Neola Medical AB (publ)

Welcome to today's webcast with Unola Medical, where CEO Hanna Sjöström and CFO David Folkesson will present the year-end report for 2024. After the presentation, there will be a Q&A session, so if you have any questions for the company, you can submit them using the form on the right. And with that said, I hand over the word to Johanna.

Thank you so much. And hello, everyone. Following this presentation today, we're really excited to summarize 2024 of key strategic process for Neola Medical. And of course, today is also an opportunity to dig into some of the details of our planned clinical study on preterm born infants. My name is Hanna Sjøström and I'm the CEO of Neola Medical since 2019 and with me here today also have our CFO David Folkesson. And today I will start by just introducing the company quickly and also give a flavor of the change that we have seen from 2024 and the key updates. And then I'll also dwell into the details of the Q4 key achievements, but also discuss a bit forward-looking in terms of what we have in front of us for 2025. And of course, David will also cover our financials for 2024. As I will be looking a bit ahead today, I just wanted to make sure that you're also aware that we're now in a phase of greater complexity, especially regarding the regulatory landscape. But we also do see more risk adding to the company as we have moved from the technical phase to the clinical phase of the company where we typically have more unforeseen events. But most importantly, we have taken an important step towards going to the market with our medical device Neola Neonatal Lung Analyzer in 2024. Our medical device is a class two device that for the very first time can monitor the lungs of preterm born infants with an instant detection of lung complications in order to detect those deadly and severe complications with preterm born infants much faster than today. And this is our key product that we are commercializing. The company was founded in 2016 based on very advanced research coming out of the Department of Atomic Physics together with neonatology. And with that very advanced research, we have developed then the very first continuous monitoring device for lung monitoring of specifically preterm-born infants. This is a class two device, and we're currently in a de novo process for the FDA. A de novo process is confirmed by the FDA as we have a technology that is brand new, so no predicate predicate device or technology exists. And that's typically very, very exciting way because we also then get to set the standards for this type of device moving forward. The company currently has 10 full-time employees. Most of the team is established in our headquarters in Lund in Sweden. We do also have a small hub in Palo Alto close to Stanford since we are also now really having a much larger footprint in the US as US is our primary market. And I would say what's really important and what's different for this company versus other companies is that we have already now before a launch in the US, a quite strong presence with key opinion leaders within nanotology in the US. And one of the proof points of that is that we have been elected Stanford Impact One company, meaning that Stanford as one of the most prominent academic institutions in the world has selected us and our medical device for lung monitoring as one of the most promising innovations in pediatrics and in neonatal intensive care that has the potential to really upgrade the way we're monitoring these babies and upgrade care from day one that we reach market. This is a quite special program that we're in. It's partly funded by the FDA as a way for the FDA to have more innovation coming faster to the U.S. children in care than today. And the background of that is that the FDA has made their own evaluation that pediatric device in terms of innovation is lagging more than 10 years behind similar for adults. So that's why we are part of this project. With that, we get access to the best neonatologists in the US. So we're collaborating very closely with the associate professor in neonatology, Dr. Janine Fersh, here on the picture. And we're also getting direct discussions with the FDA. So this gives us really a strong foothold with key opinion leaders in the US. I would say there are also some tactical elements to it that is important for us. So for example, Professor Janine Furge has participated in one of our calls with the FDA discussing the clinical need of our product. And meetings like that is quite rare to have with the key opinion leaders in the US for Swedish companies. So that's also a signal that we're really in the right US forums. We have also during 2024 won a competition in terms of pediatrics where we was awarded with 25,000 US dollars. So it's also gives us that element of getting federal grants from the US. And working really closely with key opinion leaders, I would say, is one of our main strategic pillars. And we are working now very closely with the Stanford pediatricians and professors in neonatology in a very practical sense. That means that we get input on our clinical protocol for our upcoming studies. study in the US, but also some of the key opinion leaders in Europe are also very, very key for us. So one of those is also Professor Dempsey, who was the very first to buy our Neola medical device in a research version a couple of years ago in order to start the first 100 baby completely independent study on 100 newborn infants healthy. And those types of independent studies and publications also gives us credibility within the neonatologist community. And also someone like Professor Spears, you will see here on the screen as well, is the key opinion leader in Europe within respiratory distress syndrome. That's one of the key challenges for the babies in neonatal intensive care. And he also expressed that if we can prove what we're now aiming to prove in our clinical study, Neola could be at every clinic within five to ten years. So there is quite an ambition from the company that is also recognized by key opinion leaders in both Europe and in the US. And the background to the interest in our medical device from these key opinion leaders is that current standard of care is really lacking behind in terms of innovation. So for a neonatologist today, the time is really of essence when there is a child with lung complications. And most children also in neonatal intensive care have severe lung complications. What they have today is really chest x-ray. So when they believe that there is, for example, a lung collapse of the baby, which is a very severe condition, they have to take the decision to take measures without objective decision support today or to wait for chest x-ray results. And waiting for those results today takes a very long time. So at Lucille Packards in the US, which is the number one children's hospital in the US, a chest x-ray still takes 40 minutes, which is causing quite a delay in order to discover these complications. And that's the same for Europe. In Europe, it takes even longer time. So at some of the most prominent hospitals in France, for example, it takes up to two hours. And then also having that documented evidence that repeated number of chest x-ray can lead to development of bone cancer later in life for these babies. This is something that the doctors definitely want to decrease the number of x-ray they do. But most important is to get those complications really discovered fast. And that's why we're getting support for continuous monitoring. So we're monitoring all the time with a direct detection of complications. We can We also aim to see if the complication is on the right side of the lung or the left side. Also very valuable information that the neonatologist do not have today. So a great clinical need of our product. And why are we talking so much of these respiratory complications? Well, it is because it's the primary cause of death for preterm born infants today. So this is really a great clinical need that we aim to solve together with the neonatologist to really try to monitor them much more closely than we do today. And it is a large clinical need, as many as 1 out of 10 babies are born too soon, and respiratory challenges is really the one thing that neonatologists are focusing on. And that's because for the very and extremely preterm born babies, it's up to 50% of all these babies that get what we define as severe disabilities when they reach the age of 11. And this has a great impact in terms of health economics. It is a major cost for the hospitals and for the societies today, but also then, of course, impacting the children themselves and the babies. So we're getting into a market that is growing. It's growing because we have a growing number of patients with severe lung complications, such as respiratory distress syndrome and other lung complications. It's also growing because we have that quite high number of preterm born babies that's being born. And that is something that we anticipate we'll keep at this level because it's impacted by more mothers being over 40, the success of fertility treatments, especially in the US, that's leading to more twins and triplets, which is a high risk factor of preterm birth. So this is a quite... stable number and growing number of preterm born infants that will also then need the very best care. And that's why we also see the number of beds in neonatal intensive care units growing, especially in the US. This is also an area where we have the opportunity for strong margins. So at US hospitals, typically neonatal intensive care is the key revenue driver for the children's hospital. So this is a place where we have the opportunity to also add really solid margins, especially then in the US. In terms of the US market, we have seen and we have gotten benefits from the fact that pediatric device is really promoted by the FDA. We can also foresee that this is something that we need to keep monitoring quite closely because we have the new Trump administration in the US and they're looking quite closely in terms of what will happen to the FDA. There are a couple of things that we have noticed and that is that the Trump administration will focus a lot more on predictability in terms of the regulatory process and to increase the speed to market for medical device. So that is something that I would say the industry in general are very positive to. There is definitely a need of transparent processes and faster ways to approval. However, we can also see that the FDA have quite large retirements now in key leadership. So there will be a lot of new leadership coming into the FDA. And we're yet to see what will happen with the administration's focus in terms of cost cutting on authorities. So I would say definitely some complexity in terms of the regulatory landscape in the FDA that could benefit us, but could also then give some unforeseen events. In terms of the market, the US market is really our clearest market opportunity. This is where we see a particularly high number of preterm births, but we also see a growth in terms of neonatal intensive care beds and a focus on pediatrics overall. So what would that mean for a hospital? Well, I would take just a very specific example of Lucille Packers Children's Hospital in Palo Alto, where a professor in neonatology, Dr. Janine Fersh, is working. And she has said that her evaluation is that approximately 70% of her 4D beds in neonatal intensive care could potentially have a neola for lung monitoring. And that really correlates quite well with the assumption in terms of the market research we have done with neonatologists and hospital directors in the US that there is a great need to have Neola as a potential monitoring of the lungs in quite 70-ish of all the beds available. And for each bed then we have Neola Medical as a device then standing next to the bed with the baby monitoring the lungs continuously. Our revenue model is also built that we have a daily change of the disposables that are the probes that are placed on the baby's chest to do the monitoring that needs to change daily. And then we also are adding service agreement revenue to that revenue model. So going a bit more in detail, we have 10 leading children's hospitals that are really our key market in the US. In total, you will see here on the screen the number of beds for each of these hospitals. In total, we're talking about approximately 800 beds where you can make the assumption that approximately 70% of those beds could have a neola next to it. And then you can start making that business case what that would look like. What we're adding for the hospitals in terms of value is really avoided costs and reduced length of stay. So what we aim to show is that faster detection of severe lung complications could lead to reduced length of stay in the NICU. And this is a key factor for the American hospitals. as they get a higher reimbursement for the baby's two first days in neonatal intensive care. So there is an incentive to really speed up the number of babies that goes through the department, making them healthier for them to go back to their families, but also for the hospital to have new patients in at a higher reimbursement level. But then also the fact of being able to potentially reduce the number of blood gas sample and chest x-ray is something that is important, both from a financial perspective, but also from a health perspective. And today, the neonatal intensive care is a highly manual care in terms of observation. So for the sickest babies, you have one nurse per baby just visually observing the baby today, trying to find those complications, indications of those lung complications soon. And for the not-so-sick babies, you still have one nurse per two babies. So this is a cure where we also aim to reduce that malign observation time for the nurses so that they can focus on other tasks, which is also important because there is a lack of nurses in the American healthcare today. Then going into 2024, our key focus was really in terms of clinical validation, the FDA process and preparing for market launch. And we say that in 2024, we have also reached a couple of those really big strategic milestones in order to prepare us for 2025 when we're now in the clinical phase. And I'll go into a bit more detail in that shortly, but that means that we have in 2024 reached the milestone that is really driving value creation for the company. And that is now letting us move to the clinical phase. So overall the key milestones that we achieved in 2024 is that we did a successful human factors validation study with nurses in the US. We also got technical verification in terms of the, CB certificate for a technical certification that we needed to have in order to move over to clinical study phase. And that those really key milestone has led that we can now have got approval for our very first clinical study on our specific target population, pre-temporary babies. In terms of the key milestones, we during 2024 got the CB certificate that's valid as a technical validation that's valid in more than 50 countries around the world. And with that we made part partial of the regulatory requirements that we need for our up and coming FDA approval. We also then concluded a human factors validation study with neonatal nurses in the US, in Boston, in a simulation environment where we got good results, meaning that we didn't need to do any major changes for that it works because NEOLA works really well in the nurse's current workflow. and it was intuitive for the nurses how to use Neola. And this was an important one for us since the FDA are looking at this type of validation results very closely because they don't want to add any risk related to device or related to working conditions in the neonatal intensive care. So an important checkbox from 2024. We also announced that we will do our pivotal clinical study on preterm born babies in the US and that we have gone into planning phase for that very first pivotal study. We also then received a silver medal in the Stanford Pediatric Device Consortium that gave us 25,000 US dollars in grant, federal grants. And I would say the most important, it got us a good reputation within the neonatal community in the US and a footprint in the US. We are working very closely, making sure that we have the right key opinion leaders on board One of those you see here on the picture is professor in neonatology, Dr. Vinet Bhandari. Professor Bhandari is chief for one of the big neonatal units in the Cooper chain in the US. And he has also been our reviewer in some of our publications in Pedratic Review. He is a member of the board of directors for the Neonatal Society in the US. And we're very fortunate to have his support and collaboration. We also got the opportunity to be invited to one of the most prominent neonatal conferences in Europe, where he was our guest speaker. And he had a lecture in terms of the potential with our gas mask technology in monitoring preterm-born infants. And that type of support within the largest neonatology forums in both Europe and the US is very valuable for us moving forward. Also thinking about clinical adoption for NEOLA as we reach market. In terms of patent, patent is a very important strategic pillar for Neola Medical. We received two patents last year. The patent in the US was with regards to an innovation that potentially can let us do monitoring of larger patients, such as larger children and adults in the future. that was a very important patent for us that we already also have patented in China and it's a patent application ongoing in Europe. We also received a European patent during 2024 that is focusing on really making sure that our that the Neola device is working very efficiently in the neonatal intensive care setting. So it's a very specific product patent that potentially has the opportunity to be very important for us. So overall, this is really reinforcing the protection of the company's innovation pipeline, and we keep on being quite active with our patent portfolio and new applications. We also got the Neola logo trademarked in the US in 2024. And this is, of course, an important step as we're now also looking ahead of creating a strong brand within neonatology in the US. As you might remember, we did a large name transition from GPX Medical to Neola Medical in 2022. And this has really been part of our brand journey in order to have a very strong Neola brand. as we're entering the U.S. market. But then I would say I would come to one of the most important milestones in 2024 was that we received approval for our very first clinical study on our targeted patient population, preterm-born babies. This approval was received from the Swedish authority Läkemedelsverket. In order to have an approved application from the Swedish authority to start a study, a lot of documentation is needed. And I would say that we got that approval is a testament to that the company is really mature in the way that we are handling these very broad and complex regulatory environment and that we can give all the supporting documents to start a study on this fragile patient group. When you have that approval, it goes to the National Ethical Review Board in Sweden for a grant from the ethical perspective of it. That we got an approval also from the Ethical Review Board in Sweden to start a study on preterm born infants is also testament to that we're now ready to really enter the clinical phase and do our very first study on our target patient population. So with those important approval for us, that means that we can now officially start a clinical pilot study on preterm born babies in Sweden. This is the very first clinical study on preterm born babies that we're conducting. We have previously done a clinical study on healthy newborns, but as the preterm differ quite significantly from a healthy newborn, this was the very critical step for us now to get approval to start this study. And to talk a bit more about the study specifically, this is a study that will evaluate the safety and performance of our Neola device in preterm born babies. So in terms of safety, that's mainly focused on these babies have very sensitive skin, that the probes that we're placing on the baby's chest in order to do the monitoring that they are safe for this vulnerable skin, but then also in terms of performance that we're measuring the way we should do. The study that is conducting of 10 preterm-born infants will be conducted at a neonatal intensive care unit at the Swedish hospital, the hospital of Borås, with principal investigator Gustav Lernfeldt, who is a neonatologist at Borås hospital. The babies will be from week 28 in gestational age and upwards and weigh between 1000 to 3000 grams. So a baby ranging from 28 weeks and upward have, in general, a pretty solid skin. So that's also why we're starting with this slightly this group that is slightly more stable than the ones that we will do later on in our planned US study. This is really a study where we want to make sure that we have that we receive information of any potential optimization that could be needed in terms of NEOLA or NEOLA probes as we're heading to the US. So this will really be an important study also from that perspective, evaluating how the clinical study protocol is working, how the probes are being placed on the baby's chest in the right way, all those type of operational details. so that we have the opportunity to really optimize before we go to our next planned study. So in general, I would say that this is a very exciting phase for the company. It's also a phase that's associated with more complexity and risk. And we're going to do our utmost in order to receive as much data as possible preparing for our next study. I also got the question in terms of the length of the study in some of the comments before this presentation. And we are estimating that the study will run for four months. And we are currently doing the contract with Bourras and site initiation will follow. And then we will do a press release as we're doing the first patients included in the study. So it will be a very exciting spring and summer for the company here and now moving forward. And with that, I leave over to the financial summary by David.

Yes, thank you, Hanna, for that perfect presentation. As we close the 2024, as Hanna's mentioned, we kept significant steps towards certification, checking several key boxes along the way, of course. And this has been all with continuing firm cost awareness from the earlier periods. We keep the same burn rate as earlier. Although with those plant studies that Hanna just told you about, the burn rate will increase. We understand that. But with negotiation with partners and our production department, we believe that we have kept the cost for the plant study at a very good level. If we look at the year to date, the operating expenses has increased by 1.8 million compared to last year, ending up at 19.6 million kronor. With that amount, we have conducted the human factor study that was very successful. We built additional Neolas and we have strengthened the team with several employees. The development cost for the year has amounted to 11.1 million SEK. This is a small decrease from 1.1 million compared to last year. And this amount will most likely increase during the year of 2025 when we continue to prepare and progress with the clinical studies that Hanna told you about earlier. Moving on to the next slide, Hanna. As you all can see, our big shareholders keep faith in the company. There hasn't been any major changes or almost no changes at all. We're very happy with that. With that, I'll leave it to you, Hanna.

Well, thank you, David. So to sum up 2024, as you've seen, it has gone according to plan and we have achieved major milestones. As we're now focusing for 2025, clinical study is our key focus area of the company, along with the regulatory process. We have an FDA first approach in terms of the regulatory process, but we're also making sure that We are fulfilling the key parts of a future CE mark application. And then we continue our market preparations in the US, focusing a lot on our relationships with key opinion leaders, because that's really how you get sales in the next step as well. So with that, just summing up, our next quarterly report will be released 9th of April. And you can keep following our presentations with Red Eye and also on the company's webpage and in social media. So thank you so much for listening today. And I'm really happy to address questions.

Thank you so much for the presentation here. And as you mentioned, we will now carry on with some questions. Maybe you mentioned this in the presentation, but which hospitals in Sweden is the clinical pilot study plan to be conducted at? Is it confirmed and something you can communicate?

Yes, we can confirm that we're going to perform the clinical study at Borås Hospital in Sweden. This is the only site where we're conducting the clinical study. It's going to be then on 10 patients and principal investigator is neonatologist Gustav Landfelt.

Thank you. Will you inform shareholders via press release when it starts or only when it's complete?

We will do a press release when we have the first patient included in the study, and then we will communicate when we have the final results from the clinical study.

Thank you. Do you hope to be able to start study in Sweden during H1, or what is the approximate timetable here?

Our ambition is to start the clinical study during the first half of 2025.

Thanks. Do you see any risk that the results from the Swedish study could delay the US study?

There is always risk regarding clinical studies. It is complex. You can get unforeseen events. With the current plan, we are according to schedule doing the clinical pilot study in Sweden during the first half of 2025. And we will initiate the US study. Once we see that we have solid results from that study, there could be things that we need to optimize based on the results from the clinical pilot study in Burgos. And then we will communicate if that is the case once we have the final data.

Thanks. What is the timeline for initiating the Pivotal Clinical Study in the US and what factors could impact the schedule?

So the Pivotal Clinical Study as communicated is aimed to start after the pilot study in Sweden. We have been in close collaboration with two American clinical sites for over a year. We have a clinical protocol that has been aligned with the FDA in a meeting in 2024. And we have quite some progress in terms of those relationships.

Thanks. Do you expect to increase the number of employees in 2025?

Yes, we aim to strengthen especially our technical team during the year, preparing for this clinical phase where we will also receive a lot of data. So in line with our growth plans, we will strengthen the team during this year.

Thanks. Maybe you already answered this, but how soon after the clinical study in Sweden do you believe that you could initiate a US clinical study assuming everything goes according to plan?

So in terms of when you can start a clinical study, you need an approval from the hospital's IRB boards. That is something that we're in preparation and discussion of. You also need to have signed contracts with the US hospitals. We are also in discussion of that. There are no contracts signed yet. So there are a couple of different things that are moving elements. I would, however, say that approximately three to six months after good results from a pilot study in Sweden, we could potentially start a U.S. study.

Thank you. Looking a little bit to the financial side, your operating result, they oriented slightly in 2024. How do you view your capital needs going forward? Are any of the plans to raise additional funding?

So as a pre-revenue development company, financials is always on the agenda. And we will communicate that according to the regulations of the market. I would, however, say that we feel a strong support from current shareholders, and we're delighted about that.

Thanks. Moving on to the last question here, maybe early stages, but how do you view the pricing of Neola in future commercialization? And have you received any indication of willingness to pay from hospital insurance companies in the US?

Yes, we have done market research with payers of medical device at large children hospitals in the US, and we have an indication of that. We have not put down our foot yet in terms of the exact pricing. So that will come as we're closer to market. We do, however, see that we will be able to have healthy margins in line with industry.

Thank you so much. That was all the questions we had. So thank you, Hanna and David, for presenting here today. And thank you all for tuning in. I wish you a pleasant weekend.

Thank you.