Sedana Medical AB (publ)

Hello, welcome to today's webcast presentation with Sedona Medical. With us presenting today, we have the CEO, Johannes Dahl, CFO, Johan Spetz, and CMO, Peter Sacky. 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 then star 6 to unmute yourself. And with that said, I'll give the floor to you guys. Please go ahead with your presentation.

Thank you. A warm welcome to Sedana Medical's Q3 report. Thank you very much for joining us today. As you've heard with me today, I have our Chief Medical Officer, Peter Psaki, who will talk about our progress on the U.S. side in just a little while, and our CFO, Johan Spitz, who will take us through the financial update later on. If we start on page three, please. With the highlights of the third quarter, our corporate priorities have, of course, remained the same. You have heard me talk about those numerous times now. Number one, achieve steady growth in our existing markets. Second, to reach breakeven in our ex-US business as a first important step towards our longer-term profitability aspirations. And these two together, a healthy growing business and the profits from it will form a stable platform for our third big priority, which is to make headway towards our U.S. approval, which could put Sedana on a different growth trajectory in the future. On the sales side, we've had a good quarter with 40 million SEC net sales, which is the highest Q3 we've had in our history. That's also been the case for the first two quarters this year, and frankly, also what you would expect to see in a company with the ambition of reaching a new all-time high in sales, including the exceptional COVID-19 years. There were some exchange rate distortions during the quarter, but when assessing performance, we are, of course, looking at the growth excluding currency effects. And that number was 20% year over year, which I'm very pleased with, especially as all our regions have contributed to that growth. That puts us at 19% growth year to date and therefore above our sales guidance of 14 to 18% for the full year that we have communicated at the beginning of the year. And based on that good performance so far, we feel comfortable raising the sales guidance for the full year and now aiming at net sales growth of 17 to 20% excluding exchange rate effects. So from 14 to 18 to 70 to 20, which is now our new guidance. Turning the focus to profitability, which you know is a big focus area for us during last year's restructuring, we turned Sedana Medical into a much more commercially oriented company by streamlining our corporate headquarters and pretty much all non-customer facing activities. to allow us to shift resources from the headquarters to the front line and implementing a disciplined investment approach, focusing on countries with strong momentum and good local profitability. And this strategy continues to work. Q3 seasonally tends to be the lowest sales quarter, which is also the case this year. And despite that, we are seeing good progress on the bottom line. We had an ex-US EBITDA of minus five million sec which compares to 12 million sec last year minus 12 million sec last year and also minus 11 last quarter also during the quarter we have signed an agreement to acquire our main supplier innovative cical which according to our projections will add two percentage points to the ebitda line over time once we close that transaction and have worked through the existing inventories On the U.S. side, enrollment of both phase three trials in the U.S. is completed, which is a great milestone to reach, but also important from a cash perspective. The main driver of our cash out over the last quarters was payments to the hospitals for recruiting each patient. That's done now. There's a bit of a lag effect, as you can also see in this report. while the invoices are coming in and the invoices are being paid and so forth. But we can then expect our burn rate to come down significantly next year. And it will be a small part compared to this year's level. We've also taken an important decision with regards to our submission strategy. As you know, any FDA process has a fairly high level of uncertainty. And as a company, you don't have all aspects of that process under control, as in the end, it's the FDA calling the shots. So our strategy to mitigate this uncertainty is to seek very frequent interactions with the agency to align on as many elements of the submission as possible to avoid surprises later on. And in one of these recent interactions, the FDA has actually recommended that we integrate our European clinical trial into the U.S. submission by pooling it together with the two U.S. trials, so running an analysis across the This is different from what we have expected based on previous input, where the European study had got rather limited weight. On the highest level, that is very good news, because we know that our European trial had very favorable data. And now the FDA will not just be looking at the two US studies, but also a pooled analysis combining all three studies. So the two US studies and our European studies, which adds 300 patients, again, for whom we know that we had positive results. We met the primary endpoint, we had superiority in several secondary endpoints, and we had good safety. And therefore, this makes the file even more robust and strengthens the submission overall. So we have decided to follow the FDA's recommendation here. It was a recommendation, not a strict requirement, but we will follow their advice. If we find that this pooling is technically and clinically feasible, Peter will speak more about this and we execute the plan. There will be an implication on the timeline, which will shift by approximately a year. And we will also add 20 to 30 million second additional cost but weighing the pros and cons here we firmly believe that the integration of 300 additional patients with favorable outcomes and a strengthened submission is well worth it and will create more value in the in the long term if we then move to page four please Here we're looking at the sales development over the longer term. And you can see that what I already talked about, the restructuring of the company and especially the shift of investment towards the frontline teams and field force effectiveness measures we have implemented have led us back on a growth path. So after nine months in 2024, we are 19% above last year. The two COVID years and especially 2021 still stand out as a trend break here, but of course, we are confident that we will reach a new high in sales this year. If we then move on to page five, you can again see the impact of our work on the bottom line. You see some seasonality in the sales on the top part of the slide, but the trend is quite clear after the biggest EBITDA loss in the company's history in 2022. Q3 specifically usually has the lowest sales, but both for XUS and on a group level, we see a good improvement versus Q3 last year and also compared to the last quarter, despite slightly lower sales. And again, we continue to be fully focused on turning our XUS business profitable so we can build on a stable financial platform for the US launch. And just as a side note, the shift in the US timeline to integrate our European trial will put us in a position where by the time of launch, we'll have an even stronger ex-US business, which will hopefully be generating cash at that point in time. If we then go to the next page, page six, please. It feels some time ago that we announced the transaction of Innovativ Sikal, but it was during the quarter and is an important building block towards building a long term profitable company. So let me briefly recap what we will do, why this is a very good deal and what will be the financial impact. And we will acquire our main supplier called Innovative Sikal based in Klang, just outside Kuala Lumpur in Malaysia. Main supplier means that they are not only our only supplier, but they manufacture our main device, the Sedaconda ACD and certain accessories such as adapters, for example. And therefore, they represent a sizable part of our cost of goods. And the purchase price is 34 million SEK, of which 75% will be paid upon closing, which we expect in still this year in Q4. And then 25% of the price are deferred by two years. There are two important reasons for why this is a good deal. Firstly, we gain control of the supply chain of our main product. So we are less subject to price variations and control of future products. scale up of the capacity to meet our growth plans. And over time, we can implement measures to further enhance productivity as well. And secondly, that's the obvious one, we are expecting to add 2% of our EBITDA once the existing stock is depleted. So I see this as a logical next step in building a long-term profitable company. We will pay for the transaction out of existing cash. The deal will pay back quite fast. We expect a positive impact on our operating cash flow already from 2025. And we should have a net positive overall cash effect from 2028 on. And importantly, we continue to be financed to execute on our plan also with this acquisition and the incremental costs on the U.S. side that I've talked about. Then if we go to the next page on page seven, let's have a look at our financial guidance for the full year. As I said, on the sales side, we have guided for 14 to 18% net sales growth. We continue to track above that range with 19% year to date. So we have now raised our guidance and at the same time made it a bit narrower. So the new guidance for the full year is now 17 to 20% excluding currency effects. We also had guided for reaching breakeven in our ex-US business during the year. We've reached that milestone in Q1. And as you know, with the seasonality in our business, Q2 and Q3 are quite a bit lower from a sales perspective as we had much less ventilated patients in the ICU. So EBITDA could not be positive yet, but as I've talked about on the previous slides, we will continue to do everything to steadily improve our profitability over time. So overall, well on track on the profitability side and a raised sales guidance. On page eight, the next page, let's look at our Q3 performance in the different regions. Germany has recovered from a comparably weak Q2 and specifically a weak June when we had very, very low numbers of ventilated patients in the ICU. In Q3, we saw even less patients than in Q2 and the average German ICU reported 9% less patients per day compared to Q2, which is not atypical for Q3 where people tend to be on vacation and generally healthy. Despite that decline, we reached approximately the same level of sales as in Q2, which in euros meant a year over year growth of 9%. So Germany for me very much continues to be an investment case with very attractive local EBITDA margins and still solid growth. So we continue to invest in further growth and continue to focus on our commercial execution, specifically in Germany, working on growing penetration of inhaled sedation in high potential customers where we still have a lot of upside. Then on page nine, Our other direct markets again delivered a very strong quarter with 49% growth in local currencies. Spain continues to perform very strongly. So the combination of a strong execution, updated treatment guidelines and pricing and reimbursement approval continues to show an impact. And I'm also very pleased that the UK sales have significantly accelerated throughout this year after the MHRA has finally given us approval end of last year. France, the third big market in this group of countries, has had a rough year. And with rough year, I mean flat sales. And the reason for that is two vacancies from sick leave that we were not able to fully compensate for. Our sales are very sensitive to our promotional activity in the field and with our customers. So if we're out there, we're seeing the growth. If you're not out there, you see the sales slow down. And at the same time, some promising tenders have been delayed. So overall, we're looking at a quite a flattish sales development this year, which for us and for us as a growth company and for our growth aspirations is not good enough. So we're very focused on addressing that remaining vacancy. So we are back in the field with full force and I see good opportunities to accelerate the growth going forward again. If we then go to the next slide, page 10, please. As many of you know, we had a long period of time where it was less positive to look at the performance in our distributor business. We had declining sales for almost two years as a consequence of excessive stock building during COVID-19. We never Let a good crisis go to waste. So we have used the time to restructure the team and implement a new approach, which focuses our support on a few select key partners with high sales potential and positive momentum. And what we see now in the third quarter is actually the fourth quarter in a row with solid year-over-year growth. In this case, 30%, excluding currency effects. And that growth is mainly coming from these prioritized partners. So our strategy is working. Then if we go to page 11, please. And switch gears to the United States. As you know, the U.S. is our largest growth opportunity and one of the reasons why we are so focused on turning the ex-U.S. business profitable as we want to be able to launch in the U.S. based on a stable platform in Europe and a cash generating business. We've estimated the US market potential for our products to be 10 to 12 billion SEC, which is three times larger compared to the 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 in Europe and also an overall price level. So all of that combined shows in that high potential. We also see a very... product market fit given that most mechanically ventilated patients in the in the u.s fall under a drg system which means that a hospital makes more money if they implement therapies that reduce time on the ventilator and reduce time in the icu both benefits of inhaled sedation that we have shown in europe in addition to that we know from our european trial that our inhaled sedation patients needed less opioids so 30 percent less opioids in in the adult trial and even 50% less in our kids' trial, our pediatric trial, without the patients experiencing more pain. And the country in the world that is most sensitive to avoid opioids because of the opioid addiction epidemic and more than 100,000 drug overdose deaths every year is the U.S. So bringing a therapy that will reduce the use of opioids in a vulnerable patient population would be a major plus on the U.S. market. And we also fit quite well with existing treatment guidelines, which are very focused on fast wake up, speedy recovery, early activation. And again, these are things that we're seeing every day in Europe and will hopefully also see in the US data. And on top of that, Peter and his team have done a tremendous job in building a network of key opinion leaders already in our clinical trial sites, who, as you know, have some of the premier names in the US hospital landscape. that are very supportive of the therapy and already very active, beating the drums at different conferences. So to sum it up, we have a high market potential, a good product market fit, a KML network that's eager to get started, and high-level results that are upcoming soon. And with that, I'll hand it over to Peter to go a little bit deeper into the US and, of course, specifically the updated submission strategy.

Thank you. Okay, so slide 12. As Johannes mentioned earlier, we have taken the decision to integrate the European SED-01 trial in the U.S. submission. And this was all based on recent FDA input in a Type C meeting response where the FDA proposed, recommended that we integrate include SED-001 in a pool of fixed analysis across all three clinical trials. And we had the option not to do so, but we need to justify why we not do such pooling. And after careful analysis, we decided that we should follow the advice from the FDA and integrate the European trial. in this pooling strategy. And that, as Yannis mentioned, includes 300 patients. And that's from the CESIR-1 study that was published in Lancet Respiratory Medicine in 2021, where the outcome was very favorable. And sorry, this means that the pooling of that study together with the US studies will will make our submission more robust and in a way you could say it's a way of de-risking our US submission as well. The patients, the ICUs are slightly different in Germany maybe than the US, but Germany represents a more mature and experienced sort of user base. So It's still relevant, I think, for the future in the US to include these data and outcomes. And this has implications, though, and that's that we have more data to submit, more granular data to submit, and more data to merge. And this will imply significant work and, as you mentioned, also additional cost and additional time. And if we move over to slide 13, So to describe a little bit about what this really means practically is that there's now a phase ongoing, the feasibility assessment phase, where we are looking at the data, the granular data in 701 and the US trials there. the format of the data and the way the endpoints have been derived and looking at ways to merge these data so they make sense. And that's significant work to get that done together with the statisticians, the cooling statisticians, individual study statisticians. And we have high hopes that this will be possible. And if it's possible, we'll move from the feasibility phase into the actual pooling of the data, which will be once we have the data analyzed for the studies. And the mapping work, as I said, is ongoing on how to convert the data sets to match with each other. And also specific analysis plans are being developed, including a European study. And once we have all these things set, we will approach the FDA and get a green light from them on the pooling strategy and also on the study data standardization plan. If all goes well, which we do expect, that will then render extensive standalone documents related to the summary of effectiveness and summary of safety, the so-called ISE and ISS. And in these kind of documents that are typically several hundred pages long, You do both side-by-side comparisons of the individual studies, but you also look at the pooled data. It's like a meta-analysis where you do subgroup analyses, and we have, I think, six or seven different subgroups that will be looked at. For example... young versus old patients, patients with high severity of illness versus patients with low severity of illness, sex, race, et cetera. And these analysis will be run across the different populations in the integrated summary because it's the intention to treat population, the protocol population. And in the integrated summary of safety, we're looking at different safety populations. So all randomized patients, randomized patients and running patients, et cetera. So as you can understand, it's a, very many different results that will be generated. And these results require a careful analysis and consideration and rationales or discussions. And these things take time and they have to take time. The FDA will be looking at the data themselves and we need to know the story ourselves when we submit. So if we move from slide 13 to slide 14, As you know, the two studies were run across the whole US and we had 31 clinical study sites that were involved. And these study sites have many champions that are looking forward to support the development of inhaled sedation in the US and to be our ambassadors at the time of launch. So we're looking forward to continue working with them in preparation for a successful launch ahead. And then we can move to slide 15, and I hand over back to you, Johannes.

Yes, and I've covered some of this already, but of course, our view on the market potential in the US and also our go-to-market strategy have not changed. We see a market potential of 10 to 12 billion SEC, which is approximately three times of the market potential we see in the market in Europe. And that coincides with a very concentrated customer base. So there's less than 5,000 hospitals in the US that have ICU care, a little less than 2,800 with 10 beds and more, so a little more sizable intensive care units. And these two things together, a high potential and at the same time, a manageable OPEX level to cover this concentrated customer base. It leads us to our strategy to launch ourselves. So we believe the best way to create value here is to deliver proof of concept ourselves. So we would like to keep control of the asset and capture more of the upside. And the reason we're confident about that is that we already can build on that very supportive network of key opinion leaders in these clinical trial sites. So we will make a targeted launch. where we build on these clinical trial sites as our lighthouse accounts, and then we will build sales territories around it. And that kind of a prudent, targeted launch strategy, we believe is the best way of creating value. And once that proof of concept is done, then we will have a choice whether we want to scale up ourselves, whether that is the right time to bring in an additional partner, I'm not excluding any options at this point in time, but the primary strategy at this point is to go ourselves. Back to you, Peter.

Thank you. We move over to slide 16. Q3 includes the summer months, July, August and September. We still had significant activities in different congresses. What's satisfying is to see that there are more and more congresses where inhalation is not driven by us but actually by physicians who submit abstracts and also by the committees who include inhalation in the program. For example, in the Extracorporeal Life Support Organization Congress in Detroit, they were invited speakers from Europe to talk about inhaled sedation in ECMO, both in adults and in pediatrics. The New England Clinical Care Pharmacotherapy Symposium had a presentation by John Devlin, the number one guideline author for the sedation guidelines that are used globally to speak about inhaled sedation. He was also one of our PIs in the U.S. study for a big group of pharmacists who are important decision makers in the U.S., And we also had activities driven by the Pan-American and Iberian Federation of People Care Medicine and Intensive Therapy webinar in the summer. And then we had some European Congresses also, and we expect to see more activity in the last quarter of the year. We move over to slide 17 and back to Johanna and Johannes.

Thank you, Peter. So if we take a closer look at our financial results for the quarter, Johannes has already touched on some of these numbers, but just to add a bit more context and color here. So we report net sales for the quarter of 40 million SEC. That's up from 34 million SEC in the corresponding quarter last year. So 16% growth in reported currency and 20% growth in local currencies. So what we see in Germany is growth of 6% in SEC or 9% in euros. Other direct markets, strong growth contribution, 44% in reported currency, 49% excluding currency effects. And as Johannes pointed out, it's mainly driven by Spain and UK. Our distributor markets increased by 24% in reported currency, so 30% excluding FX. And that is mainly driven by our prioritized distributor partners in Europe. The stronger sales and our continued good control of our COGS means that our gross profit is up to 28 million SEK for the quarter compared to 24 million SEK in Q4 last year. So slight increase in the gross margin, 71% for the quarter compared to 70% in Q3 last year. EBITDA, Johannes also showed this earlier, we are continuing to improve our profitability. So EBITDA for the group in Q3 2024 was negative 9 million SEK. An improvement compared to negative 13 in the corresponding quarter last year. EBITDA ex-US, which is an important metric for us, as you know, we report negative 5 million for Q3 2024 compared to negative 12 million. last year. What these EBITDA numbers reflect is an underlying OPEX level for the period of 43 million SEK, which is up slightly from last year. And that increase is partly driven by costs related to the acquisition of our main supplier, Innovative Seqal, that Johannes also mentioned earlier. So that OPEX is, of course, to be considered non-recurring in nature. But overall, what was important as a takeaway here is, of course, that EBITDA for us continues to improve as we grow sales and remain disciplined on the cost side. And that's, of course, still very much the plan for that to continue in the coming quarters. Then if we turn to the next slide, slide 18, please. Here we can take a closer look at our cash flow and available funds. So starting on the cash side, at the end of the quarter, we had 226 million SEC in the bank compared to 304 million SEC at the beginning of the quarter. So a negative change in the cash position of 78 million SEC, and that is driven by a capex of 36 million SEC. And then also important to note that other important drivers are a change in working capital of negative 20 million during the period and also a currency effect on the cash balance. As many of you know, we have a large portion of our cash in US dollars, so there is always a currency revaluation effect on those when the currencies move. So that was negative 11 million. So adjusted for the decrease in working capital and this FX effect, the change in the cash position would have been 47 million for the quarter. Some of the drivers there, so cash flow from operations was negative 29 million. And again, that's driven by a significant working capital effect of negative 20 million SEC. So other than that, of course, it lines up with the EBITDA for the period. Cash from investments for the quarter, I already mentioned that, negative 36 million. And that is, as you know, driven by our U.S. clinical study and now also the work preparing for the U.S. submission. So total cash flow for the period of negative 67 million SEC. Then, of course, as I mentioned earlier, there is also the FX effect, which then means that the change in the cash position adds up to the 78 million SEC mentioned previously. And with patient recruitment now completed in the U.S. clinical study during Q2 of this year, we now expect capex to be significantly reduced. And in particular, as we go into next year, 2025, And that is an important point that we want to highlight. That remains very much the case, even also when we consider the expanded scope of the US submission that we've announced today. And also, I should add, when we account for the acquisition of Innovative Cical. So we will see a significantly lower capex level in 2025, considering all of those drivers. And just briefly, also in terms of liquidity management, we have approximately 70% of our available funds in US dollars, and we have no long term debt in the company. So we expect to be fully financed to execute on our strategic plan for the company. And then if we move to the next slide, please, slide 19. This shows the updated shareholder list as of September 30th, 2024. Of course, we remain grateful for the support from our shareholders. And with that, I hand the word back over to Johannes.

Yeah, and let's look at our last page, page 20, to wrap things up. Let's just take a step back here and recap the investment case for Sedana Medical. Our business model lends itself to attractive profitability over time, and that is for two reasons. We continue to see good gross margins of 70% and up. And so by definition, we can become quite competitive. profitable as a business when we reach scale. And our customers, as we've said, is intensive care units, so a relatively small concentrated target group that can be covered with a reasonable operating expense level locally. And we've already seen a good proof of concept that this model works in our main market Germany, where the majority of intensive care units are already our customers today. The team is generating attractive EBITDA margins on a local level. And while we're not at the same scale yet everywhere, most of our countries contribute positively with local profitability by now. So we have the proof of concept and now it's all about reaching further scale, convincing enough hospitals to use inhaled sedation more broadly and achieving profitable growth as we have seen over the last two years. And here we have convincing clinical data on our side showing that patients really benefit from inhaled sedation. And equally importantly, we can also show that hospitals save money with inhaled sedation versus the previous standard of care. There's still lots of places to grow and create more countries that have good penetration as Germany. with regulatory approval in 18 countries in Europe and the largest commercial opportunity in the US still being untapped with the FDA giving us fast track designation. And let's not forget this, as Yuan also mentioned here, a solid balance sheet and a cash level that is sufficient to execute our plans. So that concludes our presentation. Thank you again for listening and we'll be very happy to take your questions.

Thank you very much for the presentation. And yes, now we'll jump into the Q&A section here. If you'd like to ask Johannes, Johan, and Peter any questions, you can either use the form that I showed you to the right, or if you're calling in, please press star 9 to raise your hand, and then star 6 to unmute yourself if you're giving a word. We've got the first person calling in with a phone number ending in 3089. Please go ahead. You have the word.

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Perfect. So yeah, I think I have a couple of questions relating to the US news here. First one, I think I'll take them one by one. So first one, why does this news come now and not, let's say, years ago? Also to that, when do you expect to be able to present the headline data from the studies? And if these look good, why is not that enough? I think there are quite extensive space tree studies in the US. That's the first question.

Yeah, so the question of why now and not a long time ago, as I said, we do have a strategy to be in frequent exchange with the FDA, which I think is the best way of de-risking the file. And in this specific instance, we have had an interaction with the FDA around the integrated summary of efficacy and safety. And here the FDA has come forward in that context, has come forward with a recommendation that is actually different from input that we had previously received. So initially the company tried to get the European trial involved in the U.S. submission. That was, of course, in our interest because we knew it was a successful trial with 300 patients. It was very similar endpoints. with favorable outcomes. So it would have made the submission stronger back in the days. The FDA was not amenable to that. So it didn't assign as much weight to the study. Now that seems to have changed. I can't fully explain why that is, but they have come forward with a recommendation to include the European trial in this pooling analysis. So it's not just adding the European trial as an appendix, if you like, but it's really running an analysis across all three trials, which adds 300 patients, which makes it more likely that you would hit certain end-pulled points with statistical significance and just makes the overall file much more robust. So, why now? It's a result of our continuous ongoing dialogue with the FDA. When it comes to the high level results, there's no change. So we are continuing to wait for those. We're looking at 5 million data points between the two US trials. So it's a massive amount of data. Once the data is being handed over to the statisticians, things will be relatively quick. So then it's simply running the programs, the statistical programs over the data. But it depends a bit on when our CRO is ready to hand over the data. So there's no news on that, no change in timeline. And then your third question baked into that is, wouldn't the US data have been enough? Why do you need the European trial? I could comment on that.

Yeah, please. Yeah, so just to explain that for the FDA, they, of course, are very curious to know how this works, especially in subpopulations. And their ask, I mean, for us, I think that their ask could have been expected earlier, but as Johannes was alluding to, the early assessments of the European trial was that it was not a well-controlled trial. That was all based on non-blinded primary endpoint assessment. But when one thinks about the European study, it's not too different to the US studies in that the US studies are blinded on the primary endpoint, but not on other endpoints. So in a way, I would say that the European study should have been as valid as the US studies at an earlier stage, but this was not the FDA's take. Now that they come with this request, We could choose not to try to pool, but that would mean we need to give good justifications. And the loss of those 300 patients would mean that it's also harder for the FDA and for us to understand any subgroup differences when it comes to both efficacy and safety. So on one hand, the FDA are asking this and it's it may be helpful for us to de-risk the US project. And on the other hand, they want to see the pool data. They want to see more precise estimations. And most importantly, I think they want to see subgroup analysis too, so that we can characterize this therapy appropriately. And this is quite recent use and it's taken some time for us to both evaluate sort of pre-feasibility discussions and also looking into the consequences when it comes to the work and the timeline. Hope that answers the question.

Yeah, thanks for that. And then I guess my follow-up, when do you expect this visibility work to have been done? And yeah, if you could shed some light on how challenging this is to do in reality.

Yeah, so in reality, I would say it's ongoing, but this is a joint venture between the clinical team, the study statisticians and the pooling analysis statisticians, where you need to go into the so-called SDTM data sets and look at the way that data have been mapped in the SED01 study, how they're mapped in the SED03 and SED04 studies. It was so much simpler just to pool the US studies because they are identical in design. The way that data have been mapped there is identical, whereas the SED001 study, that study started in 2017. Also, a simple thing like the primary endpoint, it may sound very straightforward to to pool the results, the proportion of time, but for assessing that or for getting the estimate on a patient level, there are multiple intercurrent events that the way the primary endpoint is derived. So for example, the way you manage rescue sedation in one study gives failure time of a certain number of minutes, say 30 minutes plus minus, whereas in the US studies, the failure time is different. And that depends on that the FDA have been very sort of interactive and picky about how they think we should different intercurrent events when it comes to penalty time or censor time. So just the primary endpoint is very complex. We need to now decide whether we go midway or whether we go with the German way or the US way. And then we need to get the FDA's blessing on the way we decide for that endpoint. The primary endpoint is the most complex. But even the second endpoint in the US trials, the opioids, There we compare, we use one type of unit, the fentanyl equivalent units. Fentanyl is the most commonly used opioid in US ICUs. We compare baseline with dosing during study treatment. In the German study, we simply compared the groups with each other. So every endpoint we want to do a pooling on, we need to both map the way we've collected data. We also need to decide what are we comparing with? Are we comparing with baseline or comparing between groups? And that's simply quite a lot of work. And that's just the sort of, I think on the mapping side of things, the work has started, but it's going to take us a few months before we determine both clinically and statistically whether the results that will be rendered from this merging of the data studies will make sense And for every endpoint, we will have to make a decision and give a rationale for why we decided to pull or didn't pull. And that's the feasibility phase. I think it's very likely that we will be able to pull a number of the efficacy endpoints. The benefit, so to say, is that we know that the results from the set zeros one the study where almost all results were in favor of isoflurane. And that includes not only opioids, primary endpoint, it also includes time to wake up, time to extubation, ICU stay, ventilator free days. So we're very eager. I would say we see this as a very positive development in the grand scheme of things. If I was to choose, just looking from the outside on this timeline extension, versus this opportunity that we're now given to include the positive results from the German study. I think that this actually is a positive development for our US case. Cost efficacy is going to be super important in the US and we now stand a better chance to demonstrate that.

I appreciate that clarification on what it takes and how you do it. Do you have any assessment on timing to when this work can be done? Just so we can pull up.

You mean the feasibility assessment? Yes, feasibility assessment. We're actually working on the timelines, but I believe that in the spring we will know if it's possible or not, because that's when the work has to start. preliminary is that it will be it will be possible to pull some but exactly which of those endpoints it will make sense to that will be some time i'll say in the spring that we'll be able to to give more information on which endpoints we we ultimately will be cooling okay and then my last one thanks for that my last one is uh if you could talk about the patent situation post approval and to what extent this is impacting that

in the US.

Sorry, did I integrate the patent situation? Yeah, the patent situation post-approval. Yes, so there's several layers of protection of our therapy. One is the patent, or not the patent, there's actually several patent families that are actually quite long-running until the end of the 30s, so 2030s. So from that perspective, we are protected for the device. Now, if the launch is delayed by a year, then we still have many years of protection. What comes on top is similar to what we had in Europe. If you bring a molecule into a new indication, you get market protection or data exclusivity, meaning that nobody else can use your clinical data to promote, in that case, inhaled sedation in the ICU. So no generic company could offer their isoflurane for sale in the ICU. And that is dependent on the approval date. So in that sense, the shift in timelines does not affect that part. But of course, the additional level of protection here is what it would take for a competitor to come in would be to, first of all, have a device that you can use. Plus, you have to run a clinical trial to show similar to what we are doing now. And as being second to market, that business case is probably a bit more challenging to to get positive compared to what we are doing now. So, of course, we need to be monitoring whether anyone is trying to enter that market right now. We don't see anything on the horizon that I don't expect it to, but, of course, we are dependent on inhaled sedation, so we need to be a little bit paranoid on that. But from a patent and data exclusivity perspective, I don't see a problem with the shift in timeline. Thanks.

I'll jump back to the queue, I think.

Okay, we'll move on with the questions here. We've got a few written questions, and I'll start with the first one here. How imminent are the top-line readouts? The data seems to be taking time to process. What would be the likely gap in time between the two trial readouts?

Yeah, I think I've covered that, so there's no news on the timeline when it comes to the high-level results. It's true we had a bit of a gap between finalizing uh the um the two trials uh one was uh finalized in april the other one in mid-may so there was four five or six weeks in in between um whether or not we will see that same gap um for the for the high level results tbd but no change in the in the timeline here. And as I said, as soon as the data get handed over from the clinical research organization to our statistician team, that analysis can be run reasonably fast.

Will the delay mean that they can choose to go out and look for partners for a possible future US launch? Or is that the idea still launched in-house?

Yes, so as I've covered in the presentation, there's no change to our go-to-market strategy. We are still aiming at a go-to-market approach ourselves, so we will launch the therapy ourselves. Of course, if there comes a fantastic partnering offer that we couldn't resist, I'm not excluding that, but the plan is to go ourselves, and there's no impact on that strategy now that the timeline is shifting.

And you raised your 2024 sales guidance to 17% to 20%. What specific factors gives you the confidence that this higher growth target is achievable, especially in your key markets?

In short, it's the year-to-date performance combined with the momentum. So we have 19% growth year-over-year, excluding exchange rates, which is above our guidance range of 14 to 18. It's been consistently above our guidance range now for the full year. And I'm expecting a good Q4. So I'm quite confident that the raised sales guidance is something that we can meet. And of course, that is based on a continued growth in our other direct markets. Again, good, consistent 50% growth here, a good solid performance in Germany and also some contribution from the distributor markets. So that's what made us confident enough to raise the guidance.

And while you report improved EBITDA margins, you're still in the negative territory. What are the main challenges to achieve positive EBITDA, especially in the ex-US market? And when do you expect to reach profitability?

Yeah, so it's a question of scale, right, with the high gross margins and the operating expenses being relatively fixed, or at least not move in line with sales. If you reach scale, you get to profitable numbers. We've seen that in Q1, where we had a very good sales level. because Q1 and Q4 always tend to be the ones where the sales are the highest, because you simply have more ICU patients with respiratory infections and so forth in the hospital. In Q1, that sales level was sufficient to report a positive EBITDA outside the US. And now in Q2 and Q3, with the sales level coming down seasonally, we were below the water again. But what you can see is a is a strong year-over-year improvement quarter for each of these quarters. So we have had a year in 2024 where we have achieved EBITDA break-even XUS during the year. But of course, the idea is sooner rather than later being consistently positive across quarters. And we will come with a new EBITDA guidance for the next year in the next report.

And could you give us some more details around the net cash position and how it will be ventilated in terms of expenses for the next two to three years, including now the additional 20, 30 million? Thank you.

Yeah, no, that's a good question, of course. And I can understand that if you look at the history here, we've consistently spent 50, 60 million in terms of cash outs every quarter. And the driver behind this was the U.S. trial and specifically the patient recruitment. That's now done. There's a bit of a lag effect. But we will see that the 25 levels for CapEx in the U.S. will be much lower than in 24. It will not be zero because we still have to pay our statisticians and medical writing. But that's very much lower levels compared to what we've seen this year. And then if you look at the other parts of the company, the European companies, A business is or the ex-U.S. business is starting to scratch on the EBITDA break even. So we will not have a lot of cash out from the operations as such. And if you take these two things together, Europe is starting to generate cash, the cash out from a CapEx perspective coming to an end. Then pretty much everything becomes a choice. So there's a difference between being committed to pay the clinical research organization where you know these costs will come. For a US launch, we have a bit more flexibility. So that gives me a lot of comfort and confidence into our long-term cash forecast. even including the 20 to 30 million additional cost for the expanded scope in the US and also including the acquisition that we will make. So we are running the company very much on the principle that we should not be dependent on external capital injection.

Thank you for that. You've reported solid growth in Germany, but with a focus on diversifying markets, how do you see the performance of other regions like Spain and the UK contributing to future growth?

Very important. So the company has historically been very Germany dependent. Historically, almost all the sales came from Germany. Now we have a group of countries which we refer to as the other direct markets, which is essentially Spain, UK and France, which now over a number of quarters has consistently delivered growth rates around 50%. We are now at 30% of total sales that these countries represent. So it's incredibly important. Of course, Germany needs to continue to grow. We're nowhere close to a ceiling yet. But if you have a 30% part of the business growing at 50%, that of course helps the overall growth aspirations of the company.

You mentioned a deal to acquire your main supplier, Innovative Secall, which you expect to add 2 percentage points to your bottom line. Could you elaborate on the strategic importance of this acquisition and its potential long-term benefits?

Yes. So what we're doing is integrating our main supplier. So we have essentially from a financial perspective, we're cutting out the margin that that company today has. That is resulting in these two additional percentage points in terms of profitability. And of course, as the business grows, that will be more and more valuable over time. So that's the financial aspect. but there's also a control aspect here because we take control of our own supply chain especially for the main main device and a couple of accessories around that um and that makes us less vulnerable to to supply disruptions it makes us less less vulnerable to to price fluctuations and let's not forget uh we have the us launch upcoming um and if you look at complete response letters that other companies has received from the FDA. So approvals that did not go through that got rejected. Very often it is due to third party manufacturing. And by integrating this factory into our own operations, we have more control in getting that factory FDA audit ready, because that is a very frequent cause of being rejected in the US is that FDA finds that third party manufacturing is not up to up to par. Now we have that under our control and we are in a position where we can control to get that factory audit ready. So that combination of financial upside, control of the supply chain and the US makes this a very, very good strategic move.

Thank you for clarifying that. Your cash and cash equivalents have decreased from $304 million to $226 million this quarter. How do you plan to manage your cash reserves moving forward, especially with increased costs for the U.S. submission?

Yeah, I feel like I've given that answer on one of the previous questions. So short answer, CapEx in the US will decrease dramatically. Europe will start to generate money. And then the additional OPEX in the US is in our hands. And of course, we will not spend money that we don't have. And a big part of our successful improvement of the bottom line is a high level of cost control and cost discipline. And that we will, of course, continue to keep.

Thank you. And we'll take one final question here, which I believe you already answered, but maybe you can give some more color to this. What is your strategy for handling the uncertainties around the U.S. FDA submission timeline and how might delays affect your market entry and revenue projections in the U.S.? ?

Yeah, so it is true that any FDA process, independent of whether you have a successful business in Europe or not, or whether you have run a European trial or not, there's always risk and uncertainties in every FDA process. And the best way, in my view, to mitigate that is to be very close to the agency and have a close dialogue and try to get alignment on as many aspects of the file as possible before we submit because once you've put in the submission and things become a review question, then it's much, much more difficult to come back and have to potentially repeat things or do things in a different way. That's usually much more time consuming and costly. So that's our main risk mitigation strategy to be very close to the agency, have that close dialogue, ask the questions as we have done in this case. uh case as well um and uh when it comes to the how does the delay um affect revenue projections in the in the us um so i mean in simple terms it will shift by a year but but the but the potential doesn't doesn't change we are the the situation we're in we are not in a neck-to-neck race where there's a competitor and us racing to market and whoever makes it first And we're the only ones that is trying to challenge the status quo of ICU sedation in the US right now. So now we will come a year later, but we also will have a higher chance of being successful because we are integrating. a European trial and the FDA will then look at the two US trials and they will look at the pooled analysis across and make their decision. So if anything, I think the submission is more robust. The revenue will shift by a year, but I don't see any negative impact at all on the market potential long term.

Okay, and that's a wrap of the Q&A section here. Thank you very much, Johannes, Johan, and Peter for presenting today and also answering all of our questions.

And I want to say a big thanks to everyone who followed this presentation with Sedona Medical.

And I wish you all great rest of the day and until next time. Thank you very much.

Thanks a lot. You have a nice day.