Bonesupport Holding AB (publ)

and welcome everyone to BOEM Support's Q3 2024 results call. My name is Emil Weilbeck, and I'm making this broadcast, as always, together with Håkan Johansson, our CFO by my side. 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. But before going through the presentations, we would like to draw your attention to the disclaimers covering any forward-looking statements that we will be making today. So let's start the presentation and go to slide three. I would like to start the entire presentation with some condensed highlights from the report that we released this morning. So overall, quarter three... Results sales were at 238 million Swedish kronor, which corresponds to a reported growth of over 50% year-on-year. In constant exchange rate, the growth was 54%. The strong sales resulted in a record operating results. Before incentive provisions, the operating results was 48 million Swedish kronor. The reported EBIT was at 41 million. The positive development resulted in a strong organic cash boost of 39 million SEK to 153 million SEK. Now, before moving into the details of the report, let me quickly cover the highlights of the quarter. The Somalia study has been running for more than four years, and hearing the positive outcome at a packed auditorium at the European Bone and Joint Infection Society's annual meeting was a personal milestone highlight. Several leading representatives for the EBGIS, proclaimed that this is a game-changing study that will lead to modified treatment protocols. I will come back to Solarium later in the presentation. We're making good progress in our preparation for this final fusion market entry, and we will provide a short update and status in today's call. Finally, I would like to highlight that SarmentG in the U.S. is taking significant market shares, reaching sales of 134 million SEC in the quarter. We continue to see that existing customers continuously increase their use. And in addition, new users are constantly being added. So let's go into the presentation now and go to the next slide where we look at sales development. So this chart shows last 12-month sales in Swedish currency every quarter since early 2017 in stacked bars per region and product category. In this slide, the strong launch momentum for Saruman G in the US is becoming very graphically visible. Saruman G in the US grew 114% year-over-year in the quarter. And the sales value of Ceremonie in the US is actually now making up 50% of the total sales in the quarter. As we are broadcasting this, we are at the North American Orthopedic Trauma Association meeting in Montreal. which is also coinciding with our launch conference for the open trauma indication. As Sermon G has only been market authorized for open trauma in the US since March of this year, we have not had close interactions with orthopedic trauma surgeons before. There are between 9,000 and 10,000 orthopedic trauma surgeons in the U.S., and we expect to establish many new relationships at this Congress. For those interested in listening to some early experiences from Sarah McGee in trauma, I would recommend the podcast on Bone Support's LinkedIn with three very prominent traumatologists sharing firsthand experiences of Sarah McGee. All in all, our top line is advancing with a solid and steep trajectory, as Saramant is rapidly taking market shares from other treatment options and seemingly is even expanding the market. It is mainly the antibiotic-eluting Saramant that is driving the development, with in total 81% sales growth across the two regions in Q3 2024 versus Q3 2023. Let's now go to North America on the next slide. So sales of 192 million SEC in the quarter corresponds to a reported growth of 59% year-on-year and 63% at constant exchange rate. Now there were many highlights in the quarter. So in September, the NTAP reimbursement request for Simon G in open trauma was submitted to the CMS. The combination of easy handling, ability to do a one-stage procedure, ability to mimic natural bone healing, and the elution of local gentamicin over more than 30 days appeals strongly to the US surgeons and the orthopedic clinics. These key points are the main reasons for the fast and strong sales ramp up. In addition, though, The avoidance of bone infection and the avoidance of amputations are also incentivized through the regular U.S. reimbursement system, which penalizes failed procedures or so-called modifier 78. That's the code for a failed procedure. The number of surgeons and nurses being trained on and using 7G is constantly increasing. We are progressing well with hospital system approvals with a total of 145 listings for ceremony at the end of quarter three. The focus right now is actually to strike a balance between adding hospital system approvals and training the surgeons and nurses in the hospitals where a listing has been accomplished. We have to train surgeon by surgeon. and nurse by nurse ahead of using the product. A positive dynamic, though, is that surgeons that used CERAM-NG in 2023 and early 2024 have followed up on their patients and are sharing positive feedback and testimonials that they see the same positive outcome as have previously been displayed in many published clinical studies on CERMA-G. This gives a very positive endorsement and we are receiving an increasing amount of surgeon-to-surgeon referrals for CERMA-G. So while we have been busy trading surgeons for the last 23 months on CERMA-G, We have only scratched the surface of the full opportunity. As an example, we have just surpassed 1,000 surgeons trained on saranagy, and there are over 20,000 orthopedic surgeons in the U.S. Another interesting market dynamic that we would like to share with you is that approximately 10 to 15% of the surgeons that have started to use SAM and G in the last 12 months have previously not used any local antibiotics in their bone graft surgeries for extremities as historically there were no FDA approved alternatives. This is an early stage observation, but an interesting one pointing towards ceremony as a driver also of market expansion. Several market investigations have shown that the use of local antibiotics in Europe is estimated at almost 10 percentage point higher than in the US. But possibly we see some first tendencies of the US moving in the European direction. And finally, a few mentions on our preparations for the future entry in the spinal fusion segment. So in preparing for the market entry into the spinal fusion, we have conducted several different activities to further map the market dynamics and determining factors for surgeons' choice of technique and materials. Overall, what we see from the market insight is that a large part of the surgeons have concerns for infection after a spinal fusion. 57% of the surgeons regard infection following the fusion surgery as a significant clinical problem. The use of local antibiotics has become an unregulated and off-label standard of care used in between 35% to 40% of all the spinal fusion procedures. We are making good progress in running several preclinical studies to build applications, instructions, and handling manuals for the various different techniques in spinal fusion And we hope to share some first data from these at the quarter four report in February next year. But now let's turn to Europe and the rest of the world. So for the quarter, we saw sales of 46 million SEC corresponding to a reported growth of 22% year over year and 21% at constant exchange rate. We're seeing good progress in Europe, where CERN is capturing market shares in more or less all markets where present. However, there was a higher than expected negative seasonality impact in quarter three, which was exacerbated by healthcare staffing disruptions in many areas. This resulted in fewer surgeries in general compared to the previous quarter, as well as slightly challenging market access for our sales representatives. Looking at this quarter's highlight, Cerament V was approved for market introduction in Canada. And Cerament BBF and Cerament G are already being sold in Canada through distributors, and the business is developing well. With the addition next year of Cerament V, we believe that the market potential will increase further. and we have therefore decided to mirror the successful implementation in Spain and Italy, and we are now recruiting to also make Canada into a hybrid market with both distributor reps and own staff on the ground. The largest highlight is, of course, that Solardo study met its primary endpoint, showing that bone substitutes with local antibiotics enables reduced systemic antibiotic treatment. Let's go a bit more in detail into this larger study. So being able to reduce systemic antibiotic by using Ceramen G or V could have a profound effect on the fight against antibiotic resistance, as well as significantly reduce the challenging side effects associated with systemic antibiotic treatment. This is why this study is so important. Only top line results from Solara has been released so far, so we should expect the full length article to publish sometime during next year, upon which we will have more data and details about adverse events and the full cost analysis. However, based on what we've learned from the top line results, these results are indeed spectacular. The standard protocol around the world in a patient with bone infection is to ordinate more than four weeks of systemic antibiotic. And in many times, this treatment will last and continue for six to eight weeks. The healthcare practitioners are well aware of the difficult side effects and the high cost of this treatment, but it has been seen as a necessary evil to manage the bone infection. The Solario study challenges the existing protocols, as it shows that antibiotic-eluting bone fillers enables a systemic antibiotic treatment for less than a week without any increase in reinfection rate. This has a significant and material effect on the side effect as visible on the graph to the right. It should be mentioned that these adverse events and side effects are in no way trivial. They're causing a large amount of patient suffering in cost of society. Severe events in severe adverse events in the study were classified as life-threatening or requiring hospitalization or resulting in persistent or significant disability. To further understand the seriousness of the adverse events, to treat an episode of nephrotoxicity, which is influencing between 5% up to 20% of patients on a long-term vancomycin treatment, could easily cost up to 15,000 US dollars. We know also from protocol and available data that one week of intravenous antibiotic combination treatment cost up to 3,500 US dollars in the US and around 1,600 US dollars in the UK. If we take a U.S. reimbursement perspective on treatment failures and adverse events, so if this happens within 30 days after the index surgery, they are categorized as failures, which is also called modifier 78. The reimbursement for the follow-on treatment, of the patient then drops with 20 to 30%. The antimicrobial resistance is one of the greatest public health and development threats. The misuse and overuse of antimicrobials in humans, animals, and agriculture are the main contributors to the rise of drug-resistant pathogens. According to the antimicrobial resistant review report, in 2050, as many as 10 people could die each year due to antimicrobial resistance. And the World Bank has estimated that enormous cost will be associated with the antimicrobial resistance. So on that rather apocalyptic and dramatic note, I would like to hand over to Håkan.

Thank you, Emil. Let's move to slide number nine. Net sales improved from 158.2 million to 237.5, equaling a growth of 50% or 54% in constant exchange rates. Emil has already spoken about the strong performance and the major drivers behind the sales acceleration. The contribution from the North America segment improved with 32.8 million and amounted to 79.3 million. The improved contribution relates to increased sales after the effect from increased costs. Sales and marketing expenses during the quarter amounted to 102 million compared with 67.6 million previous year, of which sales commissions to distributors and fees amounted to 65 million compared with 42.2 million the same quarter 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 strong and amounted to 94.7%. The drop from the second quarter this year all in all relates to the weaker US dollar. In Europe and the rest of the world, a contribution of 15.6 million was reported to be compared with 9.3 million previous year. Sales and marketing expenses increased with a minor open 3 million, dropping compared with the second quarter this year following seasonality. From the lower graph and orange marker, you can see the gross margin remaining stable. The increase in selling expenses reflects investments in the organization, but also investments in systems, to improve customer handling and inventory management to stay ahead of the increasing demand. The slight reduction compared with the second quarter this year follows normal seasonality. As presented at our Capital Markets Day in November, R&D is focused on the execution of strategic initiatives, such as Spinal Fusion and a planned market authorization submission for settlement V in the U.S. These initiatives have been progressing well during the quarter, which also explains an increasing spend. And administration expenses, excluding the effects from the long-term incentive programs, remain on a stable level. However, impacted in the period by temporary resources. To sum up the financials, the reported operating profit amounted to 41 million, an improvement of 26.1 million compared with the same quarter previous year. This follows a strong sales performance despite unfavorable currency effects in the period and despite the investments made in our commercial platform and in innovation. The difference between adjusted EBIT and reported EBIT operating results are cost regarding our long-term incentive program. amounting to an expense of 7.3 million in the quarter, compared with 9.7 million previous year, as you could see from the previous slide. With a total cost of 7.3 million in the period, only 1.9 million was cash flow impact. With strong momentum in our sales, increase in our safety stock of raw materials and semi-finished products were made during the first half of this year. As we have now reached satisfactory levels of inventories, we see a strong cash flow returning, improving cash balance with 39 million during the quarter. So with this, I hand back to Emil. Yeah, thank you very much, Håkan.

And we're going to wrap this presentation up. We're of course very pleased with the quarterly performance and the continuous solid trend. All three quarters in 2024 have shown sales growth well above 50% and we see solid and robust sales trending over the past 24 months. The current market penetration is strong, and we anticipate further future sales enablers to play out with a milestone solario study, the entry of CRMNG in open trauma, and the future entry into the spinal fusion segment. Thanks to its clinical superiority over standard of care, Saramant is constantly increasing its user base and enabling surgeons to achieve a better patient outcome. With that, we close our presentation and would like to open the line for questions.