona, we can conclude that in constant currency sales have tripled over the last eight quarters and it has doubled in the last five. There was already a very strong trend in the business even before Sarana G in the US was launched. But from quarter four in 2022, that trend has really moved up a notch. We also see a rather straight and solid penetration traction, which is common for unique and successful orthopedic products such as CERMENT, where the promotion is preceded by necessary hospital system approvals and the winning of surgeons takes place surgeon by surgeon rather than in big chunks. Let's go into the details for North America on the next slide. So with the sales of 141 million tech in the quarter it corresponds to a reported growth of 65 percent year-over-year and same number they're also in constant exchange rates. One of the highlights of the quarter was, of course, the strong sales of Cerament G. In quarter one, we saw really strong uptake and sales reaching 93 million sick, which is up 17 million or 22% sequentially. The strong continuous pace in hospital approvals have remained at the same pace as in previous quarters. However, the overall priority of our sales teams right now lies in the training and education of newly recruited surgeons at hospitals where contracts have been achieved. The other highlight is, of course, the market authorizations for Sermon PBF and Sermon G. And I thought I'd go through that a bit more in detail on the coming slide. So if we start on the next slide with the spinal fusion authorization, I think most of you are aware that the main reason for fusion surgery of the spine is to stabilize the spinal cordium and reduce pain caused by certain spinal conditions. And the fusion surgery involves joining two or more vertebrae together to create a solid bony bridge with a purpose to eliminate motion between the fused vertebrae. Into body fusion, IVF, is the procedure where a damaged disc is replaced with a caged, which is then filled with organic bone graft or a bone graft substitute and then accomplishing the fusion. The posterolateral fusion involves fusion of the transversal process in proximity of screws, rod, and potential plate, as I think it's clear on the picture. So, Sarment BVF had already regulatory clearance for posterolateral fusion, and since March of this year, Sarment BVF is now also approved for interbody fusion. This means that we're allowed to fully enter the spinal fusion segment in the U.S., adding about 750,000 procedures of addressable market. And this is a market where one out of five spinal procedures fail to fuse, and 40% of the procedures are made with off-label use of local antibiotics. So we will enter this market segment with a strong value proposition. CERAMENT is an orthobiologics platform for bone healing and where local substance delivery can be used. And it is the solid evidence behind CERAMENT's strong bone remodeling capabilities that has facilitated the fast IVF approval. In preparing for entering the market, our focus lies on building preclinical application data, collecting and analyzing the necessary observations, and building training programs for surgeons. We will also work methodically to ensure the right skills and the right resources within a distributor-led sales force, as well as building a strong network of key opinion leaders. All in all, these important activities mean that we will enter the market in quarter four 2025 at the earliest. We are thorough in our preparations and we know what it takes to make and achieve a solid market penetration and market launch. Let's also turn to the next slide and look at the open trauma approval. So in regards to open trauma, we wanted to be clear that SARMA-G has received a broad and wide approval. That means that all extremities are included on the label. The only limitations given are that CERAMON-G volumes should not exceed 10 milliliter and we have also on the labeling the wording that the Gustillo-Anderson 3C traumas are not supported by clinical evidence for CERAMON-G. The Gustillo-Anderson 3C open traumas are only about 8% of the total number of procedures in open trauma, so a very small part. In the data submitted to FDA, close to 500 patients were demographically matched and compared, and a total cohort of 3,060 patients were used to build the definition of standard of care. The patient outcome in the evidence submitted is very impressive. In the summary letter, FDA wrote that the infection rate for Salamangie in the treatment group is extremely low, quote, and that bone remodeling at 96% is favorable to standard of care. As a consequence of the low infection rate and the high unit rate, The amputation rate in the extensive study material submitted to FDA for the treatment group was only 3.7%. Now, this can be compared to the reference material for amputation rate historically for these kind of injuries is at 16%. So we're currently working to ensure that the more than 100 hospital systems where Cerament G is approved already for bone infections also get a registration for Cerament G on open trauma. We're already seeing some surgeons requesting use of Cerament G for open trauma. But we should take in mind that it will take a few months before all the system updates and registrations are done. And only after that will we see a tangible uptake within this indication. We are currently also assessing the merits to file for an NTAP. for Sermon-G in open trauma. The deadline for this is October 1st this year. And finally, I would say with the two recent market authorizations, I believe that Sermon really establishes its role as an orthobiologics platform with broad applications on various indications required bonally. So if you go to the next slide and just do a quick refresher on the U.S. market. We have earlier concluded, and this is from the Capital Markets Day data in 2022, that there are about 380,000 procedures a year in the U.S. where bone grafts are used to enable healing. The most common reason, the most common methodology for these surgeries and procedures is open trauma, as you can see on the pie chart to the left. With the most recent regulatory clearance, another 132,000 procedures will be on label for CERN-NG in the open trauma. And here I deduct the 8%, which are the Gustil Andersson 3C. Our estimate, though, if you look at the total open trauma procedures, is that off-label antibiotics are used in about 40% of the cases. And all of that, as I said before, is off-label. Now, let's also turn to Europe before we hand over to Håkan and the financial part. So for the quarter, we saw sales of 43 million Swedish krona, which corresponds to a growth of 27% year-over-year, and that is 24% in constant rates. We see a strong market dynamics in most of the European countries, as there is a continued catch-up of the cervical backlog. Our strong development is also a reflection of significant market share gains. The antibiotic-eluting thiamine, which is thiamine G and B combined, grew with 28% in the quarter versus last year. Now, much of the focus in this report, admittedly, has been on the US, given the recent approvals, but I want to underscore that we've seen strong progress in Europe as well, with hybrid markets, with Spain and Italy performing especially good. To achieve this, we have continuously ramped up tactical initiatives, participating in conferences, and arranging symposiums. There's a high interest in the product, and it's a high interest in the different application techniques. In total, over 400 orthopedic surgeons attended our symposia held at the key conferences in the US and Europe. These symposia were facilitated by faculty members of distinguished orthopedic surgeons, and featured a blend of clinical evidence, presentations, patient cases, and panel discussions. Also, to meet the evolving demand and increasing demand in euro, we have recruited additional resources within medical education and event execution. and some of those additional head counts you will see reflected also in the financial part and the cost that Håkan will now present. So over to you Håkan for a more detailed view on the numbers.

Thank you Emil. So net size improved from 119.7 to 184.4 million equaling a growth of 54% with the same 54% in constant exchange rate. Emil has already spoken about strong performance in the two segments and the major drivers behind the sales acceleration, so let us move to the next slide. The contribution from the North America segment improved with 30.9 million and amounted to 55.8 million. The improved contribution relates to the increased sales after effect from increased Sales and marketing expenses during the quarter amounted to 78.4 million compared with 55.7 million previous year, of which sales commission to distributors amounted to 47.8 million compared with 29.5 million the same period last year. The increase of 4.4 million excluding sales commission and fees was mainly driven by the organizational investments made following the loss of ceremony and the underlying sales growth. From the lower graph showing net sales as bars and gross margin as the orange marker, it can be noted that the gross margin continues to strengthen at a reported 95.3%. In Europe and the rest of the world, a contribution of 10.7 million was reported to be compared with 7.3 million previous year. Sales and marketing expenses increased with 5.4 million and was driven by field vacancies, an increase in sales representatives and a high level of market activities to capture the momentum we now see in Europe, but also by one of expenses of 1.1 million. From the lower graph and the orange marker, you can see the gross margin remaining stable with a minor impact from product and market mix. So let's go to the next slide, please. Selling expenses in the Euro increase from 5.4 million versus last year, or which 1.1 million relates to one-time expenses and 0.4 million to currency effects. In Europe, we have filled vacancies and increased our total Euro commercial organization with five heads compared to previous year. The sales cost increase in North American default relates to organization investments, ramp up in activity level of Congress's medical education, and, of course, the continued launch of ceremony interviews. If we look at R&D, as presented at our Capital Markets Day in November, R&D is focused on execution of strategic initiatives, such as final fusion and the planned marketing authorization submission for CEREM and V in the US. These initiatives have been in a preparatory and design phase during the quarter, with increasing expenses estimated for the coming quarters. And finally, covering administration, underlying administration expenses, excluding effects from the long-term incentive programs remain on a stable level. So let's move to the next slide, please. The adjusted operating profit was reported to 41.6 million, compared with 4.6 million for the same period previous year. An improvement of 37 million following a strong sales performance and further supported by a favorable impact on currencies of 6.8 million. The difference between adjusted EBIT and reported EBIT operating results are provisions regarding long-term incentive programs amounted to an expense of 9.3 million this year compared with 3.8 million previous year, as you could see on the previous slide. The share saving program approved by the AGM in May of last year, with vesting starting at the 1st of January this year, represents the highest share of the expense. But 3.8 million relates to the programs ended end of 2023 and following the share price depreciation from year end 2023 to when the allotment of shares was executed and social charges were paid. Of the total cost of 9.3 million in the period, only 0.3 million is cash flow impacting. A positive cash flow from operations was reported at 17 million, despite the continued unplanned buildup of both semi-finished and finished products, ensuring full flexibility to future market needs, but also including preparation to launch the third generation of CERAMON-E in the U.S., in second quarter this year. The third generation was launched in Euro during last year involving both increased ease of use and reduced environmental impact. And with this I hand it over back to you Emil.

Thank you Håkan. So let's wrap up this quarter one presentation. Both of us are of course together with the entire organization, very pleased with the performance that we've seen in the quarter, as well as the continuous trend that the entire business is moving at. The strong growth is mainly attributable to the continued successful launch of Cerament G in the US, but we're also growing steadily in Europe, adding Cerament users in all geographies. Apart from the strong financial performance, Highlight of the quarter is that Saramant, through the two market authorizations, proved its role as an orthobiologics platform with broad applications on various indications requiring bone healing. Thanks to clinical superiority to standard of care, Saramant is constantly increasing its user base and enabling surgeons to drive towards a better patient outcome. We feel strong confidence in the market guidance given to grow sales in 2024 with more than 40%. I thank you for your attention and with this we conclude our call and open up for questions.