Photocure ASA
OSE:PHO
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Photocure ASA
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All right. Well, good afternoon to everyone in today's audience, and good morning to those maybe calling in from the US. I'm Dan Schneider, CEO of Photocure, here to deliver the first quarter results for 2022, with my glasses on. All right. Just a reminder, today's disclaimers are in place for today's presentation.
All right, well, let's get into some of the highlights on the quarter. We had a 2% increase in unit growth for the quarter. There were low procedural volumes in January and February. You'll see that in slide deck today. The Omicron variant had its impact on the US and global markets, impacted procedures as well as staffing has now become a remnant of the effects of COVID. So despite that, we still grew, which obviously points to greater penetration. We also launched operations in Canada, January 1st.
From an EBITDA perspective, negative NOK 13.9 million. However, reminding the audience that we were building operations throughout 2021, and that we're relatively stable compared to Q4. And in fact, minus 3% in OPEX.
The commercial investment has all been made in both US and Europe. From here on out, it'd be somewhat incremental going forward.
From a studies and publication standpoint, we're generating additional data. This data's, kind of, interesting, it's creating discussions in the scientific community around the possible effects of hexaminolevulinate with PDL-1s or alone, is an anti-tumor effect and an induced immune response following exposure to the product. So we'll continue to generate publications both here on a preclinical basis, as well as in our registries, which have grown to considerable size, and we'll get in and talk about that in the future.
From a partnership activity perspective, both in Australia and New Zealand, we transferred the rights over to Endotherapeutics, more suited for our product. They are focused in the uro-oncology spaces, and we believe that they'll do a bunch better job than Juno did in the past. As we said, we've committed to making sure we hold ourselves and our partners accountable. They will launch officially in July. The product is live in that market, but we'll be putting a full-on sales effort beginning on July 1st.
In China, Asieris obtained the approval to conduct a real-world evidence study as part of their Hainan pilot to support their Phase III trial. We're expecting Phase III trial for China approval to begin with first patient enrollment in third quarter this year if things go well.
So let's get a little bit into the segment trends. Probably first, and probably unlike anyone else, we're all giving COVID updates, probably fairly similar, although I think affecting companies in different ways. Nearly half the US hospitals had postponed surgeries. In fact, according to [routers], they hit specific markets, northeast and the north, Maryland, Virginia Ohio with statewide recommendations for surgery delays in New York, Illinois, and Massachusetts. Interesting enough, this overlaid one for one with the territories that we have, that also experienced in difficulties in the first quarter, particularly in January and February.
The hospitals are working through staffing shortages. I don't believe that is going to be resolved in the near term. I think this is something that's going to resolve over the course of this year, get better and better. We do see a normalization of access to procedure volumes as we go through the second half of this year. In fact, when you looked at our data, while January start off very soft, we roared out by March with our second highest unit volume ever in the United States. That trend is continuing through the beginning of the second quarter of this year.
From a Europe perspective, there has been limited access as the Omicron wave hit in Q1. There's been unprecedented staffing shortage, just like the US. Hospital access is by appointment only. The days of standing around the hospital at the physicians' lounges are long overdue – are over. And Germany is recovering. It represents about 70% of our revenue for Europe. It is the slower one to recover. They tend to be a little more conservative when dealing with COVID and limiting restrictions and access. But it is beginning to open up. We expect full access by June.
So from an overall, looking at both regions, we're expecting volume improvement through Q2 and into the second half of the year. We're expecting momentum to continue to increase, barring any additional waves or serious waves of COVID moving forward.
As I mentioned, the trends, I think this is very enlightening and very encouraging. The US upward trending, coming off of one of our lower months in the last couple years, and then ending as our second highest unit volume in history for the US. So bode very well. In Europe, we also had the upward trend. You'll probably note that it looks like March fell off. This was actually due to Germany, just timing of orders. April made up for the differences in March. So overall Europe actually grew 1% and I believe the US grew at 3%, I believe. Yes. All right.
So getting specifically into North America trends, continued business growth, despite the latest surges. I'm actually proud of where we are today. I think we are, as an organization, controlling the controllables, we're positioned for the opportunities, maximizing those opportunities when they do become available and finding new and different ways to access these markets.
Overall, revenue is actually up 12%. If you take it in concept currency, it's around 7%. There's uptake in the clinics, particularly in flexible. You notice this was our second highest flexible cystoscopy installations at 5. We actually had several installations that were postponed into April. So this would by far been the best quarter ever. And flexibles actually now representing close to 33% to 40% of our installations in our pipelines as well, which is really good because, if you recall, the surveillance market is a much larger patient population to access.
Contracting continues to be a key driver for us in driving extra volume discounts for accounts that do very, very well. We do see procedure volume softening in Q1, but we see it improving through the quarter in the second half. And from a Cysview perspective, growing the units of Cysview while still experiencing– if you remember from Q4, we show the market deterioration of the TURBT market dropping off throughout the COVID months. That has continued into this first quarter of this year. However, we continue to grow units, which means we're gaining on penetration. In other words, the number of procedures are being done, a greater percent are getting done with Blue Light Cystoscopy and we see that continuing forward. And of course, staffing shortages will remain an issue, but will resolve over time.
From a scope placement standpoint, we had 13 towers installed, 5 were flexible, 8 were rigid. I think it took many by surprise the rigid. Just so everyone's clear, we defined an installation as first patients treated so in many of these cases, these were in the hospitals, but waiting for the first patients to be scheduled and treated. So we had – the remaining 8 towers of the old version of Karl Storz's equipment were – actually went live in first quarter. And we had 5 flexible. If you analyze that, that's about 50+ towers so far, this is pre-launching the new system by Karl Storz. That already puts us on track for a better year than the last 2 years, 45 and 43. And then from an overall growth perspective, as I mentioned, flex continues to grow in terms of its percent of the total business.
So what's happening? I'm sure top of everyone's mind is the new system. What is it going to mean and what's happening? Currently in the last couple weeks, they've begun the confidence-based testing. This is where they put machines in the hands of some of the top institutions in the US to gain feedback, if there's any issues with the engineering or the process, the procedure, etc. They're able to work those bugs out before they go into a full-time – full-on launch. I'm pleased to say that the launch – or the confidence-based testing has gone extremely well. We got a couple quotes from some of the top institutions like Hopkins and Emory. We have other ones going on this week and next week.
At this point, Karl Storz is fairly confident things will go well. They're prepared to go into the launch after AUA, which is this weekend in New Orleans. The launch will start off with the OPP, which is the Obsolescent Protection Plan accounts. These are accounts who bought the old system over the course of the last 2 years, now knowing that they were going to be converting to the new system. So they'll immediately convert them on a FIFO method of inventory. And then also start the installation of new towers.
We believe the beginning of new tower installations will begin towards the second half of this quarter and into – certainly into third and fourth quarter. We have a very, very healthy pipeline, the healthiest it's ever been in terms of, in interest in Blue Light Cystoscopy. And I think the new system by Karl Storz, with the comments here, they're able to see the tumor margins, the ergonomics are better. All the things that the new – the old system – the new system [wants to solve] and the old system are becoming a reality in the hands of these physicians.
And keep in mind, the launch is not just Photocure launching, it's Karl Storz. There will be 2 salesforces. I think most are aware also Karl Storz had a major recall on 1 of their products that was a distraction back in March. If you think about it from a sales perspective, those same sales reps have to make money, and if they can't sell the product that was withdrawn from the market, there is a product they can sell and that's Blue Light Cystoscopy. So we're expecting a higher level engagement for Karl Storz in the launch of their own product.
So key initiatives, I mean, number 1, the launch. We had a great launch meeting at the end of March, beginning of April, all things are in place. AUA is going to be – the unveiling of the system on a large scale. We are side by side with Karl Storz. Our customers will be coming, trying the new system, and we will be prepared to launch after the AUA. The other key areas are Contracting and also Veterans Affairs, we see as some key growth drivers for us in North America.
Getting over to Europe, a couple things in Europe. Keep in mind, we took over Europe, as units were declining, revenues were declining over years and years. We were able to stabilize those in 2021. First quarter, we had a 1% increase in units. And while that might seem moderate, maybe even to some, maybe perhaps a little disappointing, it's actually quite good considering the impact COVID has had on access in the markets, staffing, shortages, etc. And in fact, some of the key markets are growing; France, Italy are 2 key, and the UK as well. And we'll talk about that in a moment in terms of trending, but those markets are really taking off. Germany a little bit slower because of COVID, but we're already gaining traction there as well.
The engagement also with the KOL faculty has been high. We've had a couple different advisory groups. In fact, this – beginning of this week or late last week, we had a German advisory board. We had the who's who of European urology at this advisory board. I will tell you, they are extremely excited and very supportive Blue Light Cystoscopy. These are key guys that influence the guidelines of both Europe and Germany. So we're very excited about that. These guys had not been engaged for more than half a decade or more.
The other part is the equipment suppliers. The equipment suppliers out there, prior to us coming into market, had all but basically walked on the market. Olympus had given up their system as quite old, antiquated. Karl Storz had done a slight tweak in improvement, but were basically going to, kind of, walk away from it. They didn't think there's going to be any interest in Europe; that has changed.
So starting at the end of this quarter, Karl Storz is intending to launch their updated system, which is a step change to the current system in Europe. It's not quite a drastic as a change in the US. I mean, they're going to bring the European up to the US standard, but where they are today is a much above where they – where the US is. So they're going to add in the bells and whistles that the US has. So they'll have the latest technology in Europe from Karl Storz, that'll launch the end of June, and then Olympus plans – intends to launch a new upgraded system in third quarter of this year.
So this is an engagement that never once was before, that we have from these manufacturers. And if you think about, they're launching new equipment, they see an opportunity in this market and they're going to put their salesforces behind it as well. And we expect some additional momentum from that as well.
And then of course we mentioned the bus tours. We just did it. We're in the midst this week of a bus tour throughout Denmark, where we're bringing Blue Light Cystoscopy to all the centers around Denmark. We had the one in – and that one is in conjunction with Karl Storz. We did the Wolf co-promote throughout Germany. We'll be at EAU with a giant bus touting the benefits of Blue Light on the display floor, so it's going to be quite a splash at EAU this year. So we really have a lot of interest and lot of engagement throughout Europe.
We showed this slide when we took over Europe. I think a couple key things on Europe. What we wanted and hoped for was that these active markets and the untapped large EU markets would start engaging. And that in fact has happened. To the right are the key markets for us right now, it's France, UK, and Italy. You'll notice France and Italy, both upward trajectories. That continues to be the case. We will incrementally invest in these markets as capacity gets beyond the current salesforce footprint. But for right now, we've got a lot going on.
In the UK, this was a handful of hospital systems that because the Omicron variant had suspended procedures, they have all – happy to communicate that they've all back online, starting in April. So that trend – that downward trend is not a permanent trend, it's a temporary pause because of Omicron, those handful of institutions.
For key initiatives in Europe, I think the key is establishing our advocacy and the BLC equipment suppliers. Getting the re-engagement of the urology community has been critical, it has been necessary and it's been missing prior to us getting the product back. If you think about Europe is all but dead, we've resurrected this, it's energized, there's interest. The equipment manufacturers are investing and upgrading their machines and are excited about launching and the key opinion and [faculty] are all back engaged and supporting Blue Light Cystoscopy. And with that, I'm going to turn it over to Erik.
Thank you, Dan. Okay. In the financial section of this presentation, we will look at our 2 commercial segments, which is North America, as well as Europe. And we also look at the headlines from the consolidated income statement, the cash flow, and obviously the balance sheet.
First of all, currency impact. On the revenue side, we had no significant currency impact and on EBITDA, we had a negative impact over approximately NOK 1 million. As an average, US dollars increased 4% year-over-year and Euro increased – or decreased 3% year-over-year. When I talk financials, keep in mind, please that I will talk Norwegian kroner unless I specify another currency. So it's all Norwegian kroner.
Looking at the segments, and starting with the North America, you will notice that we used the term north America, since we included Canada and started – and launched the direct sales operation in Canada in the first quarter. We have not restated 2021 segment numbers to include Bioscience, which was the former distributor. The 2021 financials were not significant. We're looking at the revenue from Bioscience last year of less than 1% of the US revenue. I did, however, include the unit sales numbers from Bioscience as that is directly market related. And also the unit sales is a more significant number than the revenue generated from Bioscience.
Market unit sales in North America increased the 3% year-over-year. US alone increased 5%. Looking at revenue, we increased the revenue with 12% year-over-year, of which US had the 11%. Direct costs increased year-over-year with NOK 8 million, or 26%, and it's driven by a number of activities. First of all, obviously, the preparation for the launch of the new scope from Karl Storz. Also the investment in the launch in Canada, although it's not – I mean, it's initial cost that we – to get it started. We also have medical programs and an initiative to develop relevant clinical data. And finally, and very important, we had a [ high ] activity level in US in the first quarter, and used any and all opportunities to get access to the hospitals. And it's resulted in 13 new towers installed as well as a 12% revenue increase.
Looking at the contribution, negative NOK 8.6 million in the first quarter, so it declined about NOK 5 million compared to the first quarter last year. And the decline is driven by cost increases, including the Canada launch, partly then offset, obviously, by the revenue growth.
Looking at the European, [indiscernible] looking at the European business, we have had a revenue decline in the quarter. The decline is driven by FX, and by [country] mix impacting the average selling price. And finally, as changes in the inventory levels in the channels.
In-market unit sales increased 1% year-over-year, and the low growth was significantly impacted by the surge of the pandemic in the first 2 months of the older quarter. Same as in US. Again, positive development in our defined high-growth countries, including France, Italy, and UK, but Germany was at level with the first quarter, 2021.
Year-over-year, Q1 direct cost increased 33% to NOK 21.5 million. And the cost increase is planned and is driven by the investment in the local European commercial organizations since the takeover of the business from Ipsen. And we ended the quarter with a contribution margin of NOK 24.2 million, which is 48% of revenue. Moving on to the consolidated income statement. Revenues from Hexvix/Cysview, NOK 81.4 million in Q1, which was at level with Q1 last year. There is no significant impact from FX in the quarter.
Total revenue was NOK 81.6 million compared to NOK 88.3 million in 2021. And this revenue included the upfront payment from Asieris, so NOK 6.4 million. And excluding this payment in Q1, then the total revenue was at level with Q1 last year. Operating expenses, excluding depreciation and amortization, was NOK 89.5 million, which is an increase of 38% from Q1 last year. The expense growth is mainly driven by the inclusion of the European business from Ipsen in terms of establishing a local commercial operation. And in addition, we have had increased activity level in the North American operation, including the start-up of the Canadian operation. Sequentially, compared to Q4 2021, the expenses declined with 3% in the quarter, which is reflecting a surge of the pandemic in the first quarter.
EBITDA in Q1 was negative NOK 13.8 million. This is lower than prior year due to the cost increases combined with revenue impacted by the pandemic. Depreciation and amortization, NOK 6 million in Q1, which is at – it's at level with Q1 last year. And the main cost is the amortization of the intangible assets related to the acquisition from Ipsen.
Net financial items in Q1, negative NOK 7.4 million in the quarter, compared to positive NOK 8.1 million last year. And the difference is due to an unrealized currency gain totaling NOK 14 million in Q1 2021. And in general, the financial costs are mainly driven by accrued interest cost for the deferred earn-out liability to Ipsen.
Tax was an income of NOK 5.3 million compared to a cost of NOK 5.2 million last year, and tax income and expenses relate mostly to our tax asset and tax loss carry forward in the parent company. In other words, it's not tax payable. And after net financial items and tax, we have in Q1 a net loss of NOK 22 million.
Go from there to cash flow. Net cash flow from operations, negative NOK 22 million in Q1, driven mainly by EBITDA and working capital. However, working capital has improved significantly from Q1 last year. Cash flow from investments was in Q1 positive NOK 0.5 million, while cash from financing was negative NOK 15.8 million, which is driven mainly by repayment of long-term debt of NOK 6.3 million as well as paid earn-out of NOK 7.6 million. And that gives us a net cash flow in Q1, negative NOK 37 million, with a cash balance at the end of the quarter of NOK 285 million.
Looking at the balance sheet, we ended the quarter with total assets of NOK 738 million. Non-current assets was NOK 375 million at quarter end. This included customer relationship with NOK 141.7 million. And this relates to the intangible assets as we acquired the Ipsen operation. We also had goodwill on the balance sheet, NOK 144 million. We had a tax asset of NOK 58 million and fixed assets, including leases, of NOK 31 million.
Inventory and receivables, NOK 76.7 million at quarter end, which is a reduction from year end of NOK 13.6 million. And long-term liabilities totaling NOK 176 million include the earn-out liability of NOK 138 million and the long-term interest-bearing debt of which the long-term part is NOK 6.3 million. In total, the net debt to Nordea was at the end of the quarter, NOK 31.3 million. And finally, equity, at the end of the quarter, is NOK 481 million, which is 65% of total assets. And this concludes the financial section. Back to you, Dan. Thank you.
Great. Thank you, Erik. Okay. Okay. Closing up here. So let's get into the investment thesis, which still remains, the values there. It's a NOK 1.9 billion addressable market between the US and formally known as the EU 5, including the UK, and the Nordics. All the key success factors are in place and these success factors were in place at about the time COVID hit. So we've had the clouds of COVID overhanging, the momentum that we were building, it's been like a parachute on the back of a race car, but we have the approvals in place in both surgical and the surveillance markets. We have acceptance on all in most major guidelines, we have access and reimbursement and favorable reimbursement in most markets. We have activated awareness that continues to grow, the activation by our capital equipment manufacturers, our activation by KOLs, activation by direct to patient in the US. It continues to build. And of course, accelerated investment, putting the investment in place when it's going to have the greatest return and having ready – being always ready for those opportunities throughout COVID.
This has been – for those who live in the US and maybe drove in Los Angeles, California, there's parts of the highway where you'll go a 100 – nearly 100 miles an hour, and then you'll come to a complete stop. And then you'll open up again. You go 100 miles an hour again. I feel like that's kind of where we've been. But fortunately, we're in our car and ready to run the engine as fast as we possibly can. And I think we're in a good position to do so to take more of this and become the standard of care.
So ahead, anticipated milestones and corporate priorities. Number one priority is regaining that sales momentum, get back to pre-COVID and beyond momentum. Once COVID is consistently in a decline, I think the start and stop, and the remnants of shortages will dissipate over time. And the opportunities will come back.
The launch of the Karl Storz equipment in the US and the launch of Karl Storz and Olympus equipment in EU will be a significant impact on the business, especially in the US where that equipment was well over 15 years old and quite antiquated. The new system brings greater reliability, greater visualization, and we believe will increase the excitement and interests of physicians to use Blue Light Cystoscopy.
We'll continue to further execute on the GPOs. This leveraging of volume-based contracts has had a dramatic impact in the accounts that have agreed to do this. The more accounts – the more procedures they do, the bigger the discounts and that flows straight to the bottom line.
Publishing data. The registry in the US has well over 2,500 patients. It is rich with information, it is now over 5 years old since the first patient was enrolled. We've got data on recurrence, progression, identification, post BCG, installations. There is a lot of data that's in this registry, and there's a long list of publications and studies that our investigators are wanting to look at and have begun to decipher the data.
We'll report on the progress of our partner companies and the license agreements. Probably a question on everyone's mind might be Cevira by Asieris, that was our product for pre-cervical cancer. That product is in Phase III in China. It is still on track. They'll have well over 380 patients by August. We expect further updates from them. It's – again, Phase III is not a lot that's going on other than the enrollments and continued study.
And then of course we'll continue evaluating strategic product and business opportunities for the organization. We believe we have a world-class, urologic global footprint commercially and we believe that footprint can be leveraged in bringing new assets through acquisitions or commercial ventures.
So in summary for the quarter, we delivered growth both in the US and the EU, 5% in the US, 1% in the EU despite significant COVID pressures. And again, we believe those pressures have already begun to dissipate, as you saw in the prior slide with – from January to March and continuing into April, and May. We have a very strong new account pipeline, the strongest it has ever been, and we have a new product, and this is particularly in the US, and we have a new launch of the Karl Storz equipment with both companies pushing hard. That'll start taking place after AUA. 13 new towers placed in the first quarter, already outpaces the last 2 years. And that's without the launch of Karl Storz taken into account. We have this approval and launch will take place in the second quarter.
We'll continue to drive key initiatives in the regions and with licensing partners. And I believe, again, we've been well positioned for growth, and we've been there with every opportunity, taking advantage of everything we can. So I guess, in summary, I believe we're controlling the things that we can control and we're maximizing the opportunities that we can maximize. So with that, I guess we can go to Q&A.
Okay, great. Is this working? Thanks. Okay. We're going to conduct a Q&A right now, and we do have a live audience here, so we're going to give them the benefit of asking questions. I will start out with one question from the online audience. So email question. The first one is on the Karl Storz equipment. Are you guys aware of any potential supply chain issues or delays related to the new Karl Storz system?
No. There are no issues, no supply challenges. In fact, they are on track to produce 2 to 3 new machines per day, moving forward. And that's what they're producing currently. So…
Okay. Very good. One other question then we'll go to the audience here. So you guys reported a strengthening March in the first quarter. What can you say so far about how the second quarter's shaping up?
It's going well. April was a – we had a good April, May starting out quite well. So we're – like I said, as the COVID restrictions are lifting, patients and physicians are able to perform the procedures on those patients. So I think overall, I think we're looking at a good Q2, and I think that will continue throughout the rest of year, particularly with the launch of the Karl Storz equipment in the US and the excitement building around the European community.
Okay. Anybody in the audience want to take a question? Okay. You have Patrik Ling from DNB here.
A question regarding – because 1 of the numbers that surprised me was the number of towers that you installed this quarter. How should we see that for Q2? You said that you more or less depleted the backlog of the old systems, and you also said that that Karl Storz is planning to start the installation of the new systems in the second half of Q2. And you report new towers as when the first patient is [used]. Should we expect, except for the flexible, that Q2 will be the low point in installations? Is that the [risk]?
Yes, I think – yes, for Q2, the rigid system, the new rigid system, those installs late in the quarter, there'll be a handful, I think, to be honest with you. What's queued up first for them is replacement of all those machines that are on the Obsolete Protection Plan, which is approximately 30 of those accounts out there that will be replaced immediately. I think that'll go fairly quick. They can get that – through that. They believe they can install those and get those online within a couple weeks. And then they'll concentrate on all the new accounts in the pipeline of accounts that want new installations.
And then don't forget we have Flex and Flex continues to grow. And it's interesting about Flex, and I'll just take a moment to talk about Flex here, in the marketplace we've traditionally used the chemo agents or BCG as, sort of, the standard of care for treating these patients. Well, there's new options out there. Keytruda or pembro by Merck is now on the market, got approved back in August, September of last year. And I will tell you, the physicians are starting to realize that there's an opportunity here. We know that using white light cystoscopy alone, about – they're finding at least 40%, maybe more, patients are not responding to BCG. Those patients' other option after that is to either get another dose of BCG, which is, sort of, throwing the same thing at the person that didn't work the first time, give it another try, see what happens, maybe the definition insanity to a certain point. But more importantly, it gives them an opportunity to try pembro, Keytruda, or any other second line agent before they go to cystectomy and have their bladder removed.
And so this option of using pembro, hasn't lost – isn't lost on Merck. They see an opportunity here and what better diagnostic or visualization system than Blue Light Cystoscopy to find every patient that could benefit from their products. And this is just, right now, one second line agent, and there's a host of them down the pipeline. So we think Blue Light Cystoscopy is going to become a key part of identifying those patients, sooner than later, so that they have one more chance before they have their bladder removed.
And so I think that's kind the excitement that's building, I think, behind the scenes. And I think that's going to add, sort of, the octane to the tank.
Great. Then a second question regarding the new scopes. How will you report going forward? I mean, the number of scopes that you present right now are basically the number of centers, but how should you – how should we see, sort of, replacement of some of the old 270-something flexible scopes, and will you be able to provide us data with how many of the already active clients that are actually switching to the new one, and how many new clients that are added?
We can. I think we're still, kind of, debating how to go about it right now. The most important thing is have centers equipped with blue light cystoscopes. We believe that every center that currently is out there with an old scope, will eventually – over the next 24 months, maybe 36, if they bought the equipment maybe late 2020 - will convert to the new systems.
So in theory, nothing has really changed. However, as we've all talked about, the reliability of the new system from the light source being – basically won't risk burning out or fading over time, or the cleaning of the equipment won't damage the light cords. We think all that will translate into greater utilization and we'll measure that. It's not going to be something we can measure in a month or 3, it's going to take 6 or more to, kind of, look at an account, for instance, like John Hopkins, who used the old machine, now we put the new machine in. And I'm sure there'll be immediate interest and excitement, but can that sustain over time and did that translate into more patients because much more reliable equipment? That's the things we want to measure.
But for now, it's really going to still be about new accounts, whether it's Flex or the new system by Karl Storz. Like I said, from the old systems, we know 30 accounts will switch in the first month, from the old system, because the OPP. And then it's – from there forward, it's over time. I'm not sure how important that will be necessarily. I'm not convinced that's the most important metric, but we'll measure it.
Okay. Then the last question. You said that the operating cost base that you have right now is more or less what we should expect going forward, except for maybe some small incremental investments. Was that the right way to interpret you?
You want to take it?
I would say so. I mean, what you will see is that you will have probably a little bit of uptake when COVID is, kind of, retreating. Because if you look at, for example, European business, we had a significant decline of operating expenses due to COVID so probably a little bit, but then it should stabilize and you will get some increase throughout the year, but it should be single to yield.
Okay. We also have a question from an investor in Asia who is asking, is there any way for you to describe the potential revenue potential from Hexvix in China?
Yes, I mean, it's -- so first of all, I mean, Chinese market's quite large of course, but the initial – there's basically 3 layers to it. The initial layer of business in China will be the insured or basically the folks that are covered and majority are government covered and they probably – Hexvix won't initially get its coverage. But actually the product is in the hands of Asieris who is doing the forecasting of what they believe they can do with the product. So I'd like to get back on that, if that's all right on you, but it's relatively about the size of the US when it's all said and done.
Okay. Very good. Next question from e-mail. Can you say something about when you expect results from the Phase III Cevira trial?
I covered that in today's presentation. They're going to finish up enrollment this year for the Chinese portion of the trial. They're going to try to package it and get into the Chinese FDA, which has a different name today, but get it in by next year and hopefully approval for 2024.
Okay. Very good. Here's a question from Rickard Anderkrans from Handelsbanken. Should we expect new financial -- should we expect new financial targets and a Capital Markets Day in 2022?
Yes, Capital Markets Day, we'd like to get one in this – probably this fall. That'll be one of our intents from a guidance perspective. Once COVID is – I don't know if the word is stabilized, but maybe perhaps a little more predictable, we would be happy to. I don't think any of us sitting here in November, would've predicted January and February and March to go the way they did and yet they did. And we've seen that over the course of the 2 years, just when you think you're coming out of the fog of [ war ] with COVID, it hits again and it has some impact on the business. So until we have some level of predictability, it makes it really, really difficult.
I don't know if you want to add to that or not.
No, it's true. I mean, the predictability is the problem. It's like before – for me to make a forecast, I had to forecast COVID, it was a hopeless situation.
Okay. I'll just leave an opportunity for anybody in the live audience to ask a question. Okay. We're good here. So continue on with the email questions. Let's see. You talked about Keytruda already. Can you elaborate on the therapeutic effects, the plans for evaluating the therapeutic effects for Hexvix going forward?
Yes, it's interesting. It's long been talked about. In the base molecule itself, [ALA] has been used as a therapeutic in other types of cancers. What we're attempting to do is investigate the product and generate the scientific interest and excitement around the product. Is it another reason to believe in Blue Light Cystoscopy? Beyond the diagnostic and the surgical guidance characteristics of the product, does it in some way benefit therapeutically the patient, either by itself or in combination with a PD1 inhibitor? Early [wrap] model, take it for what it's worth, does say there is something there. There's been a paper out by Dr. Gakis who took post-cystectomy bladders, looking at whether or not they were treated with blue light or not. And it showed that there was a difference, a positive difference, in terms of therapeutic effect of blue light cystoscopy.
So we're going to continue to generate that data. We do have IP around the product for that purpose. So we're well covered to continue this process. If it looks like something that's interesting enough and worth the investment, then that might – down the line, might be something we look at in terms of a trial or study or something of some sort. But we'll continue to generate more and more data around this concept of therapeutic benefits of the product.
All right. Great. Another question on the new Karl Storz tower. Is there a waiting list for this new equipment?
Yes. Short of it? Yes. There is a waiting list. There is -- I don't call it a waiting list. There's a pipeline. In our pipeline, the way we define our pipeline is they have to have POs in place, meaning they've already made the decision to purchase. It's not a pipeline based on a rep's guesstimate because 15 or 20 or 30 reps will have 15 different characteristics of how they would rate it. They literally have to have a PO. So we're very, very confident in the pipeline. And the answer to that is a positive yes.
Okay, great. And also speaking of the new equipment, can you talk about the development of new accounts and tower placement in Europe?
Yes, I mean, especially in the growth markets of the UK, France and Italy, there is either reactivation, which, quite frankly, is almost a new because the old equipment either is antiquated or gone so they've had to bring in new equipment. In the UK, there's been particular interest in the surveillance market, which we're working on with the capital [equip] manufacturers to see if we can get a Flex system in Europe – in the UK. But overall, France and the UK have already initiated new accounts.
The major strategy in Europe, for those who had been with us for a couple years, Europe had well over 700 accounts at 1 point when GE Medical launched the product back in 2006. Handing it off to Ipsen over time, a majority of those have gone dormant, or near dormant. And what we've attempting to do at this point strategically is to get into all those accounts and reactivate them. In cases where you need new equipment, we bring in new equipment. It doesn't matter if it's a Karl Storz equipment, doesn't matter if they're going to bring in Karl Storz, Wolf or Olympus, we'll get equipment in there. Or if it's the original champion for Blue Light Cystoscopy could have moved on or retired or passed away, finding new champions to reactivate the opportunity.
So that's our number one priority in Europe through this year. However, as I mentioned, in certain markets like the UK and France and some in Italy, there is opportunity to grow – open up new accounts. And even in Germany and the Westphalia area, we know that it was under penetrated and we're looking for new accounts.
Okay, great. And that's all the questions we have from the e-mail audience. Anybody else in the live audience want to go? Okay. And we do appreciate you coming live to the presentation. Thank you. And that's all we have at this point. So Dan, do you want to wrap it up with some closing remarks?
Yes. Well, just thank everyone for joining today. We're excited. We remain very, very positive about the future. The opportunity still exists. Who would've predicted COVID going on for 2 years and maybe we're heading into a third year of it. But I think when you look at it in the balance of how the organization – how we've done collectively, I think we feel pretty good at where we're at and where we're heading, and the opportunity still exists long-term. So thank you. And we'll see you at the next earnings call.
Thank you.