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.