Photocure ASA

OSE:PHO

Earnings Call Transcript 2021-Q1

[Daniel Schneider, executive]

All right. Well, good afternoon, everyone. Good morning to those who may be calling in from the U.S. My name is Dan Schneider. I'm President and CEO of Photocure. With me today is Erik Dahl, CFO. We're here to present Photocure's results for the first quarter of 2021.

Next slide. Just a reminder, typical disclaimers are in place for today's presentation. Next slide. What a fantastic quarter. 2021 highlights, we had 50% revenue growth on Hexvix and Cysview. Of course, some of this is due to the acquisition of European rights, but also some growth underlying growth.

EBITDA of positive NOK 18 million, so another quarter of positive EBITDA. We had 2 publications in the fourth -- in the first quarter. We had the World Journal of Urology and the British Journal of Urology, both putting out positive data on the use of Hexvix in combination with Blue Light Cystoscopy in the detection of bladder cancer and the cost effectiveness.

And in partnership activities, in China, Asieris licensed the rights to Hexvix, which we had reported earlier. In Canada, the bladder cancer guidelines were strengthened for the use of Cysview and Blue Light Cystoscopy. And our partner down in Chile, Genotests has filed its MAA for an expedited review. So positive things in the first quarter, and we're very, very happy with the progress despite the fact that the first quarter was still affected by COVID, which we'll get into today.

Next slide. So in the U.S., it still remains significant restrictions, particularly in the eastern states and large MSAs or large cities, in particular. However, we're seeing some loosening up as we got through the quarter and we headed into March, both Los Angeles and New York appeared to be coming back online. It has been well over a year since those cities contributed at the normal contribution rates that we expect. So all the growth that you have seen has been very, very much organic growth and new growth. But when these large cities come back on, we're very positive and bullish about where that's going. And despite the first couple of months of the quarter, we still installed new towers, and we had unit sales growth despite this challenging environment.

In Europe, the severe lockdowns and restrictions have continued on. This is essentially the third wave of COVID hitting Europe and affected the entire quarter, still in the midst of the third wave, but the situation is improving, and we expect it to lift over the summer. There's successful interactions. Despite the restrictions, we've roughly reached about 20% of the customers in face-to-face or phone calls. But the difficulty will start lifting as COVID lifts, and we'll be able to get back into the hospital systems throughout Europe.

Next slide. So this is a great slide to show the historical look back at revenue development since quarter 1 of 2018. I draw attention to 2020 to now and the impact of COVID. First, the deep early March 2020 dip in the U.S. You see a drop, the greenish colored bar dropping fairly low. If you recall, in the second quarter of last year, we had complete shutdown in the U.S. and there was very few patients seeking treatment that had been of the most severe cases. But we had a rapid improvement. We retained the commercial organization anticipating the markets would open back up, and that when the markets did open up, that we would be there to accelerate sales, and we did that through quarter 3 and quarter 4.

However, first quarter '21, you can see there, again, another impact from a second wave of COVID in the United States. The good news in the U.S. is that about 60% of the population has now received at least 1 dose. We expect herd immunity by early summer. And we're seeing restrictions beginning to lift as we're heading into the second quarter, and we feel very good about where things are heading, fingers crossed.

Next slide. So let's get into the segments. Next slide. So first, let's take a look at the U.S. and Europe and the promising impact in quarter 2. We look -- as we lift out of quarter 1, January, February and then a sudden lift off into March, very strong March, of course, in both regions of the world. Particularly, you see the U.S., which has had growth over prior years, Europe lagging slightly. However, it's going in the right direction and we expect now that we're engaged in Europe directly, we'll have positive impact on that business. As restrictions open and we get back into the clinics, we expect a new normal in some places around the world. But we expect to be successful in continuing this momentum in picking up to pre-COVID growth rates.

Next slide. So in 2021, first quarter in the U.S., we installed 12 towers. But I will say that the backlog suggests an acceleration in quarter 2 and throughout 2021. And getting 12 towers installed in a quarter when you have still limited access in many of these accounts, I think, is quite an accomplishment. And if you look at it from a historical perspective, we're on track for exceeding of next year's -- last year's installation, and that's just in the first quarter where COVID has impacted the business. Unit volume was up 4% in quarter 1 versus prior year where COVID-19 actually didn't come into play until the second 2 weeks of March. So pretty much, we're comparing ourselves to a completely COVID-free quarter in 2020.

And so I think we've done quite well given this resurgence of COVID in the first quarter of this year. We do see restrictions lifting and procedure volumes are starting to pick up. Initially, when COVID hit, I think only the high-risk patients were asked to come into the clinics and have procedures. I think that's changed. I think patients are feeling safer going into hospitals, particularly ones perhaps who have for the first time, have not seen a physician and may have had issues. They're going to go back in and see urologists, and I think we'll see the procedures picking up through the summer.

Very positive on the contracting standpoint. We have our first multi-hospital system agreement, which included 5 rigid towers in 4 different hospitals that all belong to the same mid-Atlantic hospital region. This -- reminding everyone, this is an important initiative and a strategic move for the company as we continue to look for ways to do a top-down push of Blue Light Cystoscopy into systems as well as a bottoms-up part that comes from the sales reps. Momentum has also been seen in driving awareness in the surveillance market with flexible cystoscopy and Blue Light use. We've had also positive experiences there engaging large urology group practices and starting installations and peer-to-peer programs that drive utilization of Blue Light Cystoscopy on the flexible surveillance market.

And then finally, as I mentioned, there has been a significant pickup in unit sales in March following a very lackluster, I would say, January and February.

Next slide. Tower installations still remain strong. We had 12 installations, 9 rigid, 3 Flex. We're roughly running about 33% of our installations now. We're in the surveillance market. We continue -- we believe we'll continue to see a pickup in Flex. And as you all recall, knowing our business quite well, the flexible market is the larger market in terms of patients available about 3x the size of the rigid market. So this becomes an important segment for us as we continue to penetrate. So to date, we have 41 flexible scopes placed throughout the United States and over 238 rigid scopes.

Next slide. Key initiatives that will drive growth in the U.S. 3 come to mind that are most important of the 6 here. Contracting, I think we've proven that, that is going to be a very important component to our driving growth into the future, with attacking large health systems that have multiple hospitals within allowing us to place multiple systems and penetrate community-based urology groups. We also see the Veterans Affair administration. These are the hospitals that are dedicated to our ex-military personnel, very strong growth in that area, and we see tremendous opportunity as we leverage the Blue Light Cystoscopy and the results it's having with these patients who, in particular, have a lot of comorbidities. So Blue Light Cystoscopy has played a very important role in that, and we're going to continue to optimize that market segment.

And then the peer-to-peer programs are going to start building. All of last year, while we were in COVID, the face-to-face interactions were limited. Going here now into the second quarter of 2021 and through the rest of the year, peer-to-peer programs are an extremely important part of the uptake of products in the United States. This is where a physician who's using our product will talk to a dozen-or-so others or other folks that are within their practice and speak about the benefits of using Blue Light Cystoscopy with Cysview for Hexvix. So that will be an important part of it, particularly in the surveillance market, where the physician offices are also looking at the economics involved and may not completely understand that actually is positive economics to use Blue Light Cystoscopy. So very important initiatives along with the other 3.

Next slide. Taking a look at Europe. The momentum is going to be building. The first part of this is that we've exceeded our forecast from our original business plan that we laid out when we acquired the rights back to -- from Ipsen. We are actually successful in reconnecting with European KOL community as Photocure, introducing the company as a new organization backing Blue Light Cystoscopy. I think it's met with tremendous acceptance and appreciation that we are actively in the market doing the best we can. Again, most of these interactions have been remote, be it video conference, telephones or otherwise. But I will tell you that the KOLs in the European community are quite excited about the fact that Photocure has taken this on directly and that we have such a dedication to the bladder cancer patients in the world.

We've established cooperation projects with European capital equipment providers. Again, if you look back at the Ipsen relationship, there was no relationships, and it's a very important part of success anywhere in the world to have a very tight relationship, coordination, and strategic planning with your capital equipment providers. So that has already begun. We've got programs in place to begin the acceleration of the reignition of many of the equipment throughout year as well as new placements, and we've already had some early buy signals and placements in Europe.

We completed the work down of excess inventory from Germany. If you remember, they took in extra inventory at the end of last year for 2022 -- 2020 tax incentive. And of course, there's first signals of a turnaround in large growth markets of the U.K., France and Italy. If we go to the next slide, just a pictorial, a reminder that our established Hexvix market in Nordics has about a 40% penetration. The next active Hexvix markets of DACH in France have 10% -- 30% penetration. But the signals on France, U.K. and Italy are very positive. Again, it's very early, but we are seeing traction. We have direct sales force in those countries. They are making contact and we've had actual placements or buys for systems in France and U.K. So very excited about where this is going.

All right. I'm going to turn this over to Erik to take you through the financials. Erik?

[Erik Dahl, executive]

Thank you, Dan. Well, in this part of the presentation, we will start with the financial review of our 2 segments, Europe and U.S., and then followed with the consolidated income statement and have a look at the cash flow as well as the balance sheet. But as usual, I want to add 1 comment about the impact from foreign exchange on our results. And in short, the FX impacts -- FX impact for Q1 was revenue negative, approximately NOK 4 million. And for EBITDA, it was neutral. The currency fluctuation was largest for U.S. dollar, had a decline of about 10%, while euro declined about 2% in the quarter. This is year-over-year numbers.

When we go through the financials, please keep in mind that unless I mention another currency, all amounts mentioned in this presentation will be in Norwegian kroner. We will start with the segment reporting, and we'll focus on the 2 main segments, U.S. and the European business.

Let's look at U.S. first. First of all, coming from Q4 and going into Q1, our sales were impacted by the pandemic. We did see a resurgence of the pandemic late in Q4, which caused some of our territories to decline compared to the prior year period. This development continued into Q1, however, with a positive development late in the quarter. But in spite of the pandemic, the U.S. business had a positive development, both in terms of volume and revenue measured in U.S. dollars. We increased volume with 4% year-over-year and revenue with 8%. However, driven by the currency development, the revenue declined 3% measured in Norwegian kroner.

Direct costs are down from last year, a reduction of 3% in dollars and 14% in NOK. Direct cost includes local sales. It includes marketing, medical spending and also local G&A spending. We have on a number of occasions said that we are investing in the U.S. market. With COVID-19, however, it has made no sense to increase these investments due to very limited access to our customers. Therefore, cost containment has been and is important. As the pandemic loses it's grip, we should, however, expect increased activity level and expenses to drive further revenue growth going forward. The contribution was negative NOK 3.6 million or 13% of revenue. This is an improvement from last year in spite of the pandemic, but obviously, not where we want to be over time. However, the potential in the U.S. market is great, and it makes sense to continue our investments in the market but balance our cost with the revenue and the growth potential.

The European business has had a very positive impact from the inclusion of the former Ipsen business, both in terms of revenue and contribution. Revenue has more than doubled to NOK 54 million, definitely a solid growth, but the number is hiding the fact that also Europe has been impacted by the pandemic. We note, however, that the best countries in terms of volume development are the countries that we regard as high potential growth countries, such as U.K., Italy and France.

Direct costs have increased with NOK 12 million, which obviously is driven by the investments in the local European commercial organization. We expect to increase headcount and cost as COVID resolves. During the pandemic, cost containment has been important, and we have deferred hirings and kept spending low without disrupting the business. We ended the quarter with a contribution of NOK 33.8 million, that's 62% of revenue, It's an increase of NOK 15.8 million compared to Q1 last year. I can only repeat what I said last quarter, the transition of the former business from Ipsen has been a success.

Let's move to the consolidated income statement. Revenue first. Revenue was NOK 88.2 million for the quarter, which is an increase of 60% from last year. Main driver was the inclusion of the European business from Ipsen. However, we also had an upfront payment from Asieris of $750,000 or NOK 6.4 million. This payment was for the partnership agreement with Asieris for Hexvix in China and Taiwan. Finally, the revenue was negatively impacted by a currency fluctuation, in total approximately NOK 4 million.

Operating costs increased 21% in Q1 compared to Q1 2020. Contributing to this increase was the investment in Photocure's European commercial organization, which is required to support and grow the European sales. Total direct expenses for the European organization was NOK 16.1 million in Q1, an increase of NOK 12 million from last year Q1. If we adjust for this investment, our operating costs are at level with last year, a result of cost containment throughout the organization.

During the pandemic, we have maintained our policy not to reduce number of customer-facing employees. We have maintained our sales resources and as far as possible, maintained customer-related activities during the pandemic. We believe this will speed up the sales rebound as the world returns from the pandemic.

EBITDA in Q1, NOK 18.1 million, an improvement of NOK 22.9 million from same quarter 2020. The improvement is driven by the inclusion of the European business. It's driven by upfront payment from Asieris and it's also driven by the cost containment throughout the organization.

Moving to depreciation and amortization, NOK 5.9 million in Q1. This includes NOK 4.2 million of amortization of the intangible assets, which is related to the return of the European business from Ipsen. In Note 6 to the accounts, we have explained the treatment of the intangible asset and goodwill from the purchase price allocation exercise. We had restructuring cost of NOK 1.9 million last year. The restructuring costs related to the transition activities for the European business and does not impact 2021 numbers. Net financial items were a net income of NOK 8.1 million in Q1. This included a total of NOK 5.6 million of accrued interest cost for the deferred consideration to Ipsen, meaning the future estimated earn-out payments to Ipsen.

Furthermore, and due to currency fluctuation, we incurred a net currency gain of NOK 15.9 million related to the liability. Again, I refer to Note 6 to the accounts for explanations. Tax expenses, NOK 5.2 million in the quarter. Tax income and tax expenses relate to our tax asset and tax loss carryforward in the parent company. In other words, it's not tax payable. After net financial items and tax, we have, for the first quarter a net profit of NOK 15.2 million compared to net loss of NOK 17.7 million last year.

Let's look at the cash balance and then the balance sheet. Now the cash flow from operations was negative NOK 8.2 million in Q1 in spite of a positive EBITDA. This is mainly due to cash outflow from working capital, driven by the inclusion of the European business, impacting accounts payable and receivables. Most of the working capital movement relates to payables and other current liabilities and I do not see this development continue going forward. A further element of the operational cash flow is the interest component of the paid earn-out to Ipsen of NOK 6.3 million in the quarter.

Cash flow from investments in Q1, negative NOK 0.3 million and cash flow from financing was in Q1 positive NOK 3 million. And that gives us a net cash flow in Q1 of negative NOK 5.5 million, with the 2 main drivers being the positive EBITDA and mainly one-off negative development in working capital.

With this net cash flow, we end Q1 with a cash balance of NOK 329 million.

Looking at the balance sheet. We ended the quarter with total assets, NOK 767 million, noncurrent asset was NOK 354 million at quarter end. This included customer relationship with NOK 158 million. Customer relationship is the intangible assets identified as the purchase price allocation for the Ipsen transaction. Noncurrent assets also includes goodwill from the Ipsen transaction of $144 million as well as a tax asset of NOK 45 million. Inventory and receivables were NOK 84 million at quarter end, an increase from year-end 2020 of NOK 6 million. This is driven by the inclusion of the European business from Ipsen.

Long-term liabilities, NOK 165 million, include the earn-out liability of NOK 127 million and a long-term interest-bearing debt. Total interest-bearing debt, including short-term part, was NOK 50 million, and is a loan secured under the state guarantee scheme for loans related to COVID-19. The loan carries a floating interest. Effective interest rate at the end of the quarter was NOK 2.7 million. The loan is a 3-year term loan, first year interest-only, and thereafter, quarterly repayments of NOK 6.25.

The earn-out liability, totaling NOK 127 million represents the capitalized value of estimated future earn-out payments to Ipsen. The liability is subject to a 10-year annuity. We accrued NOK 5.6 million as interest expenses for the earn-out liability in the first quarter this year. And finally, equity at the end of the quarter was NOK 530 million, which is 69% of total assets.

So this concludes my part of the presentation, and Dan will continue by walking us through the strategy and then summing up. Thank you.

[Daniel Schneider, executive]

All right. Well, thank you, Erik. Slide 17, strategy for shareholder value creation. We'll go to Slide 18. So Slide 18 is a slide you've seen in the past. It talks about the total addressable market of being over $2 billion. The objective of Photocure is to bring the rest of the EU and the U.S., up the DACH and Nordic levels. In doing so, this would be a multi-hundred million dollar revenue-generating company. We believe we have the key success factors in place. We have the approvals in both the surgical and the larger surveillance market, and we're starting to penetrate that surveillance market, in particular in the U.S.

We have acceptance in all major and local guidelines. And as mentioned, Canadian guidelines have strengthened, specifically spelling out the use of Blue Light Cystoscopy as an advanced and better TURBT process and procedure. We have access, both permanent and favorable reimbursement, particularly in the U.S., but also throughout Europe, and we'll continue to strengthen our position. You never sit idle on access to reimbursement. There's always ways to improve and protect. We have activated awareness. The patient demand continues to grow through efficacy groups in the media. They actively seek Blue Light Cystoscopy. We use our search engine optimization in our website to drive the patients to their physicians asking and requesting for Blue Light Cystoscopy. And we have an acceleration in both our commercial investment to optimize the opportunity. Although I will say it has been a disciplined approach throughout the COVID situation. We have not overspent ourselves. We've been very, very smart in where we put our money for the returns, waiting this out as we emerge from the COVID shutdowns.

Next slide, Slide 19. The overall strategy focused now currently on the accelerate and expand stage, accelerating the drive in the breadth and depth of Hexvix and Cysview amongst our customers, driving more physicians to use it, more institutions to install it. And expanding, generating sales in new geographies, such as Chile, should it receive its accelerated approval that could come as early as this year, although I will caution everyone that this is a latina country and also under a significant COVID situation. So while the expedited review would logically say this would be approved by the end of this year, I think we should all sort of couch that a little bit. And then as we look into the future, looking to acquire and transform this organization into a truly global bladder cancer company with multiple assets focused on bladder cancer and uro-oncology.

Next slide. So the anticipated milestones and corporate priorities for this year. We intend and will regain prior sales momentum once COVID-19 lifts. We believe this will happen throughout the summer. Let's all cross our fingers that there is yet another wave or some variant of COVID in the second half of this year, let's hope we kick it out of the world health -- world health situation for good. We want to continue our geographic expansion, penetrating the untapped European markets looking globally at additional Hexvix licensing agreements around the rest of the world. And we are active in pursuing that.

We want to further execute on the contracting with group purchasing organizations and large hospital systems throughout the U.S. that has proven to be a very rich opportunity for Photocure. It's not a quick sell, but it is a very important sell. We'll also be presenting and publishing additional clinical data, attending major congresses, both EAU and AUA. AUA this year, which is the United States version of Urologic Association is actually planned to be an in-person event, which will be the first one in almost 2 years, and we expect that to be quite an event as people want to get back to normal.

Also we'll report on the progress of partner companies and projects, in particular, Asieris has proven to be just a tremendous partner for us, both on Hexvix now as they move very, very quickly, and we'll have more news on that in the future as well as Cevira, the free option on, on the company. As that progresses through Phase III and hopefully, into submission to the Chinese FDA, we expect future milestone payments and then eventually the commercialization of the product in China and then the rest of the world. And we'll continue evaluating strategic products or business opportunities for the organization as we want to look to fold things into the organization.

Next slide. So in summary, I think I would sum up the organization over the last 24 months as a company that is based in discipline. And I think Erik hit on it very well, we've been very smart in how we spent the money throughout the COVID situation, but we didn't handicap ourselves in any way. In other words, as opportunity and as COVID receded, we were able to get right back into the market and accelerate sales. You saw that in Q3 and Q4 of last year. We hit another COVID shutdown, but that -- we didn't make the drastic changes of eliminating commercial organization, but we did tighten the belt where we didn't think we would get the return. It's also a company of resilience, I think a lot of preparation and focus. We're opportunistic, and we're focused on execution.

So as we look into the summary of this quarter, I think we managed well through it. We had growth in Hexvix in sales in Q1 despite COVID-19 and foreign currency headwinds. We added new towers in Q1 despite COVID impacts. Again, we did it all of last year at a rate of 12 or so -- 10, 11, 12 per quarter. We expect to get back to pre-COVID rates. The pipeline looks very good as we go into Q2. So more to come.

We continue to accelerate and drive key initiatives. I've mentioned the contracting strategy being a very key one in the United States and also looking to our licensing partners and helping them accelerate their sales in their regions of the world. We delivered positive EBITDA for Q1, and our cash position remains strong at NOK 329 million plus compared to last year's NOK 127 million. COVID-19 remains volatile. Guidance will be issued when trends are more clear. It's still uncertain. I don't think anyone predicted necessarily the second and third dips depending on where you are in the world in COVID in Q4 and Q3. I hope we're coming out of the woods on this. I know we're well positioned and prepared to accelerate, and we look forward to Q2 and the rest of this year.

So last slide is Q&A. And I turn it over to Erik, who will emcee this for me -- or us. Thank you.

[Erik Dahl, executive]

Thank you, Dan. Well, it's a few questions, a lot of them are actually about China and Asieris. Seems to be a lot of interest about that part of our business. So I'll go through a few of those questions, Dan.

First question is, is it realistic that we can see first initial sales of Hexvix by Asieris already this year? And do you know Asieris' ambitions on behalf of Hexvix for the next 2 to 3 years?

[Daniel Schneider, executive]

As far as can we expect sales on Hexvix this year, a lot is going to have to do with the strategy going into China. As you recall, they are petitioning for a waiver so they can avoid a clinical trial. We have supported them using our U.S. registry and Asian patients that were registered. We've recently -- that was recently published, this data. So it's very, very interesting that it supports the use of Blue Light Cystoscopy in the Asian population. If that goes well with the Chinese FDA, and I think it's called actually NMPA, that then we expect them to get an expedited review and perhaps by the end of this year or early next year, we can get sales going on. There are other opportunities, things they're looking into that we're not prepared to speak about. But you can trust me when I say that anything and everything we can do to accelerate sales or gain sales in any country or region or any partner, we are doing.

[Erik Dahl, executive]

Thank you, Dan. I have another question on China. What is the status of MAA in China for Hexvix. And what is the status of Cevira Phase II in China. Is the Phase III fully recruited? Maybe take Hexvix first.

[Daniel Schneider, executive]

Hexvix first, Cevira second. Well, actually we'll do it the opposite. Cevira -- there's no new development on Cevira, other than to say they continue to enroll in Phase III that was anticipated to continue throughout this year. There'll be no new milestone or news other than that enrollment continues. It's gone well. They are expecting to be on track for the year as they had planned. And then they anticipate that they'll have data out in '20 -- 2022 for approval in '23 so -- or end of '22. So we'll see how that develops, but they are on track, and there's no hiccups there.

On Hexvix, the MAA continues forward, meeting with -- again, this is Asieris' business, but they're meeting with the Chinese FDA, and they're applying for a waiver to try to get an expedited review without having to do a small clinical trial. So many of the times when you're going into China with med tech or pharmaceutical products, they require a small clinical trial of some sort. It might cost about USD 0.5 million to do that, but it does take time and money. They're applying with the data we provided them from the U.S. registry to try to get a waiver. If they get -- are successful in that waiver, which they're applying to here in May and June, then they potentially could have sales beginning in early '22, but we will see. I'll keep you updated.

[Erik Dahl, executive]

We're leaving China, but we're staying in Asia. And the question is what about rest of Asia and India and Russia, many people there, is the comment.

[Daniel Schneider, executive]

There are many people, but the markets aren't so lucrative, and you have to be careful in our world here. There are some interesting countries. I would point to South Korea being of interest. I think it is an interesting country. There are a few others, but I'm very cautious going into places like Russia, India, name the rest of them. The markets, while it looks like a lot of people, the commercialization doesn't support it. Unfortunately, the health systems are not developed to do -- to help us out there. So more to come there. I think if you take a look at maybe parts of Indonesia, Singapore, et cetera, that may be of interest as well in the future. But for now, we want to stay focused on China and perhaps South Korea.

[Erik Dahl, executive]

Good. Now we're moving back to our core markets, U.S. and Europe. First question is, any news of the potential down classification of the Blue Light source in the U.S.?

[Daniel Schneider, executive]

There's no new news. And this is a long process if it's to take place. I just know that there is interest from many parties to bring this down. It is a developmental hurdle for Karl Storz themself to go through the PMA process that they have to go through for upgrades to their own system. And of course, there's interest, as Blue Light continues to grow, I'll give you an example, I mean, Olympus, when we initiated the contact and now are starting to install Blue Light scopes in the Kaiser system, that is an Olympus system, that is an Olympus preferred vendor system. So that drew the attention of Olympus, that drew the attention of Karl Storz. Olympus sees market share beginning to erode. So they have interest, obviously. So there's Wolf and others to come in the market. But until that happens, there's really no new news. And again, you're working with the FDA and it's a government agency, so things don't happen overnight, but I do know the interest and momentum is in favor of a change in the future, maybe into next year.

[Erik Dahl, executive]

Thank you. The next question is, there is a focus on driving demand for flexible scopes, but pace of scope placements remain low. How should we think about that opportunity?

[Daniel Schneider, executive]

Well, they're low, but I mean I don't know if they're really low if I look at it. If you look at pre-2018, we are averaging maybe 5 to 7 or so a quarter. Going to 2018, 2019, 2019 was averaging closer to 20% as we were exiting the year, but then we had COVID last year. And COVID ended up, I believe, at like 44, which is about 11 per quarter. First quarter this year, we're at 12. And as I mentioned, it's a COVID-impacted quarter, of which 2 months were pretty impacted in terms of access and restrictions. And to install a system, you have to physically be in the system. You have to be there with the OR personnel. You got to teach the pre-op process, the operational process, install the equipment, guide the physician. If you don't have access, it's very, very difficult to install the equipment. Having said that, the pipeline looks really good for the remainder of this year.

So as restrictions lift and we're able to get back into those ORs and work with those institutions, I think we'll see a pickup in the installations. But again, we're not just focused on installations. Installations only go far. Once they're installed, you've got to drive utilization. And driving utilization comes from the expansion of patient selection. So making sure they're not niching your product for, say, CIS or high risk. But that, in fact, every patient deserves and should get their first TURBT done with Blue Light Cystoscopy. Why? Because, a, they see all the cancer, and they can treat all the cancer; and two, proper staging, so they get the proper follow-up. And then also all high-risk and moderate patients or intermediate patients should be treated with Blue Light Cystoscopy because they're the ones most susceptible, more serious muscle-invasive cancer down the line.

So we're focusing on patient selection. We're also focusing on physician use. I mentioned in my presentation, peer-to-peer programs. A lot of times we get into an institution and we'll have 1 or 2, we call them champions. These are urologists who really believe in Blue Light Cystoscopy. They'll start using it, but there may be another 6 or 7 urologists who need to start -- who need to be exposed to it, need to come into an OR setting, see that physician use it, see the benefits of the product that takes time. So those peer-to-peer interactions, having Dr. A talk to Dr. B, becomes a very important part of our adoption process. So we're focusing on the utilization and the efficiency and effectiveness of those 2 as well.

[Erik Dahl, executive]

Europe, can you say anything about scope placements in Europe?

[Daniel Schneider, executive]

Early. Like we mentioned, we've made physical -- or nonphysical, I should say, contact with about 20% of the customer base in Europe. It's -- where we had established sales forces like Germany and the Nordics, obviously, our reps know those physicians. We're able to stay in contact with them. In emerging markets where we're starting from either growth or reigniting like France, Italy, U.K, we're doing what we can. U.K. has been particularly optimistic because U.K. has gone in and out of open and closed, as we know, all through last year, that all those windows have opened and allowed our country manager to get in. He has made impact. So early signals show buy signs.

We know in France and the U.K., in particular, there's several scopes planned to be installed this year. I think that will grow as we get more access to accounts. And I think that will just happen as we get through the second half of this year, and certainly in the 2022, we'll start seeing growth. But again, remember, we acquired or got the rights back to Europe from Ipsen. There were -- at the time when GE launched, there are well over 700 cystoscopes in use throughout Europe. In the period of time that Ipsen had this part of the world, they allowed a lot of those accounts to go dormant. So it's not all about new placements, but it's also reigniting existing ones where physicians may have walked away from it. I will also say, I wanted to add something on the U.S.

When we talk about Blue Light Cystoscopy and the expansion, one of the interesting dynamics that's happened over the last several years is because of the tremendous growth rates and expansion into particularly academic centers where physicians are being trained to be young urologists and to then eventually go off to other institutions, we have a program in place where we follow those physicians, those new physicians to wherever they go. And what you often find with those physicians is that they are trained with Blue Light Cystoscopy, let's say, John Hopkins or Moffitt or otherwise.

And those physicians then go to a community hospital or some other hospitals throughout the United States. And the first thing they're asking is where is Blue Light Cystoscopy, and when it's not there, the next step is, how do I bring it into my institution, begin Blue Light Cystoscopy with Cysview in my new institutions. So that is a burgeoning opportunity for us, and it's only kind of come about in the last couple of years. And we see it as a way to use champions from -- coming out of their med school and residencies into new practices wanting to use Blue Light Cystoscopy. So we're leveraging those relationships. Sorry to go backwards on that, but I want to make that point.

[Erik Dahl, executive]

Thank you. We're back in China now. The question is, can we say anything about the potential size of the Cevira market.

[Daniel Schneider, executive]

I'm a little hesitant to do that because what we believe it to be and what Asieris might believe it to be might be misaligned. And Asieris, this is their product. We do think it's significant. We know that a large portion of the folks suffering from precervical cancer are looking for other options. I'm happy to run through that at another presentation as they develop through the development phases to kind of characterize it. But I'd like to be on the same page with Asieris before I answer that question.

[Erik Dahl, executive]

One question on Hexvix/Cysview therapeutic effect. Any news on that?

[Daniel Schneider, executive]

Just continuing to do our experiments. There'll be more to come. I think what we do know and everyone is aware of is the base molecule, ALA, has therapeutic effects. It's used in Cevira. It's been used in Metvix. We know there's something that it can do. Does it work under Blue Light? Does it work alone? We're still investigating. We're not letting up on that. It's just more to come as data comes in, and we're in a position to present.

[Erik Dahl, executive]

I think that actually concludes the Q&A session as far as I can see.

[Daniel Schneider, executive]

Okay. All right. Well, thank you, everyone. Appreciate it. On behalf of Erik and I, we look forward to seeing you at the Q2. Thank you. Bye-bye.