Sedana Medical AB (publ)

Hello and welcome to today's webcast presentation with Sedona Medical. With us presenting today we have the CEO Johan Lestal and CFO Johan Spets. We'll do a Q&A after the presentation and you can either type in your question using the form that's located to the right or if you're calling in and would like to ask a question please press star 9 to raise your hand and star 6 to unmute. We will then announce if it's your turn by saying the last four digits of your phone number. And with that said, please go ahead with your presentation, Johannes and Johan.

Yes, thank you very much for that kind introduction. Very welcome to Sedana Medical's Q1 report 2024. Let us begin on page three, please, with the highlights of Q1, this is now my 10th quarter at Sedana Medical and of course one that I'm very, very happy with because it really demonstrates the progress that we have made. And it's very satisfying to see that all of our hard work is translating into visible results. If you have followed us for a while, you know, of course, that the company is very focused on three strategic priorities. First, to bring Sedana back to a steady growth path in our existing business. Second, to reach breakeven in our ex-US business as a first important step towards our longer term profitability aspirations. And these two together, so a healthy growing business and the profits from it will form a stable platform for our third priority to make headways towards our US approval and prepare for the launch in our largest potential market, which puts Sedana on a different growth trajectory. In 2024, we've come out of the gate strong. We have set a new all time high in sales with 48.8 million SEC, which is up 29% versus last year or 28% excluding the minor exchange rate effects we had during the quarter. I'm very, very happy that like last quarter, all of our regions have contributed to the growth. We had very solid growth in Germany and the high teams. In our other direct markets, the pricing and reimbursement approval in Spain and especially the MHRA approval in the UK are showing effect. And in our distributor markets, we've seen the first order from our main partner in South America since 2022, which was worth 1.486. That order is worth noting is not recurring, as it's expected to be enough to meet the in-market demand for roughly a year in Mexico and Colombia. But also excluding this order, we would have seen higher sales in Q1 than in any other quarter before, including the COVID-19 period. Big progress also on the profitability side. For the group, we were still slightly negative by 1 million SEC, but we do show a positive EBITDA of 1.6 million SEC for the ex-US business. Admittedly, there was a positive FX effect of 2.3 million. That has helped a bit, but it's very, very clear that we are very close to a P&L with the EBITDA imbalance, which is a very, very important milestone and one to be proud of, especially considering that I had to report the biggest EBITDA loss in Sedana's history only 14 months ago after the post-COVID year 2022. Therefore, I owe a big thank you to the entire Zalana medical team that has bought into and also executed a strategy that focuses on both streamlining the organization and simultaneously investing into profitable growth opportunities and grow the business. The cash balance stands at 361 million, which means that we continue to be financed to execute on our plans, including the US study and a launch in the US. Speaking of the US, you might have seen that we have had a busy morning with two press releases going out. Yesterday, we have recruited The last two patients for our INSPIRE ICU 1 trial and also our second trial, INSPIRE ICU 2, is getting closer to enrollment completion with currently 23 out of 235 patients that are still remaining. So we'll soon be done enrolling patients, which also means that we can again leave our timeline unchanged. We're still planning for an NDA submission to the FDA in the first quarter of next year. If we then turn our attention to page four, we can have a look at the longer-term sales development with a sharp increase during COVID-19 and the following significant decline in 2022. The recent years have been quite a rollercoaster ride, but with 2024, we are leaving the last shadows of the global pandemic behind us as we now aim for a new all-time high in sales this year and Q1 puts us well on track to deliver on that and also gives us a little bit of a head start compared to our financial full year guidance. Then let's jump to page five please. I like this slide a lot as it shows the impact of all the hard work we have been putting into executing our strategy. We've worked very hard to streamline our entire organization, especially in our headquarters, we have reduced cost in non customer facing activities across the company. And we've also cut back in countries where we did not see the momentum and the bottom line contribution that we were expecting. And we have done all of this to, of course, improve the bottom line, but more importantly, to be able to free up resources that we could invest in the front line, specifically in countries where we are operating very profitably and see strong growth momentum. For example, if I look at our German and Spanish teams, both very clear. Investment cases, we have increased the headcount of our field personnel by approximately 40% since the end of 2021. And that's in a time where the overall headcount in the company has decreased quite significantly. So quite decisive measures that we have taken, which also translates into quite substantial swings in the P&L. On the sales side, you can see the typical seasonality with less sales in the summer quarters. But overall, the trend is very much going in the right direction. And at the same time, we have moved from an EBITDA loss of more than 83 million SEC in 2022, which was a minus of 68%. to a P&L that shows only slightly negative EBITDA in Q1 2024 or even slightly positive looking at only the ex-US part. So there's no doubt that we are stronger and healthier business today. If we then move to page six, please. I would like to talk about our performance By region, in Germany, we again saw a slightly lower number of ICU patients than the year before. The main reason here is still that ICUs are struggling to fully staff their teams, and as a consequence of the staff shortages, have to limit the beds that they fill with patients. Again, a word of caution here, after the end of COVID, we do no longer have the same quality and granularity of publicly accessible data. So, for example, these numbers include both intubated and non-intubated patients, but they do show a certain trend. And anyway, against those slight market headwinds, we had a strong quarter with 17% growth in euros. What we see here is the impact from having extended the team and new colleagues getting up to speed and also starting to deliver. And also the results from our overall focus on field force effectiveness measures, such as maximizing the time we spend with customers, targeting the right accounts, enhancing the visit effectiveness, etc. On page seven. we can have a look at our other direct markets. Again, year-over-year growth above 50% and another great step forward towards our objective to become a little less dependent on Germany These markets combined have now reached almost 30% of our total sales, which is great to see. The biggest contributor, at least in absolute terms, is still Spain. We had a great year last year with updated treatment guidelines, pricing and reimbursement approval, and an expanding customer base, and we continue to really benefit from that, and the very high growth rates are still not slowing down. Great news also from the UK, where the Admittedly, long awaited MHRA approval together with some changes in our go-to-market approach have indeed led to a significant acceleration of our sales growth. So in that case, it seems we have reached an inflection point in the UK and I'm really looking forward to seeing further growth. In France, growth was a bit slower than we expected during the quarter due to some unfortunate sick leaves that we had on the team. But that shows also a little bit how much we depend on our teams being out there and present with customers. So in that quarter, we couldn't have present with customers as much as we would have liked, but we still see growth and there are great results. further growth opportunities in some important university hospitals that we have started last year and a couple of tenders that are underway as well. Then let us go to page eight, please, where we see our distributor business representing approximately 10% of our sales in the quarter. For that part of the business, we have been through a pretty long period of declining sales as it took a long time to get COVID out of the system, where we saw a lot of extraordinary demand in several regions of the world and inventory effects have hurt the business a lot. Q1 was then a quarter where we have received the first order from our main South American distributor. It was the first order since 2022. And since the last order was two years ago, it's really good news that we're coming back to a normalization here as well. It's worth pointing out that many of our distributor partners do not buy as frequently as our customers in the direct markets do, which usually has to do with shipping costs, import tariffs, et cetera. So also the South American order is one that is expected to fulfill the demands in Mexico and Colombia for approximately a year or so. So we will not see this kind of order every quarter. Outside this one order, the other distributors in aggregate show the small growth of 3%. Then let's have a look at page 9, please. So where does all of this put us with regards to our full year guidance that we have published? We have promised to deliver a full year sales growth between 14% and 18%, excluding exchange rate effects, which compares to last year's growth of 16% and EBITDA break even in our XUS business during this year. On the sales side, the Q1 sales clearly The growth exceeds what we have guided for. We had 28% excluding exchange rates. So we, of course, happy to have generated a head start versus the full year target already in Q1. And also on the EBITDA side, technically, we've already done what we promised with a positive XUS EBITDA in Q1. Q1. So great start for sure. Of course, it's too early to declare victory and we will continue to work hard on both the top and the bottom line. We will leave the guidance unchanged for now as it's still early in the year. But of course, we see ourselves very well on track towards our goals. So let us switch gears to the United States on page 10. The US is our largest growth opportunity and one of the reasons why we are so focused on turning the ex-US business profitable as we want to be able to launch in the US based on a stable platform in Europe and one that generates cash. we have estimated the US market potential for our products to around 10 to 12 billion SEC, which is three times as much as in our current direct markets combined. And this is because, of course, a higher number of ventilator beds, but also a medical practice that favors intubation and mechanical ventilation more than we do that in Europe, and also an overall higher price level. So that attractive commercial opportunity coincides with the fact that we are dealing with a very concentrated customer base compared to other markets. Less than 5,000 hospitals have intensive care units. Less than 3,000 have units with more than 10 beds. And those tend to be in the metropolitan area. So you don't need hundreds of key account managers to cover our customers. And based on that high commercial opportunity and comparably manageable investment size, It has led us to the decision to build our own commercial company in the U.S. to launch Enhatedation onto the U.S. market. Having said that, as we've said before, we also keep the flexibility to complement our own presence with a potential partnership if we assess that a potential partner could help us get faster sales uptake, broaden our reach, leverage existing relationships, etc. If we could create more value overall, then of course we would consider that. We're still keeping the same timeline. We want to submit our NDA to the FDA in Q1 of next year. So in a year from today, or a little less, the dossier has hopefully already gone to the FDA. As we've said, one clinical study is done, Inspire ICU 1, and the other one, Inspire ICU 2, is only missing 23 patients. What will be happening or what is happening after the enrollment is done is a three and six months follow-up where patients are receiving a call to assess their quality of life, their cognitive abilities, psychological state, etc. And we are using that time while that long-term follow-up is going on to write big parts of the data dossier already. That work has actually started already a while ago. We will do a database log on the main part of the study, so a lot can be done in parallel here. Adding the actual long-term data when it comes in will be relatively quick, so we can save time overall. If we submit Q1 next year, which is very much the plan, the standard would be a 10-month review time minus potential benefits from the pass-track designation that FDA has granted us. There are of course cases where fast track products were approved in six months instead of 10. But again, as I've said many times before, the FDA is calling the shots here. We can only bring forward the best possible arguments, but at the end of the day, it's the FDA that decides and they will only do that after the submission. So we're still making no promises on any kind of shortcuts here, even though we'd be very happy if we get them. If we turn to the next page, page 11, it's worth reminding ourselves that we're dealing with the same primary and secondary endpoints that we have successfully shown in our European trial, Z001. Does that mean this is a zero risk trial? No, of course not. There's always risk in a clinical trial. But as there's no medical reason why our therapy would work in German patients, but not in American patients, that risk is at least reduced compared to the average phase three trial. The primary endpoint, as in Europe, is showing that you can keep patients in a predefined target sedation range. And it's really the secondary endpoints that will hopefully show the real benefits versus propofol, as we have been able to do in the European trial. For example, if I were to highlight one of them, we know from our European trials that our inhaled sedation patients need less opioids, 30% less in Z001 and even 50% less in our pediatric trial without these patients experiencing more pain. So now that's, of course, a great clinical argument in our everyday life in Europe already today. But if there is one country in the world that is most sensitive about avoiding opioids because of the devastating opioid addiction epidemic that's going on and more than 100,000 drug overdose deaths every year. It's of course the US and also the FDA, due to their own history, is very, very much focused on reducing the use of opioids. So bringing a therapy that will reduce the use of opioids in a very vulnerable patient population would be a major plus on the US market. We can then go to page 12, please. This is also a slide that I like a lot because it really shows the caliber of clinical trial sites that we are working with. You will find the most prominent institutions in America on that list, including, for example, Johns Hopkins, Columbia, Mayo Clinic, Cleveland Clinic, Harvard, Mass General, and the list goes on. I'm just naming a few here. And that is not just great from an academic point of view. the space just gather around this novel way of sedating patients in the ICU is just hugely encouraging and provides a great platform for future commercial success. Then page 13 gives you a little impression on the conferences, symposia, events, etc. that we have dealt with inhaled sedation in Q1. I'm always very happy when we fill a room with people that are as excited about inhaled sedation as we are and if I compare Two and a half years ago, when I started in this role, we did fill the big rooms in Germany, but we're still very kind of exotic in other places. And today we really see hundreds of attendees at many of our events in different countries. So while you can't one-to-one translate attendance of a symposium into sales performance and nothing happens overnight, of course, I do see that inhaled sedation is developing into a true global movement in the ICU space. It's also worth mentioning here that, for example, the events that you see here in Brussels, ICICAM, and also the one in Barcelona, there were very well attended sessions of inhaled sedations without Sedana organizing them. So in these cases, it was one of the study investigators from the U.S. and the top European leaders from Spain. that were asked directly to present on inhaled sedation. So it's really great to see that there's enough pull for learning about inhaled sedation, even sometimes without us having to push. So if we then move to the next slide, we're entering the finance section, and our CFO, Johann Spitz, will take you through the details here.

Thank you, Johannes. Yes. In terms of the financial results for the first quarter of 2024, Johannes has already mentioned some of these numbers, but it's always useful, I think, to go through them in a bit more detail. So we report net sales in the quarter of 49 million SEK. That's up 29% relative to the same period last year, or 28% if we exclude currency effects. Sales in Germany increased by 18% year-over-year, or 17% excluding FX. Our other direct markets show very strong growth, again, 55% up relative to a year ago, or 54% excluding FX. And as Johannes pointed out, it's mainly driven by Spain, as we've seen in recent quarters as well. Now also the UK starting, albeit from a lower base, but very strong growth rates from the UK as well. And the third bucket that we present in terms of our sales, our distributor markets increased by 45% during the quarter compared to last year, 44% excluding ethics. And again, that's driven mainly by a large order from our main South American distributor. Excuse me. Our gross profit for the quarter was 35 million SEK, which corresponds to a gross margin of 71%, which is down from 73% in the same period last year. And this decrease in gross margin mainly relates to the product mix, and in particular the fact that we are now selling proportionately more of our pharmaceuticals, Zetaconda isoflurane, in terms of share of our total sales. EBITDA for the quarter, for the group as a whole, was slightly negative, so minus 1 million SEC. But importantly, it's a big shift compared to a year ago when it was minus 11 million SEC. And if we look at the EBITDA excluding the US, so looking at our ex-US business today, report a positive EBITDA of 2 million SEK, which of course is a massive milestone for the company. If you look at what's driving this improvement in EBITDA compared to a year ago, it's mainly sales. So if you look at OPEX, we report a similar level of OPEX this quarter as we did in the first quarter of 2023 of 44 million SEK. So relatively stable there. What this hides to some extent is that we continue to efficiency measures that we have put in place. In the first quarter of this year, those gains were offset by increased R&D expenses, which is linked to the fact that we capitalized slightly less or had a slightly lower capitalization rates than the same quarter last year. But overall, OpEx in total very much in line with last year. Also worth pointing out here is that the EBITDA is helped, as Johannes also pointed out earlier, by a positive FX effect of 2 million SEC. But still, of course, a clear and important improvement in terms of EBITDA And going forward, we continue to find ways to streamline our headquarters and administrative functions in the company to find further cost reductions, while at the same time also investing and adding resources to our frontline So during the quarter, we added four colleagues in Sedona Medical. So we're now at 90 people, including consultants at the end of the quarter. That's up from 86 at the beginning of the year. And again, that's related to us adding field force personnel in our prioritized markets in Europe. And then if we turn to the cash flow and cash balance on the next slide, And we report a cash position at the end of the quarter of 361 million SEK. That's compared to 382 million at the beginning of the year. And this decrease is driven by investments in capitalized development expenditures, which is primarily our US clinical trials. If we look at the components of the cash flow during the period, we have cash flow from operations of positive 8 million SEK, that is including interest received of 4 million SEK and also a positive working capital effect due to delayed payments related to our US clinical studies. Cash flow from investments in the quarter, there you see we report a large positive number of 103 million SEK, compared to a larger, even larger negative number in the same period last year. And those numbers are very much influenced by us investing last year and this year getting repaid our deposits. that we invested in to achieve better interest rates than we would in our normal bank accounts. So trying to adjust for those flows, we can see that investments in intangible assets, so mainly again our US clinical program, that type of cash flow from investments totaled 52 million in the quarter. And then finally, in terms of cash flow, so total cash flow, again, if we adjust for the deposits and the impact of that in this quarter and the corresponding quarter of last year, we see total cash flow amounting to minus 45 million for Q1 2024. Perhaps just to add for some further explanation, so we have that Total cash flow amounting to negative 45 million SEK. But then if you look at the top of the page here, you see that our overall cash position was only reduced by 21 million SEK in the same period. So the difference there is related to the FX gains that we make on our cash position that we hold in US dollars. So as you may remember, we have approximately 75% of our available funds in US dollars. So that's that effect coming through and helping our cash balance at the end of the quarter compared to our cash flow during the period. And again, we expect to be fully financed until break-even and to be able to execute on our strategic plan, including US approval and launch. And as a reminder, we have no long-term debts in the company. And then on the next slide, you can see our largest shareholders at the end of the quarter, and we remain very grateful for your continued support. With that, I will hand back over to Johannes.