Xvivo Perfusion AB (publ)

Thank you so much, and welcome to Xvivo's earning call for the second quarter of 2024. As we see on the first slide, we have today's presenter here. It's me, Kristoffer Rosenblatt, CEO of Xvivo, and Kristoffer Nordström, CFO, today calling in from Philadelphia. If we go to the second slide in the deck, we see Q2 Financial at a glance. And I'm proud and happy to report the strongest quarter in Exviva's history. And that Q2 shows improvement on Topline as well as EBITDA. More importantly, the Q2 shows that Exviva has a scalable business model with improving margins with increasing sales. Even though we continue and will continue to invest in the organization for future growth. Sales came in at a record 210 million Swedish kronor. The gross margins are continuing to show strength. We have reported that we plan to improve the abdominal gross margin to 70% at the latest in 2027 or earlier when we reach economies of scale in production. And we see that we continue to produce according to that goal. The EBITDA shows a strong improvement to 24% and Christoffer Nordström, our CFO, will get into the details on sales, gross margins and EBITDA later in this presentation. I also want to mention that the growth for Thorax is picking up and mainly come from higher XPS activity during the quarter. We have historically seen solid growth from Europe on the XPS and we now see that growth is coming more and more from the US. There's a high interest from new customers starting EVLP programs and we see that former low volume customers are increasing their EVLP activity level. And with that we go over to Y2D financials at a glance and as you see on this is slide three. We see a similar picture the first six months as we've seen in the quarter. And the key takeaways for the first six months are growth is still mainly coming from increased activity in existing customers and a strong market. We continue to see high interest from new customers, especially after ICT in April. And we see that that interest starts to get converted into active customers. We can also conclude that sales from products is picking up faster than sales from services. even though we have a fantastic service offering with a very, very good quality and very good customer feedback. And even though we are investing heavily in mainly commercial and field force, we can conclude that the revenue model is scalable. In other words, we see that it gets converted to gross margin and EBITDA. Lastly, and most important to mention, is that projects are progressing according to plan. The HART project is on time, and by that, the production capacity project, where we invest to scale up volumes, times tens of today's volumes for disposables, are running in line with communicated timelines. I'm happy to report that the first milestone for the kidney assist transport is met, and we now will have production volume for US launch in Q3, probably after the vacation period in the US. And as we have reported earlier, The project for full scale production of disposables for heart, liver and kidneys is estimated to be completed end of Q2 next year. So we still have a year to go. And with this first two glances, we will go over to Q2 highlights on slide four, and then we can go directly into slide five, where we go over what happened. I know I mentioned the ISHRT last quarter, but some news needs repetition. So we start with the report from this year's ISHRT conference in Prague in April. ISHRT is the largest and by far the most important conference for hearts and lungs transplantation. And I want to repeat again that it was the most selected exhibitor and the results from the EU study With XV, hard technology was the most selected scientific session in the whole program. We also helped to extremely well attended industry symposia during the conference where we got extremely good feedback from customers of the scientific height. And they said it was even better than most of the original program. And as I said earlier, we can already see in late Q2, the impact of the conference in an increased interest for our lung and heart technologies. I also, again, want to mention on slide six the fantastic results from the EU Heart Study. I've never seen such good results before in my life, and there are three key takeaways from this study. One, it is, again, to our knowledge, the first randomized controlled trial with the superiority designs in heart and lung transplantation, which shows the confidence the clinicians have in the ex vivo heart technology. Two, the HOPE group, where HOPE stands for hypothermic oxygenation perfusion, in other words, pumped with ex vivo technology, showed an improvement of 61% for severe PDD versus the control group. This is a highly important improvement provided that PGD is the leading cause for early mortality after heart transplantation. And we know that PGD negatively affects long-term survival. Three in the takeaway is that all whole parts were deemed transplantable after perfusion. This is important to highlight since cold perfusion offers safety advances during transportation. On top of the NIHP 2019 trial presented during ISHC. I also want to mention the PEGAS trial or Pegasus in English study by Professor Le Beton and it's progressing according to plan and the study is designed that with transatlantic flight on commercial airlines show that more than 12 hours of transport is safe and it's feasible in the practice setting. We think that even though this trial is comparably small with seven patients, that this can show and revolutionize how heart transplants logistics are performed. And it's the first proof that our technology can enable both patient benefits and cost benefits for the healthcare systems around the world. And with that, we turn to slide seven, where we also will still stick to heart and some great news around DCD donors and heart trials. Approval has been granted to study DCD direct procurement. Direct procurement means that transplants are made without prior NRP or similar. The portion of the donor pool that are coming from DCD is comparably large in some countries, and it's growing very fast. For example, in the US, it's already 36%, and in Benelux, it's approximately 58%. And if we want to substantially increase the number of transplants, we need to prove that DCD hearts can be transplanted in a safe, cost-efficient, and practical, feasible way with good patient outcome. And this study is designed to show that. The earlier experience we have from liver and kidney shows with very good clinical outcome. that it is possible, so the concept in itself is proven. We have also seen in preclinical settings on hearts that using the ex vivo heart technology on DCD direct procurement shows good results. And lastly, as we have reported earlier, the study in the US for regulatory approval, there we also include DCD hearts. The company hopes and believes that we will have good evidence when those two studies are concluded. With that we will turn over to another organ and more precisely the lungs. We have seen in both Q1 and Q2 good results and increased usage. We can see that the pressure from mainly the American political system to increase the number of transplants has had a very positive impact on EVLPs for lungs. We can also see that the hub models we have talked about before or centralized perfusion models help to drive growth. We now have the bridge in Scandinavia active recruiting and we know Paris has a hub which now have three clinics participating. which all of those hubs enable that we can make more transplants with less resources. I also want to mention in the U.S. that we have deeper collaboration with, for example, lung by engineering that is also showing to be very fruitful. The other trend we see with a positive ISHAT and more feet on the ground is an increasing interest for EVLP and setting up EVLP programs. And as I mentioned in the beginning, we have seen that Some of that interest has returned into more usage of EVLP and some of the interest has resulted in new EVLP programs being set up in both Europe and the US. This is really exciting news and we know that with more EVLP programs, we get more patients, we get a chance of a lung transplant and hence not dying waiting for a new lung. and with that we go straight into the abdominal portfolio. During the last year we've seen more than 20 publications on the liver assist technology showing improved patient outcome on both the DBD and DCD grafts after transplantation. This quarter long-term survival data was published on extended criteria DBD livers and we very good results. We are very pleased to both read this and very proud of what our technology can accomplish. And we can see in the study that the five year outcome for organ survival is 87% in the liver assist group, which in itself is a very strong result. And I think it gets even more clear if we showed it compared to the control group where the salt was 52 percent which was standard of care which is the beer cooler type of transport with that on ice with a solution. I have mentioned before also that we last quarter we had a Lancet publication showing that livers can be safely perfused up to 20 hours and we can eliminate in if we use this technology, the need of nighttime liver transplant. And I think this again is a great example where we can improve that or show that we can get improved grass survival and also improve work-life balance for our customers. Lastly, as stated earlier, the production scale up times 10. of today's volumes is progressing according to plan. We have reached our first milestone and hence we're now ready to launch kidney assist transport also in the United States. And with that we leave the highlight section and we turn into our clinical pipeline. This is a divider on slide 10 and we can go straight actually to slide 11 where we see the regulatory status and the clinical trials and our tentative timeline. I'm happy to report that nothing has changed since last time we met, so I will repeat what I said in April. In the U.S., the heart trial is progressing according to plan, and our clinical team in the U.S. is working very hard to include all clinics into the trial. The interest is very high to be part of the trial, and we are literally doing our utmost to make sure that we can meet that interest. As also mentioned before, in Europe, we have handed in our technical documentation for review according to our time plan. We are aiming for a C-mark in Europe in Q4 2024. Important to mention is that we can't affect the review time to 100%. The good news is that the notified body has been very responsive, and even though they have a high workload under MDR, they've been really working together with us. MPA is responsive and delivering on time. The insecurity we deem we face is that how fast EMA or the European Medical Agency can handle the review. We have done what we can and in other words handing in product and clinical files with good quality and on time. In Australia and New Zealand we have already high usage of the product, of the heart product in this case. The regulatory approval will be pending the CMARC in Europe But we are encouraged to see the continued high usage of approximately 30% of all hearts in Australia going on on the experience of heart technology on a compassionate use. We have also previously reported that the liver assist have been granted breakthrough device designation by the FDA. This will mean that we get a faster route through the FDA PMA process. It is also a quality stamp that the products are innovative and fulfill a need on the market. We have started to invest in an organization to run the study and we are preparing the FDA documentation. The aim is to hand in the IDE application at the end of this year. And with that we have concluded the first part of the presentation and I will hand over to my CFO Kristoff Nordström who will present the financial performance of the quarter.

Thank you so much. Yes, as Mr. Rosenblatt started off this call, it was, as you all know, a financially strong quarter. We're very satisfied and happy over that. Basically, we're doing many things right at the moment, and that starts to pace off, and we should just continue to deliver on that way, of course. Sales came in on record levels in Q2. Same did EBITDA. Same did EBITDA. But last but not least, also our operating cash flow was also strong, which is delighting, of course. But so to the numbers then. Net sales in Q2 came in at 210 million SEC. That is a new record, as Christopher mentioned. Organic growth, 35% in local currencies. Overall gross margin, no surprises, really. 75%, same as last year. EBIT in Q2. 16% versus 10% last year. That's mainly driven by our increased sales, although we continue to invest in the organization. But as you know, we have done that in a fairly controlled way so far. EBITDA in Q2, 24% versus 19% last year. So overall, a good quarter where we continue to sequentially improve both top line and profitability. Also looking at the year-to-date numbers it looks good so we reached 396 million second sales and that's a growth of 34% in local currencies. EBIT 13% and EBIT up 22% and both these measures are significantly better than last year. I should touch a little bit upon the outlook. When we look ahead into the next quarter Q3, it is worth mentioning that the third quarter is normally a sequentially weaker quarter than the second quarter. That's our experience. And most often this is due to things that are a little bit out of our hands, such as, you know, summer, lower activities during the summer at the sites, etc. But we will do what we can to keep the momentum, of course, but at least from the past that has been our learning. When it comes to EBITDA, the quarter was a record, as mentioned, 24%. This measure can, of course, go up and down a bit, quarter by quarter. And we continue to invest and grow our organization, as you know. But I think what we did this quarter was that we clearly demonstrated that this quarter showed that our current business model is scalable and it is profitable already at this point. lower levels of sales that we are seeing this year and last year. Moving over to Thoracic and back to Q2 again. So, very strong quarter. Sales coming in at 141 million SEK. Organic growth for disposables was 40%. And the main driver, similar to previous quarters, is EVLP, which is great, and specifically in North America. In North America we saw EVP grow 40% in Q2 and actually more than 60% year to date. So a very strong development and very good. We start to see the results now from the reorganization that we did last year. Perfodex sales not forget, grew 12% versus Q2 last year and have grown 12% also year to date. And that's driven by the increase of number of transplants, but also our price increases. On the sales side, it's also great to share that we had hard sales in Q2 of 19 million SEC. And that comes from a variation of compassionate use. supported by the strong evidence presented at ISHL-T, but also revenue from our U.S. heart trial. So we start to see some good numbers now also on sales, despite the fact that the products are not yet approved anywhere. Gross margin disposables Q2 was 85%, and that's in line with previous quarters as well. Moving over to abdominals. Net sales amounted to 47 million SEC, which represents another record quarter as well. Organic growth disposables, 36%. If you also include machines, which makes a little bit more sense on the abdominal side, because here it's more frequently that we actually sell liver assist devices. If you include machines, the sales growth was actually 53%, which is very strong. Liver stood for 72% of total abdominal sales, and kidney sales came in about 10 million SEK, which means that we're close to 20 million SEK year-to-date. As Christopher mentioned, we have increased our production capacity and improved that capacity in Q1, Q2, and we do now have supplies so we can start to re-engage with customers who have expressed interest in our technology, which is what we are waiting for, obviously. Gross margin disposables came in at 63% versus 70% last year. It's weighted down temporarily by costs associated with our interim solutions for production capacity. And I think you can expect to see that also in Q3, Q4. We need to put in some extra dollars to ensure that we can continue to provide capacity. It's as simple as that. Final business area, moving over to services. Sales in Q2 came in on 23 million SEK. That came from 126 recovery cases. And that represents a modest sales growth, 10%. Transport activity at our customers increased in Q2, but we still suffer from lower cases versus last year due to the loss of two high volume centers in 2023. So we have added new customers in Q4 but we have simply not yet recovered and grown our case volumes and that's also reflected in the numbers of course. We continue to work to develop our market strategy for organ recovery and we'll focus on that in Q3, Q4. We are also working and looking into expanding our offering, not only offering organ recovery services, but we are looking into NRP. We have had a very successful pilot case with a prominent US hospital, and there is interest from other hospitals to have us helping them execute on such a program as well. We are also looking into EVLP perfusion services, hope to see a pilot in the second half of the year there as well. Most of the hospitals, they run their EVLP programs perfectly well because we are training them and we are there for them, so to say. But if there are cases where new centers want to come aboard and they want us to also offer profusion services, we should absolutely be able to offer that as well. So that we're looking into. Another initiative, a final comment on services, is also that we want and we will start to engage our Exceda Services team with our Hot Trial Centers. Centers today want to learn how we can help them grow their thoracic transplant programs, not only after the trial, but also during the trial. So those are dialogues that we are also having at the moment. So we are carefully optimistic that we should end this year on a high also for services, no doubt about that. Moving over to EBITDA, just, you know, we have said it all, I think, a solid quarter, 24%, rolling 12, we're at 20%, and the trend develops nicely. We have stated it, you know, many times before, but our ambition is to continue to improve EBITDA year on year, absolutely. We will do this step by step, and what we want to do is to maintain a healthy relationship between sales growth and our ambition to sales growth and profitability. And we show this quarter that we're definitely on the right track. Final slide on my side, as always, financial position and cash flow. I mentioned it in the beginning. Good quarter here as well. Q1 was cash positive from operating activities, 25 million SECs positive. Investment amounted to 48 million SECs, primarily spent on the U.S. clinical trials and investments in machine sleep. And that led to total cash flow of minus 27 million SEK. We ended the quarter with a solid cash position of 481 million SEK. And that was everything from me for now. I'm happy to receive questions. So I'm giving the word over to you again, Christopher.

Thank you so much, Nordström. We will just have two quick slides on the outlook and I will start as always on the long-term pictures. We're here for the long game and it's important to establish the long-term picture. The demand for transplant is still 10 times higher than supply today according to the WHO. I also want to mention that the sales value of machine perfusion is approximately times 10 versus static cold. So there is a large market opportunity and a huge opportunity to improve life for patients with end-stage organ failure. Machine perfusion and our service models have proven to increase the number of organs to be used for transplantation, especially in the fast-growing DCD organ pool. The main growth drivers are superior clinical results from machine perfusion and the fact that service models reduce complexity and time for the transplant clinic. Hence, machine perfusion and service models are normal and DCD graphs will drive growth in the near to medium term future. But lastly, to grow all the way to times 10 in number of transplant the company believes is possible with the current human donors. However, over time, new innovative sources of organs will probably be used. One example is xenografts or grafts from other animals than humans. for both machine perfusion and new sources of organs, Xviva has proven a proven product line and this puts Xviva in a unique position on the market today. If we go to the next slides, number 21, this is more of a near-term outlook where I want to say that we will keep Razor Shop focused on our key priorities which are, we see that after ISH-IT we will have increase focus and actually spend more resources on both the US Heart Trial and launch preparation in Europe and Australia and New Zealand. For the same reason we will also expand our global market leadership in Lund by driving a further EVLP utilization and here the investment is mainly in marketing and field force capacity. I said it many times before, but ramp-up production capacity is the most important project we're running right now to meet the increased demand we see for both kidney and liver. So we are focusing on that as well. And lastly, we have a clear focus on our service support for the growing US transplant programs. So we will... continue to drive pilots and develop successful product service revenue models to meet the logistical needs we see as trans backlinks have today to grow their programs and not burn out their staff. So with that I will hand over for questions and remind everyone the reason we are here and it's that nobody should die waiting for a new organ. Thank you so much.