Bonesupport Holding AB (publ)

Good morning. Thank you, operator. And welcome to everyone to the bone supports quarter two, 2024 results call. I'm Emil Billbeck, the CEO of bone support, and I'm making this broadcast as always together with Håkan Johansson, our CFO. We will use the next 25 minutes to guide you through the presentation of the second quarter results, and then we will open up the line for question and answer session. Before starting the presentation, I would like to draw your attention to the disclaimers that covers any of the forward-looking statements that we might make today. Let's go to slide three. I would like to begin the entire presentation by covering some condensed highlights from the report that we released this morning. Overall, quarter two sales were 220 million SEK. which corresponds to a reported growth of 57% year over year, and in constant exchange rate, the growth rate was 55%. The sales increase was positively influenced by accelerated market penetration of Cerament G in the U.S. During the quarter, Cerament G in the U.S. reached a milestone of surpassing 100 million SEC. We see that the existing customers are continuously increasing their usage. And in addition, the new users are constantly being added. At a total growth rate for the company of more than 10 times market, we are, of course, taking significant market shares. The strong sales resulted in a record operating result, despite the large blocks of R&D investments that took place in the quarter. Before incentive provisions, the operating results was 36 million, and I reported EBIT on 29 million SEC. So as you might have seen from the release of the report this morning, the very strong business momentum has also led us to raise our sales guidance for 2024. Let's move to the highlights of the quarter. So operationally, first of all, I would like to highlight that our New Executive Vice President of Quality Management and Regulatory Affairs, Anna Stegmark, started about 10 days ago. We're very pleased to welcome her and her contribution to our future journey. There has been elevated R&D cost in the quarter. As most of you know, we received U.S. regulatory approval for CEREMENT BVF in interbody fusion in the U.S. in the first quarter of this year. Before launch, which presumably takes place earliest in quarter four 2025, we will assemble an extensive launch package, including a variety of preclinical application studies. And these studies were started during the quarter and will run into early 2025. Other highlights of the quarter include Cigna's recognition of CMS's transitional pass-through payment, CMS's proposal for a one-year extension of the NTAP reimbursement, and strong data from Australia on reduced amputation rate with sediment. All these topics will be covered later in the presentation. Let's start with looking at the sales development on slide four. The chart you see shows total last 12-month sales in Swedish currency every quarter since early 2017 in stacked bars per region and product category. Topline is advancing with a solid and steep trajectory, as Cerement rapidly is taking market shares from other treatment options and seemingly also is even expanding the market. It is mainly the antibiotic eluting cerament which is driving the development with, in total, 82% growth in Q2 2024 versus Q2 2023. Since the end of the pandemic, where we could again visit customers and promote cerament, we have seen strong progress in both geographic segments with an almost linear development for total sales development since early 2022. There are no signs of this trend slowing down. To give you some input on how well CEREMENT is performing in relation to peers, we have included a slide from one of the most established industry reports. So let's go to that. It's on the next slide. So this is from an institution called OrthoWorld. OrthoWorld is the leading market intelligence platform within orthopedics. In their recent orthopedic annual report, they summarized the industry's sales performance for 2023. We had to cover the other companies in the matrix to avoid displaying data that does not belong to us, but we left the public companies visible. As you can see in the table, We are still a rather small player in the segment of orthobiologics, but nevertheless, we are the absolute organic growth leader. As you can see from the numbers we presented today, we have a growth pace of well over 50% for the first six months of 2024. So it is likely that we will move up the list notably for the next annual report. Let's progress in the presentation and go next now to North America. Next slide, please. So at sales of 173 million SEC in the quarter, this corresponds to a reported growth of 67% year over year and 66% at constant exchange rate. This means that the U.S. sales in quarter two had a reported sequential growth of 22% over quarter one, 2024. Cerament BVF grew with 13% in the quarter. A lot of new accounts are being generated by the strong interest in Cerament G. And some of these new accounts have started to use Cerament BVF on patients with very low infection risk. The highlight of the quarter otherwise, of course, was the strong sales of Cerament G. In quarter two, we saw very strong uptake and sales reaching 108 million Swedish krona. Surgeons that have pilot use of Cerament G at the end of last year have now evaluated patients thoroughly with x-rays and are now ramping up a repeat use. At the same time, new surgeons are constantly being added. The surgeons that have done medium-term follow-up are encouraged that the treatment outcomes are mirroring what has been seen in published clinical studies for cerament. Our transitional pass-through payment, TPT, And the open trauma approvals have brought a lot of interest with new surgeons and new clinics for ceremony. But the impact on sales is so far only minor. The big launch conference for the open trauma indication will be the OTA, the Orthopedic Trauma Association, meeting in October 24th to 26th, 2024. Now, it is common that some of the private health care insurance providers honor the reimbursement issued by Medicare and CMS, the Center for Medicare and Medicaid Services. The scrutiny and the evaluation by CMS work a bit as a guiding standard. So the third largest healthcare insurance provider in the U.S. with more than 20 million people covered, that is Cigna, announced this quarter that they will follow CMS's decision on TPT for the use of Cerament G in the outpatient setting. This is an early success on the path towards establishing Cerament G as a new standard of care in the U.S., We will over time report other specific reimbursement schemes by private insurance providers, but we will only do that when it relates to the top providers. And on the slide that is on the screen, you can see the different top providers of private health care insurance to the right. The NTAP, the New Technology Add-on Payment, That was awarded to CERAM-NG for bone infection effective October 2022 to October 2024. It's proposed by CMS to be extended one year to October 2025. After the NTAP period ends, bone support will apply for colds, granting a permanently elevated reimbursement based on strong health economic data and patient outcomes. With the evolving success in the US for CERAMENT, both in sales development, market access, reimbursement and regulatory approvals, we have invested in additional resources to drive further market penetration. We have recruited two clinical specialists to drive CERAMENT awareness in the outpatient settings. This is related to the TPT reimbursement. In addition, A senior and well-experienced Spine product manager has been hired for the future entry into Spine. And four back office positions were added at the onset of the quarter in anticipation of increasing demand and execution of strategic initiatives going forward. The U.S. headcount was 35 at the end of the quarter. The approval and penetration of hospital systems, also called IDNs, is progressing well. In the quarter, we have landed some additional prestigious and high-value hospital system contracts. Now let's turn the attention to Europe and the rest of the world, which is on the next slide. So much of the focus, of course, in this report has been on the US, given the strong sales development, but I want to underscore that we're seeing excellent progress in euro, where Salamand is capturing market shares in more or less all markets where we are present. For the quarter, we saw sales of 47 million SEC, corresponding to a reported growth of 28% year-over-year and 26% at constant exchange rate. We continue to see positive market dynamics, as there is a continued catch-up of the surgical backlog in most geographies. There are, however, some sporadic continued challenges from shortage of staff, exacerbated by nurses striking and other disruptions like the hacker attack on the NHS. The latter might sound trivial, but A disruption of a few days in the surgical theater on major London hospitals is actually visible on surgery volumes. The antibiotic-eluting serment, which is serment G and V combined, is clearly leading the growth trend. The positive differentiation of cerament G and of cerament V versus traditional treatment options is well validated in several clinical studies. In the quarter, results from a clinical study conducted in Australia on 136 patients with infected diabetic foot ulcers was published. It was a retrospective study comparing historical patient outcome with outcome after switching to Sermon G or V. And all of this took place at one specific large clinic. The result displayed an amputation rate of 2% for patients receiving antibiotic-eluting Sermon versus the historical rate of 18% when using standard of care. When switching to Sermon G or V, the number of patient days in hospital over a 12 months period decreased from 26.1 day to 12.6 days. So almost cut in half the time that the patients have to stay in the hospital. This is in line with previously published European data. Now, Australia is an attractive market, and in the quarter we changed distributor to make sure that we cover more indications and more hospitals. This study will of course be very useful in the hands of our new competent distributor to accelerate market penetration. We have previously concluded based on solid published evidence that there are large health economic effects to be gained by preventing fracture related infections. In a well-made Dutch study that was published in the quarter, 246 patients with severe fractures were monitored with a mean one-year follow-up. The infection rate with the studied cohort was 18%. The authors concluded that the cost of care tripled with patients that got an infection and required one additional surgical intervention. When this was compared to the patients that were infection free, the cost was driven by the extra stay in the hospitals, the additional procedure and the use of systemic antibiotic. Now, even worse for those patients that required multiple interventions due to reinfections, the cost of care in total rose sevenfold. This speaks in very strong economic favor of CERAMON G and V, bringing infection rate down to around 4% with a one stage procedure on severe trauma induced fractures. Before moving on to the final section, I should mention that we expect to see the primary investigators present the first results from the Solario study at the European Bone and Joint Infection Society meeting on September 26 to 28. And with that, I will leave over to Håkan to guide us on a deep dive in the numbers.

Thank you, Emil. So let's move to slide nine. Net sales improved from 140.4 to 219.8 million, equaling a growth of 57% or 55% in constant exchange rates. Emil has already spoken about the strong performance in the two segments and the major drivers behind the sales acceleration. So we move forward to slide 10. The contribution from the North America segment improved with 35.1 million and amounted to 66.8 million. The improved contribution relates to increased sales after effect from increased costs. Sales and marketing expenses during the quarter amounted to 99 million compared with 66.5 million previous year, of which sales commissions, the distributors and fees amounted to 61.6 million compared with 36.7 million the same period last 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 remains very strong and amounted to 95.8%. In Europe and rest of the world, a contribution of 14.2 million was reported to be compared with 7.6 million previous year. Sales and marketing expenses increased with 2.1 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 euro. From the lower graph and the orange marker, you can see the gross margin remains stable with a minor impact from market mix with a higher ratio of indirect sales in the period. Let's move to the next slide. So looking at expenses, the increase in selling expenses reflects investments in organization, as mentioned by Emil. We also invested in systems to improve customer handling, inventory management, and to meet the increasing demand. The sales and marketing expenses in the period also included a 1 million bad debt provision relating to the bankruptcy of the steward healthcare system in the U.S. As presented at our Capital Markets Day in November, R&D is focused on execution of strategic initiatives such as Spinal Fusion and a planned marketing authorization submission for Cerament V in the US. These initiatives have been progressing well during the quarter, reporting an increasing spend. And underlying administration expense excluding the effects from the long-term incentive programs, remaining on a stable level, however, impacted by temporary resources and recruitment costs in the quarter. So let's move to the next slide, please. The adjusted profit was reported to 36 million compared with 13.6 million for the same period previous year, an improvement of 22.4 million following a strong sales performance and despite the investments made in commercial and innovation. The difference between adjusted EBIT and reported EBIT are provisions regarding long-term incentive programs amounting to an expense of 7.4 million this period compared with 7.7 million previous year. Of the total cost of 7.4 million in the period, 1.4 million was cash flow impacting. With a strong momentum in our sales and the revised sales forecast, we have decided to bring forward our plans to further improve our safety stocks of raw materials and semi-finished products. With these adjustments made, we have created a good position for the rest of the year. The increase in inventories, together with a temporary self-growth driven increase in trade receivables, contribute to a negative cash flow for the period. Here is worthwhile mentioning that we had seen material timing effects in trade receivables with large inflow of payments in early July. And with that, I return back to Emil.

Thank you very much, Falka. So we are, of course, very pleased with the quarterly performance and the continuous solid trend. We're delivering strong sales and solid earnings. Thanks to the strong market access achieved through agreements with GPOs and IDNs for Saramagi, we have seen a robust sales dynamic over the past 18 months. Given this growth trend and the recent US regulatory approval in open fractures, we are raising our 2004 guidance. We are expecting a sales increase of over 50% in constant currency versus previous year. We have strong confidence in this market guidance. In the long run, Saramend is on track to prove its role as an orthobiologics platform with broad applications in various bone healing indications. We see the two market authorizations earlier this year as the start of this journey, thanks to its clinical superiority over standard of care. CERAMENT is constantly increasing its user base and enabling surgeons to achieve a better patient outcome. With that, we conclude our presentation and would like to open up the line for questions.