Neola Medical AB (publ)

Hello and welcome to today's webcast with Neola Medical where CEO Hanna Sjöström and CFO David Folkesson will present the third quarter of 2024. After the presentation there will be a Q&A so if you have any questions for Neola you can submit them via the form to the right. And with that said I hand over the word to you Hanna.

Well, thank you so much and a very warm welcome to everyone. Today, we will present Neola Medical's Q3 report of 2024, and we're really excited to summarize an intensive and productive first three quarters. and we are continuing to reach the milestones according to our business strategy. This is a special quarter for us because this is where we have advanced to clinical validation phase where we're really intensifying our preparations for the very first pivotal clinical study on preterm born babies that we're going to do in the US next year. And that will really be a cornerstone in our forthcoming FDA application, securing market approval for our medical device, Niola. Presenting here today is myself, Hanna Syström, CEO at Neola Medical and CFO, David Folkesson. So first I will focus on presenting the company a bit to give you a flavor of what Neola Medical is, our key strategies and our business plan moving forward. And then I'll talk about the quarter and significant events. And thereafter, David will walk you through the numbers and our financial summary. And before we begin, please note that this presentation includes forward-looking statements based on the current expectations and assumptions. These involve risks and uncertainties and may cause actual results to differ. So key factors might include market conditions, regulatory changes, and execution of strategies. But our focus remains on driving sustainable growth and delivering long-term value. So Neola Medical is a deep tech company, and we have developed the world's first medical device for noninvasive continuous monitoring of the lungs of preterm born babies. Neola, that stands for neonatal lung analyzer. And with this medical device, we're addressing a growing clinical need since we have an increase in infants born preterm in need of continuous monitoring of the lungs really to survive their severe lung complications. We have already, before C-MART, sold our research version of NEOLA to an EU university hospital that is generating real-world evidence for us. And we're in the FDA process, a de novo process, for receiving an FDA grant to take our medical device to the US, which is our primary market. We are a listed company on Nasdaq First North's gross market in Stockholm, and you will find us under the ticker NIOLA. So today, doctors need to wait up to two hours for a chest x-ray result showing if the preterm born is dying from lung complications such as a lung collapse, very common for these babies. And time to action is really critical in order to save the patient. So with Neola, the doctor will know within seconds. And this is a major improvement versus standard of care today. Preterm born infants are very vulnerable. Their lungs are not yet developed and current competing monitoring methods are clearly insufficient. So the methods used by neonatal healthcare professionals today involve manual observation with the help from, for example, chest x-ray. They take blood gas samples and pulse oximetry. And in some cases, we see ultrasound or electrical impedance tomography used as well in the clinic, even though it's still rare. However, most of these methods only give that snapshot of the lung status, and they're very slow to show results. All that handling of the infant is very disturbing, and some of these methods are also potentially harmful for the infant, such as chest X-ray. So with our new medical device, Neola, we offer continuous monitoring of the lungs very fast to show results. And it's safe for the infants of vulnerable skin and non-invasive, which is exactly what the neonatologists are looking for. So we have a very strong support for our technology from the very best key opinion leaders around the world, both from the US and from Europe. And what they're saying about our technology is that they love it because this is the first time they're able to monitor what's happening in the lungs in real time. And this has really the potential of really altering the way that we monitor babies today. in order to really improve the long-term development outcomes. So we're getting into a market that is really growing, and it's growing because we have more infants born preterm, having much more need for continuous monitoring since they are suffering from one of the most common complications for preterm-born infants, which is respiratory distress syndrome and other similar lung complications. and with our medical device we're entering a growing and non-cyclical market that is really underpinned by a lot of favorable trends and distinct market drivers so the global market for neonatal respiratory device was valued at 1.7 billion in 2022 and is now expected to reach 3 billion us dollars by 2030. And so this is a strong market for us, but it's also a market where it's really clear need for new medical device in the neonatal space. And that is driven by a number of factors. First, we have that growing number of patients. There is an increase in preterm birth worldwide. We also have the opportunities to generate a lot of high margins globally, especially in the US, where the pricing landscape is considered to be very favorable. And I would say one of the most important ones is also that there is a rising awareness of the importance of newborn disease prevention. leading to an increase in demand for neonatal intensive care. And that is also driven by the FDA. So the FDA, the Food and Drug Administration in the FDA, has introduced several incentives and guidance to encourage device development and new technology coming into the field of pediatrics medical device in the US. And that's because they see that innovation towards children is really lacking behind. So their estimate is that it's approximately 10 year behind the development of medical device for adults. So we have a huge potential addressable market worldwide. There is a growth in preterm birth and an increase in number of neonatal intensive care clinics around the world. There's also a large medical need for better neonatal care, which translates into a high demand for technology innovation within the field. especially the US, is a very attractive market opportunity due to their particularly high rate of preterm birth with more than 35,600 beds in neonatal intensive care units amongst approximately 50 to 70% of those should be relevant for our medical device, Neola, according to our extensive market research with US nematologists and hospital directors. And our revenue model really extends beyond the primary sales of Neola main unit, also including sales of disposable probes that are changed daily on the baby, as well as then service agreements. So here we have three parts of the revenue streams where the daily change of disposable probes is really the key part of our business model that's going to give us that revenue lift quite early on after we get our market launch. And unlocking this revenue opportunity has been key for us as we have developed the Neola product. We expect disposable to be that really key driver of both revenue and margin. And you will see that in the diagram here where we expected the split of the revenue really coming from disposables quite early on and then dominating our our revenue as we are scaling in the US. So market penetration and going into a market like the US with a brand new technology requires a lot of strategy, strategic thinking, but also making sure that we find the very best partners for our market launch. And we have identified 10 leading children hospitals that are really our priority target customers for market launch. where we already have established contacts with two of them, both in Stanford, as we're collaborating very closely with Stanford. We're also selected as one of the very few companies who have been a Stanford Impact One company, meaning that we get a lot of support from Stanford and their neonatologist. And we're also collaborating with Cooper and the professor in enatology at the Cooper chain, who I will soon present also, have made a very impactful lecture about the potential of our technology and Neolaz for coming to clinic. For these customers, Neola will bring financial value in form of, most important, reduced length of stay in the NICU. That's something that we want to prove in our clinical studies. Reduced number of blood gas samples and chest x-ray. So these are a high cost at the hospital, but also something that the doctors really want to decrease because it's so invasive for the babies. Also reduced manual observation time for the nurses as there is a lack of nurses in the US and around the world. So this is really a cure with the intensive care where we want to make sure that technology can really support healthcare professionals in the clinic. And then potential reimbursement is through the MS-DRG payments, which really is a benefit for us as well. We are commercializing within three distinct phases. We are currently in the prelaunch phase where we're focusing on gathering scientific support for the upcoming FDA application and then forthcoming approval. And we're expecting launch phase to start in 2026. So with that short company introduction, I will go into the highlights of the Q3 report. And our focus for 2024, as I presented in the beginning of the year, is within three areas. First, enter the clinical validation phase. So check we have achieved that this year according to schedule. And then our FDA process and preparing for market launch is really in focus. This is exactly what we've done. And so far, just looking back on the key highlights for Q1 and Q2 2024, we have been elected winner at Stanford Pediatric Device Competition. in the beginning of the year. And this is important, especially as that means that we're rapidly gaining momentum with our efforts in the US and getting into the very best scientific communities that we as a new technology company can be in. So Neola has been recognized by Stanford as one of the top medical technology innovation with the potential to completely transform pediatric care. So we're very honored to receive that silver medal in this prestigious competition that is really aimed at promoting innovation in pediatric medtech. But it's also, what's important is that it's also partly funded by the FDA, so this is a way for us to also, from a very early beginning, be on top of the FDA's agenda. NAOLA has also obtained a CB certificate, signifying that the product has undergone a rigorous and very comprehensive testing and evaluation process at an accredited and independent testing house, Forest Technology. and what that certification really means is that it indicates that the product really meets those specific quality requirements and international standards for medical device and healthcare with that particularly high demand on safety essential performance and electromagnetic compatibility So in practical terms, this means that Neola has been tested and verified to be safe for use according to all the requirements that we have for its application in a neonatal intensive care unit. The CB certificate is valid in over 50 countries around the world. And this is really that crucial piece that the company has secured in preparation for the market approval for Neola in the US. So without this, we could not have gone into clinical validation phase and started our clinical study. So this was a very important piece of the puzzle this year that we solved. We also have a successfully completed human factors validation study for NEOLA that we did in Boston that is also confirming safety, but very importantly, usability for neonatal intensive care professionals. So this study is also a critical step in validating NEOLA. And these positive results really This brings in our opportunity now to get a really strong FDA application ahead of our market launch. So this was also one of the key cornerstones that is now forming the base of our upcoming FDA application. And just to emphasize the importance that we have on U.S. expertise as we're now progressing towards market launch, we're also happy to have Monica Alfari-Welling appointed as the very first American board member. And her expertise has already now improved invaluable as we navigate this very critical phase with clinical study in the U.S., preparing for market launch, and the very important approval phase with the FDA. So coming to the third quarter, we're now entering the clinical validation phase. The successful human factor studies in the U.S. along with the CB certificate really then underscores the product safe design and essential performance. so that now we really have in place and as a result of this neola medical is now transitioning from the technical verification phase to this clinical validation phase as we're now preparing for our very first pivotal study on preterm born infants in the u.s that is scheduled for 2025. So this milestone really aligns our strategic goals and reinforces our commitment to achieving market approval, really a significant step forward to bringing Neola to market. So, during a pre-submission meeting with the FDA, we aligned on the clinical protocol for the pivotal clinical study, and the clinical need for our medical device for continuous lung monitoring was also noted to the protocol. And for me, this is one of the really key important things to really highlight that the FDA has recognized that there is a clinical need for our medical device. So in preparation for the pivotal clinical study in the US, we plan to do a clinical pilot study on newborn babies at a neonatal intensive care unit in Sweden. And the clinical protocol for this Swedish study has been finalized, and the company is now currently in negotiations with a Swedish hospital. So other significant events during Q3 is that we've really strengthened our competitive position with receiving two patents. First, a US patent where we have been granted a patent that strengthened the protection of our company's innovation pipeline of medical device for continuous lung monitoring. So this granted patent is for a technical method that really opens up the opportunities for lung monitoring of more patient group than preterm born infants. And a part of this patent family is related to positioning the light source inside of the body when measuring gas in the lungs. And this approved patent is really crucial for future measurements on larger patients such as children and adults. So the approval of this patent not only solidifies our competitive position in the US market, but also really protects that critical aspects of our technology pipeline. So this patent is also a cornerstone in our strategy to innovate and also deliver next generation of lung monitoring solutions for patients in intensive care, including both children and adults. This patent is also pending in Europe and in China. And we have also been, during this quarter, granted a patent in Europe for a technical method and equipment that really enhanced the accuracy of continuous measurement performed with our lung device Neola. So this patent is also, I would say, a milestone in our intellectual property strategy that reinforce our competitive edge in the market. So by continuously expanding our protection of our product, we can ensure that NIOLA also remains at the forefront of medical technology for neonatal care. And this patent specifically protects our invention for compensating background signals, so thereby improving that accuracy of measurements in our product. And this patent application is also pending in the US and China. And then the third point that I wanted to talk about today is that Neola Medical really had a prominent role at one of the largest and most prestigious scientific events outside of the U.S. that gathers all neonatologists around the world, especially the European ones, and it's called the Tenth Recent Advances in Neonatal Medicine, held in Würzburg in Germany. as we're really proud that we were given the opportunity as the only innovation company at the conference to sponsor a special lecture on our GOSMOS technology. which was delivered by a medical doctor and Professor Vineet Bhandari, who is the division head of neonatology at the Children's Regional Hospital at Cooper in Camden in the US. And Professor Bandar's lecture that was titled, Gas Man's Transition to the NICU, Are We There Yet?, really offered neonatologists from all around the world that first opportunity to really have an in-depth exploration of that transformative potential of our technology and professor bandari really showcased what he thought was the potential our medical device has to improve the monitoring of preterm born babies aimed at improving clinical outcomes for this very vulnerable patient groups so we got a lot of interest from neonatologists around the world now uh for our technology and uh very very much an excitement that finally we can have some true impactful innovation coming into the field so with that let's talk some numbers and i hand over to cfo david focus on

Hi, everyone, and thank you, Hanna, for the introduction. In the first nine months of 2024, as Hanna mentioned, we kept making significant progress towards certification and clinical validation. All of this has been achieved while maintaining a strong cost awareness from the earlier quarters. There's nothing sticking out. We keep keeping the cost at a low level. With that said, we understand that the completion and the plan studies ahead of us will impact the burn rate. The burn rate will go up, but with the negotiation with partners and close operations, cooperation between product management and the finance department. They managed to keep the burn rate on a second level, despite being quite a few increases worldwide on these services. Looking at the year to date, January to September 2024, the operating expenses has increased with 1.8 million SEK And that amount has been used to conduct the human factor study successfully. We built a few additional neolas and we expanded our successful team here in Lund. In total, 7.4 million SEK has been spent on development costs. That is an increase of 1.2 million compared to last year, January to September. This amount will, of course, increase as we continue to prepare and progress towards more clinical studies. And if we change slide, you can see our top 10 shareholders on the right. You can see that they're the same and our major shareholders keep faith in the company. And there's no major changes in the ownership. They all stay at the same level. And with that, back to you, Hanna.

Great, thank you so much, David. Yeah, so we have achieved a lot so far this year. We're following our plan, moving from technical verification in 2022, 2023, now in 2024, getting those very important milestones in place, so the successful human factor study in the U.S., the CB certificate that was absolutely critical in order to move now to the clinical validation phase, where we are planning that clinical study on preterm-born babies in the U.S. I also want to highlight that clinical study is one of the last pieces of the puzzles in our technical file that was sent into the FDA in order to get that FDA approval and move into market launch. So as we're now progressing, we will also focus a lot on our market preparations for the US, where we're looking to build a strong pilot case with a few selected hospitals. So a lot of exciting milestones ahead of us now for the last months of 2024 and especially also in 2025. So our next report where we're closing the year will be released February 12th. And I hope that you continue to follow us. We're quite active in social media and you can also find all our updates on our website. You're also very warm welcome to Lund on May 24th where we have a physical general assembly and where we also share the latest updates and also have a demonstration of the NIOLA device. So with that, I'm closing up with just some investment highlights. So why is Neola Medical a really interesting company to invest in? Well, as you can see, we have a very large and growing addressable market with great clinical need and demand for new technology innovation. We also have built a very attractive business model where disposables is going to really give that lift in our revenues. Our technology is proven. It also is implemented within other industrial applications, but all the patents belong to the company that is really monitoring the body. And we have a highly experienced team. And as you can see, also strengthen our board of directors as we're now transitioning to a more American focused phase. So with that, thank you so much. And I open up for questions.

Thank you so much for the presentation here. And as you mentioned, we will move on to some questions. And the first one here, what specific challenge do you anticipate in the clinical validation phase and how do you plan to address them to stay on track for the FDA application?

Yeah, so clinical studies is always a very critical element of medical device companies preparations. We have worked on the clinical protocol with. uh the principal investigators and key nanotologists really to make sure that we address any type of risk related to the monitoring and making sure that neola will also work in the nurses workflow And then I also want to highlight that the study that we're doing in the U.S. is a safety study, meaning that what we're aiming to prove and what the FDA want to see in that study is that Neola is safe for use on preterm born babies. SAFE means especially related to the probes that are placed on the baby's chest. We have worked to address any challenges related to the adhesive of the probes for many years now, and that has been one very important part of risk mitigation to make sure that we don't have any severe events or very few ones related to skin and safety of the probes.

Thank you. You mentioned a pilot study in Sweden as preparation for the US clinical study. What insights are you hoping to gain from this and what is the timeline for its completion?

The pilot clinical study on preterms that we're planning in Sweden is really to make sure it's a smaller, it will be a smaller pilot, and it is aimed at making sure that we find any types of gaps related to the products, the probe, or the workflow that we could then improve before going to the clinical study in the US.

Thank you. With the recent patent approvals in the US and Europe, how strong is Neola's patent protection and are there any areas where you see a need for further protection?

Yeah, so we have been working very intensively on continuously strengthen our patent portfolio. This is a brand new technology and we currently own all patents relating to the technology in the key markets of US, Europe, China, and some also in Australia, which is a big neonatal market. Where we especially strengthen our portfolio and what I'm personally encouraging the team is to protect the disposables as much as possible. And that is because the disposables is such a big part of our future revenue model. and this is typically where you would see infringements and so on. So we've been working on that quite closely and we'll continue to work to strengthen our patent portfolio and disposables. We have patents on them, we have design protection, but it's an area where we always need to be really on our toes.

Thank you. How do you assess the competitive landscape for Neola globally and what sets your technology apart from other continuous lung monitoring devices?

So we're in a field that is really lacking behind in technology. So if we go to the very big perspective, the technologies that are out there to monitor the human body and the lungs are chest x-ray. So x-ray that has more than 100 years. behind it and the problems with that is really the radiation I would say for the pre-tums connected to that is only a snapshot of the lung status and you don't want to use just x-ray so frequently on the babies because of the amount of radiation so just x-ray then you have ultrasound ultrasound was also developed for the clinical need here in Lund in Sweden so we We have a very strong heritage of combining medicine and physics together. Lung ultrasound is really new in intensive care. It has proven to have some challenges, especially on monitoring the preterms. It's also something that is just a snapshot. And currently, it is rather hard for that professional. So there needs to be a special professional to manage it. So we haven't seen a wide adoption of that yet. And then we have pulse oximetry. And pulse oximetry is then measuring the oxygen in the tissue, so not the free oxygen in the lungs that we are measuring. So that means that it takes for the baby, it takes a long time before the pulse oximeter is really showing any signs of the vital signs of the baby going down. So those are the big technologies within the field. So you can see that we fill a very clear gap. where we are the only technology that can actually see the free oxygen in the lungs and the lung volume in real time. So that's why we believe that we have a technology that really has the potential to transform care.

Thank you. As you approach market approval, what are Neola Medical's plans for commercialization and how do you intend to secure successful market entry, especially in the US?

So for the last quarter of last year, we formed Neola Medical Inc. So we now have an Inc. in the U.S., which has proven to be important for us as we're now acting more and more as an American company in the U.S. We have an office in Palo Alto in Silicon Valley, very close to walking distance from Stanford. So we're now really focusing our effort in the US market. As soon as we get that positive indications from the FDA that we're moving in the right direction, We will quickly build up our sales organization, clinical organization, and our distribution organization in the US. And that is already on a planning phase because of cost control, which is very important for us. We're going to activate that as soon as we hear those positive signals. And then we are already now, as you could see, we have identified the key leading children hospitals in the US that is our primary customers. And we are now already in very deep collaboration and contact with two of them. so connected to Stanford and to Cooper. So we will continue to focus building very strong relationships, understanding the procurement model and the value committees at these hospitals in order to scale as fast as possible once we have gotten FDA approval.

Thank you. What is the reason for the decreased costs during the quarter compared to previous courts in 2024, especially the decrease in personnel costs?

Yeah, that's a question for me. The main reason for personnel costs is that the change in personnel costs is due to vacation. Last year, a large number of employees had vacation in June, and this year they've been on vacation in July, which makes a difference between the quarters. So that's the explanation for that one. Otherwise, the changes are within reasonable amounts and they will fluctuate a little between the quarters, but there's nothing major than the vacation.

Thank you. Moving on to the last question here. What is your view of the current cask position?

What is our view on our cash position? Yeah, we have a solid cash position for this year. It also then includes our clinical study in the US. So we have enough cash to continue now with our plans that we have presented here today.

Thank you. That was all the questions we had. So I hand over to you, Hanna, for some closing remarks.

Great. Well, thank you so much for attending this Q3 presentation. I hope that I was able to portray that we have had three very successful quarters where we have really reached the milestones that we have said that we would reach. So we're now very excited to have transitioned from technical verification phase into the clinical validation phase. And I really hope that you uh would like to continue following the company it's a very interesting investment case as we're now really fast approaching market launch in the us so with that thank you so much