Photocure ASA

OSE:PHO

Earnings Call Transcript 2019-Q2

[Daniel Schneider, President & CEO]

All right. Well, good morning and welcome to Photocure's 2019 Second Quarter Update. I'm Dan Schneider, CEO and President of Photocure. With me today is Erik Dahl, CFO. I'll take you through a number of slides before Erik wraps up with financials, and then we'll go to Q&A, if that's okay.A reminder, the usual disclaimers are in effect for today's presentation.I thought I'll start today's presentation a little bit around the strategy, the 4 steps to become a transformative, multiproduct, bladder cancer company: step 1 is accelerate, growing the Cysview/Hexvix line. I think we put, and you know, considerable investment and effort and are starting to see the acceleration. This expansion and acceleration is important to setting up the foundation of the future for Photocure.Expand. Our recent indication late last summer/early fall launched into the surveillance market open up a tremendous opportunity for Photocure as the market quadruples in terms of size for us to address. New geographies, whether it be Canada, New Zealand, Australia or other countries around the world provide additional opportunities.As upon these first 2 steps that we believe, if done well, will get us to the third step with acquisition: expanding the portfolio of bladder cancer products and assets. By doing the first 2 steps well, we'll attract the investors and the partners to move the company forward. And finally, transform, building a pipeline through partnerships and acquisitions that set us up for the future.We believe that we are perfect for this type of strategy. First, we're an expert in non-muscle invasive bladder cancer both from R&D, clinical trials, all the way through to commercial. We achieved a solid position with our key opinion leaders and patient associations. We have a highly trained sales and medical team deployed in the U.S., in the Nordics that have built strong relationships in and out of the ORs. No other company is dominating this space, which leaves a significant opportunity for Photocure to become the bladder cancer company.But to get there, we have to deliver on our objectives. The 4 key objectives for 2019: the first objective, significant growth of Cysview in the U.S. TURBT market. Second quarter revenue growth in U.S. dollars was up 41%, in-market volume increase of 34%. Objective number two, accelerate Cysview in the U.S, particularly in the surveillance market. We have a 45% growth year-over-year of installed blue light cystoscopes in the market. There are over 188 now deployed, of which 14 are Flex. I'll remind you, we still are in the early stages of the launch of Flex. The sales cycle is -- can be more than 12 months, and we launched late last summer/early fall.Increasing Hexvix/Cysview global in-market unit sales. Total Hexvix/Cysview revenue increased 23% year-over-year. That's NOK 52.1 million. This is the highest quarter ever, and it is now our seventh consecutive quarter with increases quarter-over-quarter sales. And finally, create opportunities vis-à-vis our strategic partnerships. Our in-market sales increased 6% year-over-year in quarter 2, a lot of this attributed to the extra pressure we've been putting on Ipsen in the European markets.The momentum is clear. This chart depicts the accelerated momentum that we intend to sustain. There's a clear inflection point, where the increased focus on commercial effort has accelerated results. We got a 52% growth in revenue second quarter '19 compared to second quarter '18, a 34% increase in kits second quarter '19 compared to second quarter '18, and this is our sixth consecutive record quarter growth in the U.S. This is a typical launch curve and yet the products have been on the market for 7 years. We're meeting the opportunity with the investment that we placed already.The key to our future is the number of blue light cystoscope accounts. This is the key performance indicator for us. This chart quickly shows the accelerated momentum in the underlying KPI of installed cystoscopes. We have a healthy pipeline and expect the same momentum to carry through 2019 and into 2020.Hexvix/Cysview: positioning and sales process. Well, before I go to this slide, I apologize, I do want to -- there's one other additional comment I'd like to make. Our strategy has been to target the key hospitals in the 30 largest MSAs in the U.S.A. We built the commercial foundation. The build is for the most part complete. The sales team is focused on the top 700 centers that influence bladder cancer in all of the regions. The team is composed of 27 surgical experts, surgical sales executives, and 4 clinical support specialists, the farmers that I spoke about in the past. The average territory for sales rep potential is USD 1.5 million to USD 2 million, and they can generally cover 20 to 25 accounts. Any future investment would be predicated on gaining optimal account coverage and with similar ROI. But as of today, the foundation has been set.You've seen this slide before. This slide addresses the size of the market itself. The non-muscle invasive bladder cancer is one of the most common cancers with significant reoccurrence and a high disease burden. The name of the game is finding it and treating it completely. There's a 60% reoccurrence rate at 1 year, requiring ongoing surveillance. There are over 200,000 new patients globally each year and 80,000 new U.S. cases in 2016 with over 17,000 deaths. This is a treatable disease, and Blue Light Cystoscopy can make the difference.This slide depicts the improved cancer detection and management of bladder cancer. The patient flow: there's a flexible cystoscopy done as a diagnostic to determine whether or not the patient has cancer. If the patient looks as if they have lesions or cancer, they are then referred into the OR, where a surgical cystoscopy is performed under blue light. They are then discharged and asked to return every 3 months for the first 1 to 2 years, depending on the severity of their disease, in which they could receive an additional Blue Light Cystoscopy each time. This is the larger market that we have talked about in terms of opportunity. There's a 10% to 30% progression rate, and diagnosed patients are recommended to have follow-up cystoscopies every 3 months during the first 24 months.This next slide is depicting the difference. Blue Light Cystoscopy allows for early and better detection. It reduces reoccurrence and the potential for reduced cystectomies. The detection rates especially in CIS, at 35%, which is one of the most difficult to see, is compelling evidence. We have more complete control in the removal of tumors, and a correct diagnosis link to better patient management. This is the reason for being on the AUA, SUO, EU -- or EAU guidelines and expert consensus guidelines most recently published in April.Blue Light Cystoscopy with Hexvix and Cysview is a drug/device combination and it's for the better detection and management of non-muscle invasive bladder cancer. Hexvix/Cysview is indicated for the use of cystoscopic detection of non-muscle invasive bladder cancer, including carcinoma in situ among patients suspected or known to have lesions. It is a colorless, reconstituted solution instilled into the bladder that utilizes the body's own biology to detect malignant cells. It's a drug that is taken up selectively by cancer cells in the bladder, making them glow bright pink and red when illuminated with blue light.Hexvix/Cysview is a blue light-enabled -- needs a blue light-enabled cystoscope, a diagnostic system from Wolf or Olympus or KARL STORZ in Europe -- or KARL STORZ only in the U.S. is an adjunct to the standard white light cystoscopy. It can be used both in the surgical and in the surveillance setting -- office setting.But I'll remind you, this is a long and complex process to complex organizations. I've mentioned this in the quarter 1 presentation. I thought it would be good to revisit the selling process and why this takes time. Keep in mind, the flexible cystoscopy or flexible cystoscope has a similar sell pattern as does the rigid. It can take over 12 months to close the sale. The first part is the correct targeting of the key centers, the influencers. In every MSA, or metropolitan statistic area, a large city, there are those hospitals that are key influencers. It's key to us to get those influencers set up with Blue Light Cystoscopy. Inside those institutions, we work on developing a urologist champion. That could take time to build that relationship and have them onboard. They then commit to supporting us internally within their own organization.We move to the hospital economic and clinical review process. This is a Value Analysis Committee, the P&T Committee and also the Capital Equipment Allocation Committees. This could add more months and sometimes does add some delays, particularly when you get to the economics of that capital equipment. Upon the decision, and positive decision, there's a coordination with KARL STORZ for the delivery and the installation.And then we move to the in-service, probably one of the most critical points in the setting up of a new account. The training is done by our surgical sales executives and the KARL STORZ key account managers to educate and implement a process to maximize the number of patients treated. That process is key. It is a new workflow, a new patient flow within the hospital, but if you get it right, things go well. And then, of course, the ongoing support. The process has to be embedded, meaning that everyone in the hospital has to be aware of what the new process is and how Blue Light Cystoscopy works. And then the key is getting more urologists onboard. So you may touch base with the first 1 or 2, but if there are 6, 7, 8, 9, 10 urologists, the key is getting all urologists using Blue Light Cystoscopy and then, of course, expanding the patients that you're using it on. They may start with high-risk. We'd like to move them to moderate and low-risk, of course, used in all settings and all types of patients. It takes years sometimes to optimize an account.Positioned for growth. We have a very supportive environment and increasing awareness for becoming what we want to become in our mission of becoming the standard of care. We're included in all the bladder cancer treatment guidelines: the AUA, SUO, EAU, NICE and also the expert panel that was convened last year and published in April of this year. We have a high adoption rate in our cancer centers with over 170 cancer centers in the U.S. and actually high penetrations of up to 70% in the Nordics. We have patient preference, a growing awareness and an active preference, as shown in the BCAN study that you've seen in the past. We have favorable and permanent U.S. reimbursement in 2019 for Blue Light Cystoscopy with Cysview in all settings of care. We have activated awareness in the health care community through major congress presence and media campaigns, and we partnered with prominent patient associations like BCAN and the World Bladder Cancer Coalition.The investment in the U.S. is producing accelerated and sustainable results. An expert panel for the new consensus recommendations has suggested that Cysview should be used in all types of patients on the first TURBT in the OR, the first surgical excision of the cancer and for high-risk and intermediate patients in the first surveillance at the first 3 months; and then in high-risk, in every surveillance for the 2 years going out. In surveillance, it should be used in the first 3 months' control for high risk and moderate risk and regulating surveillance for the first 2 years with strong recommendations for high risk. While in moderate risk and low risk, experts say more research is needed to give qualified guidance on frequency. And that's why you see the lighter-colored Fs for Flex scopes is the data supports it but not to the strength that the expert panel felt. However, what we are seeing in real life is that they are using the Flex. It's a new modality for them, and so we believe that it will become a standard of care as well. For patients with low grades, undergoing a biopsy and fulguration in the office, they also recommend using Cysview for all tumors detected and removed. This means that for every blue light transurethral bladder resection, patients is referred to blue light Flex for the first surveillance. And that would double our current market size.We have the key enablers in place. We have the approval, both surgical and surveillance market. We have acceptance by major and local guidelines. We have access to permanent and favorable reimbursement. We have activated awareness, patient demand via advocacy groups and media, and we accelerated the commercial investment to optimize the opportunity.Let's talk about the Cevira license agreement. This is a pleasant development and one that we worked on for several months this year. And I'll go through the agreement.First, Asieris. Asieris is a subsidiary of a Chinese-based, Jiangsu Yahong Meditech Co., a specialty pharma company fully committed to research, development and commercialization of innovative new medical treatments through their own IP and in-licensing efforts. Their leading candidate is an oral drug for non-muscle invasive bladder cancer. It has a registration trial in China and is in Ib in the U.S. It has strong development capabilities in the genitourinary diseases in China and is rapidly expanding in global capabilities.The potential to fill an unmet need for nonsurgical treatment of HPV and CIN populations, it's a breakthrough single-use integrated drug/device technology. It has potential to treat high-grade cervical dysplasia independent of HPV genotype, and it's easy and convenient for the provider and patient, and in particular, where this fits is for those women in childbearing years. It preserves the cervix so they can have children. And so high-grade cervical squamous intraepithelial lesions is a precancerous condition caused by persistent HPV infection, a highly prevalent sexually transmitted disease, and approximately 10 million cases with high-grade disease. There are greater than 500,000 new cases of cervical cancer each year, and in China alone, 1% to 2% of the women have HSIL. Currently, surgical excision is the most common treatment option offered to women with high cervical -- with cervical high-grade dysplasia. And as I said, for women of childbearing years, that's really not a good option.The deal. The deal itself has a value of up to $250 million. We think this is a fantastic deal for Photocure. Under the agreement, we have $5 million upfront in 3 installments. We've already received the first installment. We'll see the final 2 in the next coming couple of months. We have $18 million development approval in China, a $36 million milestone for the development approval in the U.S. and then, of course, additional revenues or milestones for -- sales milestones and sales royalties.And also, payments are made for certain development milestones or due at a certain time or when reaching the milestone, whichever comes first. And that's very key. This actually keeps Asieris on track. A lot of times, you can sign deals and the partnering company can lag in their development. In this situation, they have x amount of time to complete a milestone. If they don't complete the milestone, they still have to pay Photocure. So if they fall off by 2, 3, 6 months, we still receive the money and they continue through the development. Again, we think this is a fantastic opportunity for Photocure and valued up to USD 250 million.I'd like to turn it over to Erik Dahl who will take you through the financials.

[Erik Dahl, Chief Financial Officer]

Thank you, Dan.Well, as usual, I will go through 4 slides: first of all, the segment report to understand the 2 segments we're having; then secondly, the consolidated income statement. We'll walk through the cash flow, and finally, the balance sheet.Before we do that, a couple of comments on foreign exchange as well as the implementation of IFRS 16 and how that is impacting the numbers. FX impact, or foreign exchange impact, in the second quarter was for revenue, positive, approximately NOK 2 million; and for EBITDA, it was neutral. If you look at the year-to-date number, we find the positive impact from FX of about NOK 4 million, while we have a negative impact on EBITDA of approximately NOK 1 million.Regarding IFRS 16, you will find comments and information in Note 1 and 3 to the accounts. So I suggest that you read that. But in simple terms, what we're actually doing is that we are replacing the lease payments that is normally a part of G&A spending, replacing that with amortization. And the amount that is being replaced, we're reducing the operating expenses with about NOK 2 million year-to-date, and we're increasing the amortization with about NOK 2 million, approximately the same amount. So that's the impact we get on the P&L or the income statement for the year-to-date numbers.With that, let's start on the numbers, first of all, the segment performance. And what we're going to look at first is the commercial franchise. And the headlines as in last quarter, a continued strong revenue growth for Hexvix/Cysview year-on-year as well as quarter-on-quarter. We continue our investments in the commercial -- the U.S. commercial structure. We have a significant increase year-over-year in commercial cost. However, if you look at quarter-on-quarter spending, we're seeing that it's flattening out, and I'll get back to that. And finally, we have a positive EBITDA for the quarter, which we have had over the last few quarters.Total Hexvix/Cysview revenues in the second quarter increased 23% year-over-year, and the year-to-date growth was 24% in constant currencies. Eliminating the foreign exchange, we have a year-to-date growth of about 19%. In-market unit sales year-to-date increased 6%. We had a strong growth in the U.S. In U.S. dollars, we had a 41% revenue growth in second quarter and 46% year-to-date. This was driven by in-market unit growth of about 34%, and we also had, obviously, price increases. Year-to-date in-market unit sales increased 39%. U.S. is the largest and fastest-growing region for Photocure with a revenue growth driven by improved productivity as well as added sales resources. Furthermore, we have had a significant growth in installed base of permanent blue light cystoscopes. At the end of second quarter, we had 188 scopes installed, so in total, of which 14 were Flex scopes. And we had an increase in total of 45% from the same period last year.Nordic revenues increased 4% year-to-date. We had a decline of 1% in the second quarter, and in constant currencies, year-to-date, the revenue also increased 4%. Decline in second quarter, driven by lower in-market volumes, partly offset by inventory changes at the distributors. In-market unit sales decreased 10% in the second quarter, but it followed a significant increase in the first quarter of 13%. So year-to-date unit sales is about flat for Nordic. We had a 2% -- year-to-date, we had a 2% decline in Denmark, but it was offset by significant growth both in Sweden and in Finland.Revenues from partner business increased 8% both for the quarter as well as year-to-date. In constant currencies, the revenue increase was 6% year-to-date, and the increase was driven by both of the main market for Ipsen, namely Germany and France; but it was also driven by the revenues in Canada, where we have a partner, BioSyent. And in-market unit sales for our partner business increased 4% in the second quarter and 2% year-to-date.Total revenues, including milestones and other revenues in addition to the Hexvix/Cysview business, increased 16% in the second quarter and 21% year-to-date. Other revenues includes, for 2019 as well as for 2018, IFRS 15 adjustments of NOK 0.8 million in the second quarter and NOK 1.7 million year-to-date. In addition, the company had, in the second quarter of 2018, a milestone income from Bellus Chemical (sic) [ Bellus Medical ] for the Allumera product of NOK 2.4 million. So that explains the decline from 2018 to 2019 on other revenues.Operating expenses, excluding depreciation and amortization, increased 30% in the second quarter and 25% year-to-date. This increase was planned and is mainly driven by sales and marketing cost in U.S. The quarterly operating expenses in the commercial segment has, however, over the last 3 quarters, been approximately at the same level between NOK 44 million and NOK 47 million per quarter. So we had a strong increase in 2018, but it stabled or leveled out in 2019, in the first quarter.Recurring EBITDA for the commercial segment was NOK 1.5 million in the second quarter and NOK 3.2 million year-to-date. And the EBITDA margin was 3% year-to-date compared to 7% year-to-date last year.Development portfolio. Over the last years, we have shown significant declines in operating cost for the development portfolio. We did not show a decline in the second quarter this year, and it was driven by a one-off cost related to the work with the Asieris agreement. We will have limited cost related to Cevira going forward. We will, however, have cost related to IP and maintenance over the patent portfolio and may also incur some cost related to our alliance management. We have, in 2019, very limited cost related to Visonac. And the cost related to Visonac will gradually be reduced to 0. In total for the development portfolio, we had fully loaded cost year-to-date of NOK 7.3 million compared to year-to-date last year of NOK 9.1 million.Now to the consolidated income statement. This is just the revenues in the last slide, so I'm not going to add any comments to that here. But I think I should add a few comments to the operating expenses, and operating expenses increased year-over-year at 27% in the second quarter. In constant currencies, the increase was 20%. The increase was driven mainly by planned increase in sales and marketing cost in the U.S., but we also had nonrecurring expenses related to -- in the quarter, mainly related to Cevira and Asieris. Year-to-date expenses was 20% above prior year, in constant currencies, 14% above prior year. The last 3 quarters, the spending has been relatively flat and between NOK 48 million and NOK 51 million per quarter. The increase of NOK 3 million reflects the increase in sales and marketing spending over these 3 quarters.Year-to-date EBITDA, negative NOK 4.1 million compared to negative NOK 3.4 million last year. 2018 EBITDA is, however, driven by one-off milestone from Bellus Medical of NOK 2.4 million. Year-to-date EBITDA was negatively impacted by foreign exchange, as I mentioned before, of approximately NOK 1 million, and again, positively impacted by the IFRS 16 adjustment on lease accounting with about NOK 2 million.Depreciation and amortization, year-to-date, at NOK 8.5 million. The increase from last year of NOK 2 million is driven by the IFRS 16 lease accounting policy. Many single items within depreciation and amortization is the amortization of the investment in the Cysview Phase III program, which is now obviously closed. This item has quarterly amortization of NOK 2.5 million, and at the end of the second quarter, we had on the balance sheet a remaining amount of NOK 14.6 million.Restructuring expenses we haven't had this year, but we did have it last year in the second quarter. It was driven by organizational changes, including reducing the headcount of 5. The changes were done to streamline the organization and to increase the focus on commercial targets. And after net financial items and tax, we have, year-to-date, a net loss of NOK 10.1 million compared to last year's NOK 20 million net loss.Let's look at cash flow. Net cash flow from operations, negative NOK 4 million in the quarter compared to negative NOK 11.5 million in second quarter last year. Year-to-date cash flow from operations, negative NOK 19.7 million compared to last year at NOK 30 million. Included is the impact from working capital year-to-date of negative NOK 12 million compared to negative NOK 11 million last year. These numbers are, however, and particularly for last year, driven by accruals related to the restructuring that we did in the second quarter last year. This year, we had an improvement compared to last year for inventories and receivables of approximately NOK 3 million.Cash flow from investments for year-to-date, positive NOK 0.7 million compared to negative NOK 0.9 million last year. The improvement is driven by reduced investment in fixed assets as well as development expenses. Cash flow from financing, year-to-date, negative NOK 1.1 million; last year, negative NOK 0.6 million. And the 2019 cash flow includes payments of lease liability of NOK 1.8 million year-to-date. And again, we see the impact of IFRS 16.Net cash flow, negative NOK 4.7 million in the second quarter compared to negative NOK 12.8 million last year; and year-to-date, negative NOK 20.2 million compared -- which is an improvement of NOK 11.2 million from last year. Cash balance at the end of the quarter, NOK 86.7 million.Balance sheet, a few items. We had total assets of about NOK 221 million at the end of the quarter, which includes net cash of NOK 86.7 million. Noncurrent assets, NOK 82.4 million, including a tax asset of NOK 55 million and investments in tangible and intangible assets totaling NOK 18.6 million. And these investments are, as I said before, mainly related to intangible assets related to the Cevira -- through the Cysview Phase III program. We also find another item on the noncurrent assets totaling NOK 8.8 million, which is mainly related to the balance sheet impact of the adoption of IFRS 16 on lease accounting. We have a similar increase in long-term liabilities, which is also driven by IFRS 16. You will find again the explanation to these amounts under Note 1 and 3 to the accounts.Current assets excluding cash was NOK 51.9 million, the increase from year-end was revenue-driven and relates both to inventories as well as receivables. And in terms of funding, company had at the end of the second quarter no interest-bearing debt. And we had an equity of NOK 167 million, which is 75% of total assets.A couple of closing remarks. As we said before and in the last few quarters, we invest in the U.S. commercial activities, which is driving a year-to-date revenue growth in the U.S., measured in dollars, of 46%. This growth is mainly driven by increased volume. For the company as a whole, we have a revenue increase for Hexvix/Cysview year-to-date of 19% measured in constant currencies. The investments in the U.S. commercial activities have increased the cost base for the company. The year-to-date increase in total operating cost in constant currencies is 14%, which is 5 percentage points below the revenue increase also in constant currencies. So we're growing the revenue more than the expenses. We see that the expenses are flattening out over the last couple of quarters. I believe we are on track.Dan?

[Daniel Schneider, President & CEO]

All right. So taking it back to the first slide. So why invest? So where are we exactly in our strategy?For steps 1 and 2, we have great traction. We have cleared the main challenges we had in the early days in the U.S. We've invested where investment made sense, and we're better positioned to grow in both segments of rigid and flexible cystoscopy, surveillance and surgical. We have a 50% larger customer-facing sales force. We are targeting the 700 largest hospital centers in the U.S. across the top 30 MSAs. Blue Light Cystoscopy is now recommended by the AUA, NCCN, EAU, SUO and now the expert panel. And as I mentioned in my presentation earlier, just by getting the first TURBT done for whether it's high, moderate or low-risk patients, would double sales for us. Approval and accelerated penetration into the large, untapped surveillance market, and beginning in 2019, we now have permanent and favorable reimbursements in all settings of care.The financial guidance is as we maintained, NOK 20 million to NOK 25 million range in the U.S. by 2020 -- by the end of 2020, which represents a 60% year-over-year growth as we go from NOK 7 million last year to over NOK 20 million in sales in just 2 years. We expect the significant and sustainable revenue growth trajectory and profit opportunities to continue in the U.S. beyond 2020.So with that, I want to thank you and turn it over for questions. Invite Erik Dahl to join us. And also with us today is Inger Ferner Heglund. She headed up the Cevira program from the development standpoint and also saw it through to the completion of the deal last month. So if you guys would join me.

[Daniel Schneider, President & CEO]

Okay. Any questions?

[Unknown Analyst]

I have one question for Mr. Schneider today. Given you have a clear view on costs going forward, can you provide some guidance or EBITDA guidance for 2020?

[Daniel Schneider, President & CEO]

I'm not prepared. I will turn it to Erik, but I don't believe we're completely prepared to give EBITDA guidance for 2020, other than we believe in profitability. Is that kind of the underlying question?

[Unknown Analyst]

Yes. If I understood you right, you said you had -- as of today, the foundation have been set. You said something about that. Does that mean that the sales force consists the foundation in that regard?

[Daniel Schneider, President & CEO]

Yes, yes, yes. So the sales force at 27 hunters, salespeople, and 4 clinical support specialists, which are the farmers underneath, is for the most part set. That's a great foundation. Any further investment is going to be based upon whether we believe they can deliver $1.5 million to $2 million per territory or if the account loads -- the account loads rep can only cover so many accounts, and then you just -- you can't cover anymore. So if they got 20, 25 active accounts, it's about the limit of a human being can cover actively, and so that would maybe trigger a split in the territory. But there's no big plans to grow of any significance over the next couple of years. We believe we have the foundation to deliver. Now it's about the revenue going like this and keeping the cost constant.

[Unknown Analyst]

Yes. So congratulations on the Cevira deal. I was just wondering if you would be able to elaborate a little bit about the deal in terms of how -- for how long did it go on? Who contacted who? How did you flag that you actually have the product? Who was the main responsible from Photocure side?

[Daniel Schneider, President & CEO]

Yes. Okay. I'll turn it over to the person. We have to get you the mic.

[Inger Ferner Heglund, Acting Vice President of Research & Development]

Yes. We have been going on for -- after we got the support from the FDA in 2015, we continued to go on to bio conferences and then you do speed dating and all this kind of things. And we had several interactions with many companies, and -- but this one, Asieris, is a company that we have talked to maybe more than a year all in all, a little bit of a back and forth, and we also had others up to the end. And they're very, very committed and very excited to move Cevira forward, which, of course, we are very happy with.

[Daniel Schneider, President & CEO]

And just an additional point to make. They're -- the folks funding Asieris are deep-pocketed Chinese financiers. So we feel very confident in the fact that they can carry this deal to fruition. They have a high interest in this space. So it wasn't just buying an asset that doesn't fit, but it actually fits with non-muscle invasive bladder cancer. The oral pill, they want to build out of Chinese franchise and also then globally as well. So they have been a great partner in the sense that they're going to go into the Chinese market first, which makes sense, they need 1 trial to get through. And I believe -- and we believe handing them a Phase III-ready product with a SPA -- FDA SPA, which is basically a road map to what you need to do to get to the approval, is derisk this deal significantly and derisk the development for these guys. And then going into the U.S., they will need to then do a second trial in Europe and then register. So we expect approvals in 2024 and 2025 for the assets, and then the milestones kick in on sales and the royalties kick in. So a significant deal for Photocure.Any more questions? All right. Well, thank you for coming -- oh, yes, [ Heiner? ]

[Unknown Analyst]

Can you say anything about what you see in the market today?

[Daniel Schneider, President & CEO]

Yes. Well, we -- what I see in the market today is a very, very strong pipeline and increased activity, particularly in the surveillance market, the flexible cystoscopes. As I've mentioned, the launch of the Flex cystoscope didn't take place until late summer/early fall, in reality, about the September time frame. The process, as I mentioned or talked about in today's presentation, is fairly long and complex. That doesn't change for a hospital. It doesn't change for the individual large group urology practice. In fact, in many ways, the financial decision by a large group urology practice is a little more significant because they're buying it versus the hospital buying it and a few urologists using it. So that process takes a little bit of time. And we've come about 7, 8, 9 months into this process, and we're starting to see this acceleration of Flex scopes being placed. And so we expect this to continue to increase, similar to probably what you saw in the early stages of rigid, albeit there's really no challenges that face flex like they did for rigid. This is more of a selling process, and we're now coming into the part where we're starting to harvest all that hard work that everyone's gone through over the last 12 months.Does that answer your question?

[Unknown Analyst]

Yes.

[Daniel Schneider, President & CEO]

We have questions on the -- we're getting questions from the web.

[Erik Dahl, Chief Financial Officer]

There is a question about the 14 scopes that we have installed, the Flex scopes, whether they are operating now or...

[Daniel Schneider, President & CEO]

Yes. Yes, those are operative. Those are all in operation now, and they are starting to see patients. So I think Dr. Lotan was one of the first. And I think you've seen his name pop up in some of the press releases. He's down in Texas. He's up to over 100 Flex scope cases. I know -- see that Dr. Daneshmand out in California, also over 100 Flex cases. What they've seen, I think I might have said this at the last presentation but it's probably worth reiterating because it goes back to the expert guidelines, is while the guidelines will say, do a Flex scope at the first surveillance and then you may or may not want to do a future one for perhaps like low risk or moderate risk, what we actually are seeing is patients coming back and demanding Blue Light Cystoscopy. And Dr. Lotan has been very clear that, that is driving a lot of the usage, that the patients are seeing the value and are much more confident.And why not, right? You got bladder cancer. You know the name of the game is surveillance and full complete treatment. Would you want to go back in on your surveillance to see if you have cancer with white light? Or would you like to take blue light? To me, it's a very simple answer and it's, "I want blue light." And that's what the patients are demanding. So that -- his scopes were placed mid-last fall, about November time frame -- October, November, and he started to really see -- and I said it's over 100. I don't know what the exact number is now. That was as of EAU, which was back in March. So I suspect it's significantly more than that today. So hopefully, that answers it.Okay. All right. Well, if there's no other questions, thank you for coming and look forward to give the next quarterly update. Thank you.