Bioporto A/S
CSE:BIOPOR
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Bioporto A/S
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Good afternoon, everybody, and good morning to the management BioPorto. With me today, I have a pleasure of Tony Pare, the CEO of BioPorto; and the CFO, Neil Goldman, and then a couple of practical issues before we start for the participants, and thanks a lot for you to listen to this event. [Operator Instructions] and we have a Q&A in the end of the presentation. So with that said, I would like to, first of all, welcome management and welcome to the audience. Please go ahead, Neil.
Actually, it will be Tony.
please go ahead, Tony.
Thank you, [indiscernible], and thank you to everyone joining us today for our Q1 2023 financial results and business update call. With me today is Neil Goldman, Bioporto's Executive Vice President and Chief Financial Officer. Before we begin, let me remind you that the company's remarks made during this conference call today, May 10, 2023, may include predictions, estimates and other information that might be considered forward-looking. For more information, I refer you to our public filings. Let's proceed. 2023 has started off strong for Bioporto. We're encouraged by our 24% year-over-year revenue growth with DKK 8 million in sales. We are on track towards our full year 2023 revenue outlook of approximately DKK 30 million to DKK 33 million. Adjusted EBITDA for the first quarter is similarly in line with our full year 2023 outlook -- we aren't sitting -- I'd like to remind you that the revenue outlook assumes minimal growth in U.S. NGL test revenues during the FDA review process. Similarly, since approval timing is unknown, the outlook does not include any post-approval U.S. revenue. We aren't sitting and waiting for FDA approval to drive NGAL test adoption. We have invested and we'll continue to invest in commercializing Ingal test in countries where we are already have regulatory approval to sell such as in the EU and elsewhere that accepts the [indiscernible] product. We are also focusing on promoting our high-margin antibody business. Together, these can offset the company's capital requirements. In addition to expanding revenues at favorable margins, we have adopted measures to maintain strong cash position, which is -- which was DKK 57.7 million. Next, I will spend a few minutes reviewing the clinical value of NGAL test and introduce the business in investment thesis to new listeners. Our primary reason for being is to commercialize and go test. The NGAL test provides early detection and prevention of acute kidney injury, or AKI. AKI occurs when there is a lack of blood flow or good perfusion of the kidney, even temporarily for the kidney is directly damaged by nephrotoxic drugs or contrast agents. When the injury occurs, you lose the function of the kidney, which is to filter blood and to remove waste in excess fluid and produce urine. Initially, there are typically no symptoms to AKI, but if you can detect its onset early enough, you can save the kidney. If detected too late and it does not resolve on its own, the kidney can start to fail, resulting in death or chronic kidney disease and a lifetime in dialysis. The problem is that with today's diagnostics, detection can only really occur in the latter stages. As such, clinicians operate in the [indiscernible] for the first couple of days in the ICU. And based on their training and experience, they will either choose to wait to make any kind of therapy changes or perform prophylactic early intervention measures such as dialysis, which takes time, resources, including people and dialysis instruments and money. If AKI is detected too late and does not resolve on its own, the kidney can progress through the stages of AKI to kidney disease and chronic kidney disease, likely leading to a lifetime of dialysis or even death. AKI is highly prevalent, expensive and hard to detect. AKI affects 1 in 4 children and 1 in 5 adults that are hospitalized. -- and it represents up to $24 billion burden in the U.S. health care system alone. There are no early biomarkers of AKI marketed today and the standard practice of use in serum creatinine measurements is highly deficient in terms of sensitivity, specificity and time delay relative to the actual onset and progression of AKI, relying solely on serum creatinine, combined with urine [indiscernible], AKI can often be missed or by the time it is detected is too late to meaningfully intervene. By contrast, when AKI is detected and treated early, further AKI progression can be halted, allowing the kidney to recover, resulting in minimal or no dialysis in shorter stays in the ICU. BioPorto is already shifting the paradigm of AKI detection through our proprietary NGAL test, which detects the biomarker and gallon urine within only 2 to 3 hours after initial kidney injury. NGAL tests are already marketed in Europe, Korea and other countries. Unlike serum creatinine and NGAL test can detect AKI in the absence of any other detectable market or absorbable symptom. NGAL stands for neutrophil gelatinase-associated lipocalin. It is a urinary biomarker that identifies AKI induced structural damage to the kidney. In your kidney, you have approximately 1 million nephrons whose job is to remove waste products from blood and produce urine. It is essentially a filter in the bloodstream. On the left side of this slide, you will see a normally function nephron sample, which has normal level of NGAL protein expression that will show up in urine as well as blood samples. The undamaged nephrons will effectively move fluid from one end to the other, allowing for efficient removal and reabsorption of salt, water, proteins and minerals. The output is our urine output and common functional kidney measurements, including serum creatinine urea, nitrogen albumin, sodium potassium as well as others remain in normal ranges. The undamaged nephrons will not produce NGAL high levels. Now let's focus on the right side. When the nephrons are damaged due to surgery, sepsis or other cases, they will not effectively move blood from one end to the other. As such, these damaged nephrons will not be able to effectively perform their filtration function. This loss of function is identified by a reduced urine output in increased serum creatinine. The problem, though, is that this reduced function is slow to respond. Additionally, other common functional kidney measurements are unreliable. Lastly, the lack of urine output can be misinterpreted as if somebody is not getting enough fluids. NGAL, however, is rapidly increased in the damaged nephron in detectable soon after the kidney damage. The rapid detectility of the NGAL allows clinicians to assess a patient's fluids and nephrotoxic drug dosage in order to protect the kidneys from further irreversible damage. The first reaction to high NGAL levels when combined with other clinical evaluation would be to stop or minimize the use of nephrotoxic agents such as strong antibiotics or contrast agents. -- in patients with established AKI who are unresponsive to fluid administration, fluid restriction is often the treatment of choice. When fluid therapy is indicated or required for AKI patients, isotonic crystalloids can be the preferred agent as the last measure dialysis could be considered. Our test is run on urine samples on very common chemistry analyzers such as the Abbott Alinity or the Roche Cobas which is shown here in the picture. Every hospital has a core lab and every core lab has at least one of these standard instruments. As such, the hospital does not require any capital investment in equipment to implement an NGAL program. Also, our assay is a reagent-only product, enabling the attainment of very high gross margins. It also makes our regulatory pathway typically shorter. -- as or more important than portals NGAL test superior sensitivity in its ability to detect AKI significantly sooner than current approaches. When used as part of a clinical assessment, clinicians have a clearer and more complete picture of a patient's disease state. Patients benefit from a higher likelihood and rate of kidney recovery shorter hospital stays and fewer days on dialysis. While dialysis is important and effective as a life-saving tool, it is also invasive and generally not recommended, if avoidable due to its well-recognized impact of shortening the overall life of kidney function. As we discussed during our year-end 2022 call, over the last several months, we have been actively investing in sales and marketing of the NGAL test in Europe, which is where it is already commercially available under a CE Mark. However, our gases is squarely set on the FDA's ongoing review of our de novo application for marketing authorization of NGAL test for patients from 3 months up to 22 years old on a Roche Diagnostics clinical chemistry instrument. The submission was well supported by a strong body of data from our guidance clinical trial, demonstrating highly specific near real-time detection of AKI to empower clinicians to for the first meaningful time treat the devastating consequences of AKI. The unmet need for superior AKI detection and treatment in children is well established and certainly a contributing factor to receiving breakthrough designation from the FDA. It is also why we have selected pediatrics classification as our entry into the U.S. market, where we expect greater leverage to meaningfully drive adoption. As an update on our FDA status. After a 3-part clinical study, we submitted our de novo application for approval on November 10 of last year. We have been in communication with the FDA, answering questions which started almost immediately after our submission. In January, we received an official request for additional information and/or clarification on 14 specific points. This is very normal and most de novo submissions will receive one or more of these requests. Although we have completed answers to most of the questions, the process dictates that all answers be supplied at once. Some of these observations require additional laboratory testing, which we are performing with what appear to be positive results to date. We do not anticipate needing to expand this study with additional patients. We remain on track to respond to the recent request for additional information from the FDA by the end of this quarter, which is in advance of the July 23, 2023 deadline. The team has made meaningful progress in preparing the materials, which will be submitted together when complete. Last year, we established 3 pillars of our strategy to operate from. While the tactics underneath this strategy will change from year to year, the overall pillars remain the same. The first pillar is to drive the NGAL test market adoption and have a pipeline of high medical value products. First and foremost is to get our pediatric submission approved by the FDA. In the meantime, we can perform the work necessary to expand our indications for use to other instruments or for other clinical indications beyond pediatrics and the ICU. We can also drive sales of NGAL in Europe, where we are already approved, but relatively untouched in terms of sales efforts. Our second pillar is to strengthen the company to scale and execute. In 2023, this means closely managing our cash during the uncertainty in capital markets. As indicated in a recent news release, we will execute a financing round this year. The last round we had was in March, April of 2022. We need to ensure we exit 2023 with a good cash position. It includes driving sales on our high-margin antibody business to help offset expenses. It also means suspending certain activities such as new biomarker development until we have certainty in our NGAL test approval in the U.S. Our third and very important pillar is to attract, develop and retain the best and brightest employees aligned with our values. As we build the team, we need to recruit the very best to drive success. As part of good expense management and using our cash judiciously, we have trended our overall staffing. We are not unique in this endeavor. -- as many companies have already taken steps recently to manage their capital reserves. Of course, we need to continue to motivate and reward our existing employees to ensure long-term positive retention. I'd like to wrap up this segment of the call by sharing one of the several presentations that discuss NGAL at a recent AKI CRRT Conference in San Diego. AKI CRRT is a preeminent global conference for critical nephrology. The presenter in this photo is Dr. Natalia. -- a critical care clinician at Cincinnati Children's Hospital. Her presentation describes how she routinely uses BioPortals and NGAL test at the hospital while treating patients. What is interesting is the fact that she always used NGAL as part of our diagnosis. This is one indication that the next generation of clinicians are being educated by their leading colleagues in the value of test gates in the diagnosis decisions and incorporate into their standard of care. Just to touch on the capital requirements. And before I turn things over to Neil, again, I'd like to provide a word on the future capital requirements by updating some of my comments from the last earnings call. Improving revenue from NGAL Test sales to European and other markets, combined with our growing current antibody revenues are important actions to mitigate capital risk given the current turbulent financial markets. We also don't control the approval time line with the FDA. We continue to maintain a conservative cash spend strategy and have implemented cost control measures to extend our cash runway. This, combined with unknown factors drive us to conclude that the likelihood of the need to raise additional capital in advance of FDA approval is high. And as such, we have been and are continuing to explore those avenues to provide the company with flexibility when we reengage in the capital markets. With that, I'll turn the call over to our Chief Financial Officer, NeIl Goldman.
Thanks, Tony, and hello, everyone. I'm happy to walk through our strong first quarter 2023 financial performance. Starting off with revenues, which are illustrated on the chart on the right-hand side of this page is in the first quarter of 2023, revenue totaled $8.0 million or $1.2 million, representing a growth of 24% over the prior year period. Total revenues continue to be driven by our two largest product categories, and NGAL test and antibodies. To illustrate this, please refer to the chart on the left, which shows annual revenue by product group. Each bar also shows the contribution by quarter, and the labels at the top of the bars are the annual or year-to-date amounts in millions of kroner. While we only have the first quarter to look at for 2023, you can see the year-over-year sales growth of both NGAL test and antibodies. Annual test revenue for the first quarter of 2023 totaled SEK 4.8 million, an increase of DKK 1.1 million or 29% over the prior year period. Antibody revenue in the first quarter of 2023 totaled DKK 2.8 million, an increase of DKK 0.9 million or 50% over the prior year period. This growth was somewhat offset by a DKK 0.5 million reduction in revenue from ELISA kits and other items compared to the prior year period. As we have mentioned on prior calls, NGAL test sales may have timing variability among U.S. customers because the test is presently a research-use-only product in that region. In addition, antibody sales can on occasion be impacted by bulk customer orders. This next slide provides further historical trend information on sales of NGAL tests over rolling last 12-month periods. As you can see, NGAL test sales have continued on their positive growth trend, including being up 15% over the last 12 months compared to the previous last 12 months. These revenues realized gross profit of DKK 5.3 million during the first quarter of 2023 and corresponding to 66% margins. Also, gross profit increased by DKK 1.4 million over the prior year period. The increase in gross profit reflects a combined benefit of higher sales volume and a 530 basis point improvement in gross profit percentage over the prior year period. Our adjusted EBITDA loss totaled DKK 15.2 million or $2.2 million, which is consistent with the company's 2023 outlook. Therefore, we are maintaining, as Tony said, our 2023 guidance with revenues of approximately DKK 30 million to DKK 33 million and adjusted EBITDA loss of approximately DKK 60 million to DKK 65 million. EBIT loss for the period was DKK 17 million or $2.4 million, representing an improvement of 7% over the prior year period. These are illustrated on the chart, which, in particular, shows historical quarterly adjusted EBITDA and cash balances. As part of the expense and cash control measures that Tony described earlier, after the end of the first quarter of 2023, we implemented a reduction in force that affected 28% of our global employees to better align the company's resources with its strategic priorities to grow revenues in European other markets that accept CE Mark, prepare responses to the FDA's request for additional information and expand the total addressable market for NGAL tests. The company expects to record a restructuring charge related to the reduction in force of approximately DKK 2.5 million during the second quarter of 2023. Moving to the balance sheet. We had cash and cash equivalents of SEK 57.7 million or $8.4 million as of March 31, 2023. And -- the use of cash from operations during the first quarter of 2023 reflects the planned payment of clinical trial costs that were invoiced by our contract research organization and trial sites in December 2022 and annual incremental expenses. Our team has continued their effective management of working capital, which as of March 31, 2023, totaled DKK 55.3 million. Now I'd like to simply reiterate the 2023 outlook that was delivered at the end of 2022 and for which we remain well on track, and those are outlined here on the slide. We continue to operate with fiscal discipline given broad-based capital market uncertainty. As has benefited the company over the past many months, Tony, the team and I will continue to take responsible measures with careful and conservative expenditures that focus on our program's critical paths. Finally, Alport's outlook is subject to risk factors, including those described in the 2022 annual report is supplemented in the interim report for the first quarter. With that, I'll turn the call back to Tony for closing remarks.
Thank you, Neil. And I'd like to wrap up by sharing some pictures of the BioPorto team watching test and progress at Boston Children's Hospital. Boston Children's is consistently ranked as the #1 or #2 pediatric hospital in the world. As such, Boston Children's had the resources and capabilities to qualify our NGAL test, which in advance of FDA approval is only sold in the U.S. on a research-use-only basis as a lab-developed test. Because they qualified NGAL test in-house, Boston Children's is permitted to utilize them clinically for diagnosed in children without FDA approval. The pictures show the instrument that runs our test and our Director of Operations is happily pointing to bioportal boxes on the shelf of the hospital's inventory of reagents. It was indeed heartwarming to walk through the hospital and see the children and parents that are going through some very difficult times, but know that our tests are helping clinicians support their quick recovery. I would like to thank all of our customers, employees and shareholders for all the support required to get this life-saving test in the market and into eventual routine use. I am confident in the continued momentum built into and through this first quarter of 2023 and eagerly anticipate a very positive 2023. With that, I'd like to turn it back to [indiscernible] for questions.
Thanks a lot, Tony, and you for updating us on the current development Q1. And as always, we have a lot of good questions out there. I think I will start out with the FDA process. There's a couple of question Christian addressing this and of course, in a in a broader sense. But in this process, Tony and Neil, you are in right now, as you mentioned the Q4, it's like, of course, you are having a dialogue with FDA. Could we imagine that if the after you [indiscernible] your -- your answer, sorry, have further questions to the process? And if so, would that prolong the approval process.
Yes. So you never know. And it is very typical to get 1 or 2 and sometimes even more of these additional information requests from the FDA. That being said, we are trying to make our answers as complete as possible to answer as much of the inquiry that they have. But nobody should be fooled into thinking that the FDA will just take that and approve. It could result in additional questions.
And out of those 30-plus hospitals that have done the test [indiscernible]. -- are you able to use those results in your final answers for the approval?
So the only results that we can utilize in the approval process is those that were part of the clinical trial that we performed.
and then if we jump a little more in to the NGAL. There's a couple of questions regarding Europe, and I know you already addressed this during Q4, but just to repeat it for the new listeners, you chose to change focus in Europe, and that's why why we wait for the approval in the U.S. Could you elaborate a little on that again, Tony? And maybe Neil, can you update us on what your expectations are for 2023 in respect of NGAL in Europe?
Sure. So it's really all about sales focus commercial focus, which includes not only adding folks onto the sales team to work with distributors to get the products sold. But very importantly, if not more importantly, providing medical education to the health care community on the value of NGAL. The problem with just going through distributors is they don't necessarily have the clinical expertise to explain to nephrologists, intensive care clinicians hospitalists on the value of NGAL. What they do have, however, is direct connections to the labiatorians, the lab directors, the people that actually buy the test. And so we are -- we have started building a team of folks to educate the clinical community as well as a robust marketing effort to get that medical marketing information out there.
Yes. And then to the second half of your question, [indiscernible], in terms of the outlook, we haven't specifically broken out our outlook geographically. But remember, what we did say is that in advance of an FDA approval, we really haven't planned for much of any growth in the U.S. And frankly, it's because we don't sell it in the U.S. We're not allowed to do that yet. Therefore, the flip side must be true, which is that most of the growth that we're expecting is in Europe and elsewhere on both the NGAL front as well as with the antibodies.
And if we look a little into the future, of course, and we -- of course, you get the approval and then you start to work in the market. If we get back to those 30-plus hospitals and the part of them being in the U.S., would you expect most of them to sign up? That's probably a question for Tony. And then secondly, when you get this pediatric approval, what type of trials do you need to take to the next level for adults, but also for additional tractions and other parts of the market because it's a quite huge market, as you mentioned in your full year report. Could you elaborate a little on that, please?
Yes. So the first part of your question is our hospitals in the U.S. ready. We are basically making a lot of efforts to make sure that folks in the community understand about NGAL without necessarily going into hospitals and selling the test, right? So part of that is attending the correct conferences to make sure that there are people on podium that are talking about the value of the NGAL test. We are talking to a number of hospitals just to make sure that there's a level of education about acute kidney injury because that is not necessarily very well understood by the community outside of nephrologists. So the folks that are thinking about kidneys every day, they think about it all the time. But in terms of the critical care clinicians that are out there, they need to get educated about AKI, and we're part of that process as well. And the second part of the question was, again, I'm sorry,
Was all about -- when you get the approval, when you get the grinding from the [indiscernible].
So the value of us performing a de novo submission is that now once approved, we will set the predicate by which we can measure against for adults. So we will still have to do an adult trial of some sort, and we're still in the selection process. We haven't announced yet which adult population. We will go after. But the trial will be designed such that you have a control and a test group and you're able to see results, positive results in that test group for adults.
And that goes also for other kinds of pediatrics and...
That's exactly right... Well, we don't have to prove in future indications is our ability to measure NGAL, which is what we have to do for this first indication.
Let's get back to something completely different. We talked about it in the beginning. There's a couple of questions about an old platform. And you guys have done a terrific job turning around the company. And when you do that something, you will focus on something and something you won't focus on it anymore. So there's a question about the platform for [indiscernible]. And I know, Tony, you have a good answer to that question. And...
So [indiscernible] is a strip test. Basically, everybody is familiar with strip test now as a result of the COVID pandemic and those strip tests they're called lateral flow tests. The technology that we had basically was a type of strip test. However, its usage was very focused on research, right? It provided you the ability to test different antibodies to identify the antibodies that could be used in the development of simple lateral flow tests. But as a lateral flow test in and of itself, it wasn't necessarily commercially viable outside of research. And so we decided not to pursue it because the research market is not necessarily our market. Our market are the folks that actually provide direct clinical care. We utilize it. However, we utilize it for our own research, and we sell it to others that are doing research as well.
And then a question to you, Neil. When you look at an efficient capital structure, so you and Tony have mentioned, and we've done -- you did that already two months ago that you need to carry out some kind of share issue during 2023. Do we see other possibilities like loan financing or other stuff possible to bioportal.
Yes, thanks for the question. with where the company is currently today, certainly, all types of capital financing is something that we think about and talk about at the Board level and amongst the management team. But I would say for a company at Bioporto stage of development and capitalization, equity financing is generally the most appropriate version because when you go with a debt financing that comes with it with a bunch of covenants or criteria that you have to continue to meet or if not, it can cause a great deal of more dilution to shareholders than what some incremental equity can provide for companies at our stage. And certainly, equity financing for companies in our stage is very typical, and you see it across the industry. I hope that's helpful.
And then just one more question here. are close to the end of the event. What kind of character what characters are FDA actually requesting. I know you mentioned that before, Tony, these ongoing discussions you have with FDA, but could you elaborate a little on that... Please?
Yes. They wanted to see -- there were a number of things. One was interpretation of some of the statistics that we had supplied in our evaluation of the statistics that we supplied. I mean it's really all about how do we characterize that better for the FDA. There was really nothing changed in terms of the data and the results around sensitivity specificity and so forth. And they -- additional breakdown of age groups and so forth. It was more clarification questions. There were some additional testing that we had to do for interfering substances, they wanted to -- for us to include a whole different class of antibiotics, nephrotoxins and so forth for us to test as well as what we had already tested. And that's kind of the activity that we're doing in the laboratory today. But there's nothing to say that those tests won't be successful.
[Operator Instructions] That seem like there are any other questions. So with that said, I would like to to thank both of you, Tony and Neil for a great presentation. I would like to thank the audience for all the good questions. And with that said, I will close the event for today. And thanks a lot once again.
Thank you, [indiscernible]. Thank you for hosting this...
Thank you, everyone. Bye-bye.