Senzime AB (publ)

Welcome to Carnegie. Today I have the pleasure to interview Philip Sieber, CEO of Sensime. Very welcome, Philip. Thank you very much. Very nice to have you here. If you could just start with a short introduction of Sensime.

Sensime is a medical device company. We are headquartered in Uppsala. but originated out of long-term research in the US, specifically from Mayo Clinic. And what we do is we developed a system to monitor neuromuscular block and neuromuscular function in the operating room. So we've developed a system that stimulates the muscles of the patient and then in real time gives you the number of how blocked is this patient, how paralyzed is this patient during surgery to make sure you get the right dose of specifically anesthesia drugs and that you are extubated or you can breathe spontaneously again on your own.

And you have had some pretty nice performance looking at the 2023 and this has continued into 2024. Maybe you could summarize what is behind this very, very strong sales growth that you have reported.

Yeah. So, I mean, we've been a classic medical device research company for a long time. We passed through all the regulatory hurdles. And then about 18 months ago, clinical guidelines came that recommended objective neuromuscular monitoring on all patients that received these types of anesthetic drugs I mentioned. So this became a true... catalytic event in the market where suddenly there was a pull from the market and we went from a small growth rate to growing pretty much at triple digit growth rates. So very, very strong demand in the market.

Could you perhaps describe the reception of these new guidelines? If we could just start with the perspective from the US side.

So the US, the American Society of Anesthesiologists, they are a society with, I think, 30-40,000 anesthesiologists. They agreed and they published on these guidelines in the fall of 2022 when they were published in the spring of 2023. And they came out and said that because of the high rate of complications related to these drugs, they said again mandating that everybody should be monitored with an objective monitor. And then there's guidelines on how to use it, how to reverse patients, et cetera. So when that came, we suddenly very quickly saw a strong demand from the market because there was a lack of monitoring in the US market. The European guidelines came pretty much at the same time, independent of the American. So they were two different working groups and the conclusions were pretty much the same. The Europeans were a little bit even tougher saying that there should be a monitor in every single operating room by each bed. So while in Europe there has been a tradition of monitoring, so the change hasn't really been the same kind of trajectory as of yet, but it is converting as well.

And you feel you are in a good position in Europe or is it more competitive?

So Europe has had a tradition of using a more legacy type of technology. It's called acceleromyography, which is a more mechanical, indirect way. What you do is you give small electrical impulses and then you measure what happens with the thumb. How is the thumb actually moving mechanically based on what happens in this. So this technology came out in the 1990s. It's been integrated. There are standalone devices. We believe there's about 80,000 AMG monitors out there with strong penetration in the European market. There is a strong, I would say, criticism to the AMG technology because it's been shown to have very low accuracy. It's up to 50% deviating. So it's difficult for the clinician to actually make correct clinical choices based on the AMG technology. The AMG is also very, you need to calibrate it. There's very devices. there's been a strong demand for a more accurate simple digital single kind of single use disposable electrode so so that's what emg that's what we are pioneering

Yeah, but on the flip side, I mean, it's a little bit cheaper technology as well. You don't have to... It is, yeah.

So we introduced a single-use disposable electrode that stimulates and records, which is a small kind of component. It's a very, very small fraction of the cost of anesthesia. While AMG has more reusable device that you put on the thumb, but what we've heard in the market is that people throw these away. So the cost is, in the end, quite similar. Okay.

Yeah. Okay. Let's just stay a little bit longer with the U.S. market. You have seen a very good uptick in the U.S. Should we expect this as the early adopters we see or do you see this broadening out to a wider space?

It is. I mean, it started, if you look at the pyramid of hospitals in the U.S., we've secured many of them on the kind of top 20 level. And I see that's where we and competition, that's where it started and then it starts trickling down. So we've secured over the last 12 months large IDN, university hospitals, academic institutions. They are the kind of the front runners in the US and they define how to make this change. I am seeing that these quite long competitive clinical evaluation processes are now shrinking and I'm seeing that smaller hospitals are more quickly adapting to the technology. They're looking at what are the people doing in the top level and then this is trickling down.

Perfect, and I also would like to jump to your presenting some exciting news when it comes to upgrading or updating your monitor.

Yes, so very proud to announce the next generation TetraGraph. We started the development of the TetraGraph almost 12 years ago. We gained our FDA clearance in 2019. And then we have now, we have nearly 3000 units in the market. But as this technology and the demand is now trickling down, it's becoming widespread and the demand is very widespread. So based on collaborations and long-term research with anesthesiologists around the globe, we are at the ASA meeting in Philadelphia now unveiling the next generation TetraGraph. It's really, I would say three key messages here. One is it's a suite of intelligent algorithms that makes it easy to use. It makes it individualized. So it automatically adjusts all the positioning and the configurations to you as a specific patient. And then it automates the process. So for an anesthesiologist or clinician, it's a one push-stutton, and then it just keeps on going throughout the procedure. So that's one. We call it adaptive intelligence. The other set of features is... is a new user interface. So what we're introducing is a gauge based on the recommendations of the guidelines. It's sort of like your car. It's sort of like a gauge that guides and gives the level of blockade throughout the patient journey. Neuromuscular monitoring is very complex because there are different levels of block that the patient is in. One of the limitations of its widespread adoption has been the complexity of the procedure. But now we're just making it so simple for clinicians to follow throughout the procedure. And then the third message is the sixth generation EMG algorithm. So we're introducing a brand new technology that increases the resolution with 4x. It's a totally new feature set that really makes this industry leading precision for clinicians. And on top of that, we've meticulously chosen materials to be sustainable. And I think we have the only ISO 14001 very environmental friendly production process, which is important to fulfill kind of the sustainability demands of hospitals. and this product is this ready to launch uh it is yeah so we're making the big buzz here at the asa meeting in philadelphia unveiling it to the world and we will command shipments november december time frame uh in the us and then we will start shipping in in europe in q1 and then the rest of the world will follow as regulatory clearances in other markets and does this do you change the price in any way or We are, because of the very strong value-added features that we are providing to this, we are increasing the price a little bit, yes.

And the former TetraGraph, that will be removed from the market?

So we will have a segmented product portfolio. So we will have kind of the TetraGraph Classic with a more kind of attractive price point where it's a very well-established product that meets the needs of some, I would say, hospital systems. while the the new next generation has you know the the feature set that attracts other types of i think a broader scale of customers so there's two different ways here to um to meet the market needs do you feel a bit more confident than perhaps before even uh that you are the leading product in this i do standalone yeah this is a fantastic effort i think it's it's a truly a game changer in the industry that we're launching so i'm I'd love to have the product to show here, but it's a game-changing way to do this. As we worked with key opinion leaders across the world to develop this, the feedback has been enormous. I can unveil that orders are coming in before we haven't even launched the product.

Do you think that perhaps some customers have been awaiting this launch?

I think so, yeah. I think it's been not a very well-kept secret in the industry because we work with so many people around the world around this. But I think one of the... We may have received some criticisms from prospective users that our device is so technically superior, while we could perfect the user interface a little bit more. So now we've really emphasized on design and usability and attracting not just the professor on top, but the widespread user in hospitals.

Sounds very nice and looking forward to get more information about this new product launch. But could it perhaps stay a little bit longer when it comes to competition? Because you have a market, you're not that many companies active, but you have two large players, Philips and GE Healthcare. Maybe you could give us a brief, how is they performing in this market?

Just back up. I mean, there's three different types of competitors for us. One is you do nothing. So classic anesthesiologist doesn't monitor, just kind of looks at the patient, says you're free to wake up. Two is the big GE, Philips type of companies that have plug-in modules within their patient monitoring systems. so phillips is fantastic big market leader they have an amg module which they have you know in tens of thousands of monitors out there so very broad penetration for example in sweden they have a very high market share of this so it's typically sold as accessories when you buy the the patient monitor you kind of just take in i want this this this i would say that on the flip side two-thirds of our business is connected to philips monitors so we have a collaboration with philips where we connect in our date our number is shown on the philips screen so i would say despite people having the plug-in they prefer to buy our product and that's again because of the the issues with amg as a technology So then GE, they have a plug-in EMG system. The drawback of the GE system is that they use standardized electrodes that they hook up with cables and it's a very burdensome process. We secured one of our larger deals this summer that was announced. That was a GE account. They had the GEMG plug-in, but they said, you know, we want the Tetragraph. We want a portable technology that we can move around with the patient. And we want disposable, simple to use, takes seconds to put on the electrodes. Okay, perfect. And then the third set of competition are other players like us that have portable EMG devices. One of our main competitors in the US is a company called Blink. They launched slightly before us in the US, but we were first to market in Europe. But they have a very nice product. They've done a good job. and uh but with the feature set that we're now bringing out you know we're really elevating our position in the market but how much have you met the competition from blink in the tenders that you have been participating i would say it's always if it's a tender process or an evaluation they always benchmark us versus blink okay yeah so so that's the main competitor that's amazing okay

Perfect. And just looking ahead then, you have issued some new financial guidance rather recently. You're optimistic that the business will continue to grow strongly, if you could perhaps describe?

Yeah, so we issued some guidance back two years ago in the fall of 2022. at that point you know the company did a very thorough kind of analysis of the opportunity with the insights the company had two years ago so now we know so much more and what we learned at that time what we thought at that time was that the the guidelines specifically in europe would it would take off the business faster and what we saw that was us performed better than we thought and so did south korea and japan but europe has been slower in adoption rate so all in all what we did was we came out and we said okay because of this we're pushing kind of our our targets a little bit forward one year because there were macro effects in the market that was hard for us to to affect on so we said 2026 the guidance is to have revenues in the range of 250 to 350 million swedish kronor be cash flow positive during the year and really, really distinguish ourselves as the true market leader in this field. And then we also just said that the next strategic milestone is to reach a billion SEK in sales. And if you look at our ratios that we have today and the margins, et cetera, that translates to a very profitable company.

But looking at your 2026 sales target, how important is it that Europe really takes off?

We've honestly lowered the expectations, make the more moderate expectations on the European market. So for me, it's the importance here is that the US continues in the traction and the trajectory that we're seeing. And again, I think the new next generation TetraGraph will help to accelerate the penetration, specifically of kind of the more mass market of hospitals that need something simple to get started.

Sounds good. And to reach your goals in 2026, you raised 86 million SEK recently.

Yeah, we did. So we did a directed shares issue. We attracted quickly some of our key institutions and also a few new ones. We raised 86 million. We raised it at the average market price. So it was really done without discount. We also made a signal to the market that we have a lot of alternative financing options on the table. As we grow now, there are attractive alternative options. It's not just equity and potential dilution that's on the table. so um that that was the signal i wanted to tell that we're probably going to evaluate some type of ultimately i want my customers to pay my bills but on the way there i can probably use some type of a credit line as we grow the business

And then my final question would be a little bit if you can comment on, we touched upon this earlier, but the order intake and the activity from customers today compared to a year ago or something like that.

No, I think the buzz is out there. The activity is the same. If I look at the ASA, the annual Congress I mentioned, the Congress starts with a big panel discussion. That's kind of the first topic of the meeting. It's like how to implement the new clinical guidelines around neuromuscular monitoring. So it's the big people, it's the panel talking about how to do this and helping to advocate them. By implementing the technology right, it's a patient safety issue, but you also can eliminate a lot of drugs that are used because you can help the patient spontaneously wake up rather than giving them expensive drugs that may be posed to risk to the patient. So definitely the buzz is out there and we're seeing an increase in utilization rate in the accounts that we have. And the utilization rate now is a lot higher than it was, I would say, 12, 18 months ago. So the accounts that are really investing into this are having the traction that we want. Perfect. Thank you so much, Philip. Thank you. Nice to be here. Thank you for listening.