Photocure ASA
OSE:PHO
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
48.05
70.9
|
| Price Target |
|
We'll email you a reminder when the closing price reaches NOK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Photocure ASA
You don't have any saved screeners yet
All right. Great. Well, good afternoon and good morning to those in the U.S., and good afternoon to those in Norway and other parts of Europe. My name is Dan Schneider. I'm the President and CEO of Photocure. With me today is Erik Dahl, CFO, and we're here to present the Photocure ASA results for third quarter of 2020.Next slide. Typical disclaimers are in place for today's presentation.Next slide. So just to give you a brief overview, and I'm proud to say that we can now claim this. We have direct sales, both in Europe and the U.S., beginning on October 1 in Europe and worldwide rights and partnerships throughout the globe. We are now actually approved and in use in over 30 countries across the world. We have over 100 employees now that we've absorbed and built out the European operations. We treated well over 0.5 million patients in total. Revenues in 2019 were approximately $32 million. The map to the right shows where we're direct, which is the darker blue, the purple is partner countries, and you can see Chile down on the far bottom of the slide. What's not pictured, obviously, is Australia and New Zealand, which could not fit into today's slide.Next slide. So a reminder on our mission. The mission is delivering transformative solutions to improve the lives of bladder cancer patients across the globe. We see this in basically 4 phases. Phase 1 is where -- and Phase II is where we are today, the acceleration phase, where we've invested more heavily in our commercial organization, increasing the depth and the breadth of Hexvix and Cysview used across the countries that we're direct into.And we use expansion, Phase II, which includes the acquisition of European rights back to expand into geographies around the globe, partnerships with companies like Genotests and others across the globe and other countries; in addition, expanding in terms of the use of the product and taking a look at whether there's enhancements to the product to improve the surgical guidance and the diagnostic and possibly the therapeutic benefits of the product.Moving on to Phase III is the acquisition phase, partnering, in-licensing. A very good example of that is Combat Medical in the Nordics. We're doing quite well, which is a HIVEC system. We'll look at continuing to add to our portfolio with products that are very synergistic, used by the same types of physicians in the same settings of care.And finally, transform, and it's building into a complete global bladder cancer company inclusive of pipelines and other acquisitions.Next slide. So highlights in the third quarter. I am extremely pleased with the results and our continued rebound of the depths, I guess, of Q2's COVID impacts. We had a 17% U.S. unit sales growth in this quarter. We've had a 14% increase in revenues for Hexvix and Cysview. This is adjusted with some of the one-off costs in the transition to European rights and operations of building out.I'm proud to say that we are now live in Europe, and that began officially on October 1, although we had a little bit of a lead in with people working behind the scenes in establishing the strategic planning that goes with it and setting up the MAH transfers and also the supply channels. So thanks to all those individuals throughout Photocure who put a lot of long hours in to make this a reality. And I have to say it came without any hitches. It was as smooth as I've ever seen a transition. And I think in addition to that, we'll get into a little bit more, having many of the sales force from Ipsen come over with the product ensures the transition and the continuity to be very smooth, and we think we can pick up running. And then finally, partnership news. We announced that Cevira's NMPA, which is basically the old Chinese FDA, has approved for the start of the Phase III in China. We expect that will happen here soon. In addition, we also inked a deal with Genotests for Hexvix rights in Chile. Next slide. So a reminder on the disease itself. It has been chronically underserved for generations. It's the sixth most common cancer in the world with over 550,000 new cases annually across the globe and over 200,000 deaths. It's also one of the most expensive, and I think that often surprises both patients, physicians and payers. It has the highest per patient lifetime treatment cost of any other cancer, and that's because once diagnosed, it is a lifelong treatment. And hopefully, you don't progress to muscle invasive, where more invasive procedures are used. In the U.S. alone, it's about a $5.7 billion expenditure. And from a recurrent standpoint, it has a very high reoccurrence. Over 61% patients have recurrence within the first year. And by the fifth year, nearly 80% are now going to see reoccurrence and have to be retreated. It's progressive, and this is the most important part of treating non-muscle invasive bladder cancer is you want to keep it non-muscle invasive. Once it becomes muscle invasive, you undergo cystectomies, which is having bladder removed and more invasive procedures, and it really changes a person's life, but the progression rates run from 1% to upwards of nearly 50% for patients progressing to muscle invasive within 5 years. And that obviously plummets survival rates significantly.Next slide. So here's the product itself and how it works. We believe blue light cystoscopy can and will become a new standard of care. It doesn't come without effort. It does require the commercial and medical teams to really go to work throughout the globe. The drug itself is a colorless reconstituted solution that's instilled into the bladder. It uses the body's own biology to detect malignant cells. Oftentimes you'll hear people comment that it is a dye. It is not a dye. It's actually a biologic reaction within the cells. And then once it's absorbed, it is actually seen -- glows bright pink, the malignant cells glow bright pink under blue light and gives very clear margins and gives a physician the ability to see all the cancer throughout the bladder. We believe Hexvix blue light cystoscopy offers an improved detection during surveillance (sic) [ surgery ] and surveillance, and this could lead to the reduced recurrence versus a white light cystoscopy alone. Next slide. On a way to becoming a standard of care, probably one of the most important elements is becoming -- finding ourselves on the major guidelines, both globally and nationally, and Cysview, Hexvix has and is on the major guidelines, AUA, EAU, SUO, NICE, AFU, the German guidelines and many, many, many regional guidelines throughout the world. And we'll continue to work on improving our positioning, but this is a great foundation upon which you can build a standard of care as a reference.Next slide. So this slide depicts the journey of the patient. I'll take you from left to right. Patient is -- finds blood in the urine or some other symptoms. They move down the continuum to the right. They go to urologist offices. The urologist will perform an initial cystoscopy. This is not generally done in blue light, probably very rarely if ever would it ever be done under blue light, and we actually do not have the indication to be used in this setting for an initial diagnosis. If it's -- if bladder cancer is suspected, if they see polyps or otherwise or perhaps they have blood in the urine but a negative cystoscopy, they will schedule the patient into the OR and perform a TURBT, which is a surgical procedure, to remove any polyps and cancerous tissues in the bladder. There are over 700,000 cases in the U.S. and EU5. And just -- I say the EU5 because, as you know, we've taken over complete European rights, so that number obviously is higher. Now we have all of Europe.The patient -- once the tumors are all removed, the patient is then also staged and asked to come back for ongoing surveillance. If they're high risk, they may be asked to return to the physician's offices in 3 months; if intermediate, it might be 6 months; and maybe if it's low risk, it might be upwards of a year. If the patient returns or comes back to the physician's office, this is where, kind of circle underneath, where we talk about the regular surveillance cystoscopies. According to the risk stratification, there are over 2.3 million of these cystoscopies that take place in the U.S. and Europe. If the patient is clean, they'll be asked to come back in 6 months, 3 months, a year, whatever, depending on, again, the risk stratification.If the physician sees something in the bladder, they see additional cancer, they may do some low-level procedure, but most -- quite often though -- quite often they will refer them back into the OR for a complete TURBT. And this cycle continues for the patient for the remainder of their life, trying to keep them from moving to the far right, which is a progression to muscle invasive. So that gray area where you have the 2 red dots is where blue light cystoscopy is most dramatically going to change a patient's life and prevent them from moving to the right side of this slide, which is where plummet -- where there is a plummet in life expectancies of patients who end up with muscle-invasive bladder cancer.Okay. Next slide. I'm going to hand over to Erik Dahl, who will give everyone update on our financials. Erik?
Well, as usual, in this part of the presentation, we will do a financial[Audio Gap] reporting. And please be aware that the numbers used in the next slide are the reported IFRS numbers, but I will obviously comment by using the adjusted numbers. So let's start with the commercial franchise. The headlines for the commercial franchise in Q3 are, first of all, the rebound from the pandemic we experienced at the end of Q2 continued into Q3. And the commercial franchise was, obviously, heavily impacted by transition activities in Europe. However, if you adjust for these activities, Q3 EBITDA was positive NOK 4.2 million. We see total Hexvix/Cysview adjusted revenue in Q3 increased 14% compared to Q3 last year. This includes adjustments for the inventory changes in Q3 at Ipsen. Without these adjustments, the revenue decreased...[Technical Difficulty]
[indiscernible]
Okay. We're sorry about this. Apparently, the sound disappeared when I started. So I'm -- just to make sure that I get every items included there, we're going to start with this slide, financial slide, financial highlights for -- from the third quarter. And we have 2 major streams that are defining the financials in the third quarter. First of all, we have a strong business performance, which was driven by significant revenue growth as well as positive adjusted earnings in the quarter. U.S. volume is up 17% in the quarter, and European volume was up 7%. Adjusted revenue increased year-over-year 14% in the quarter, and adjusted revenue and earnings are after eliminating one-off costs related to the transition of the Ipsen activities.The European transition is a second stream in the quarter. We have gone through a major transformation of the global business as we are building and integrating the European business. The European transition alone is adding 50% additional revenue for the company going into next year. The transition, however, does not come without one-off costs. We have said previously that the transition will cost us around NOK 30 million. In the third quarter, we incurred NOK 15 million, and year-to-date, the transition cost was NOK 18.6 million. I do see us incur cost in the fourth quarter as well, but the total cost of the transition will be well below the NOK 30 million we have indicated previously.The one-off items incurred are of various types. We have identified the items well below -- on this slide, Slide #11, in the column that is marked red. And starting with the revenue, obviously, the transition impact includes reduced revenue. We did not want Ipsen to remain with an inventory after the transition as we do not want a competitor out there. Therefore, we agreed with Ipsen to reduce the shipping of goods to Ipsen in the quarter, and we also agreed to take back inventory remaining at the end of the third quarter. The impact of revenue was NOK 8.9 million and on cost of goods sold NOK 2.5 million. The transition costs also include operating costs relating to the European organization established during the third quarter. The cost in Q3 of that organization was about $1.5 million. Then finally, we had one-off restructuring costs, including recruitment costs, various setup costs and legal fees. Adding the revenue impact and cost impact, we get to a total transition impact of NOK 15.1 million in Q3.Adjusting for the transition impact, we have an adjusted revenue of NOK 58.5 million in Q3, which represents a growth of 14% from the third quarter 2019. Furthermore, we have an adjusted EBITDA of NOK 2.5 million positive compared to last year, NOK 8.3 million. Keep, however, in mind that last year, EBITDA was driven by a milestone payment from Asieris of NOK 8.7 million. So looking at Hexvix/Cysview only, we have an improvement from Q3 2019 of approximately NOK 3 million. So to conclude, and in spite of COVID-19, we have improved our Hexvix/Cysview revenues and EBITDA performance compared to last year. Looking at the details, and we will start with the segment performance, and I will look at the commercial franchise first. The headlines for the commercial franchise in the third quarter is, first of all, the rebound from the pandemic. We have experienced that in Q2 as well as in Q3. And then also the commercial franchise has, obviously, been heavily impacted by transition activities in Europe. However, if we adjust for these activities, Q3 EBITDA was positive NOK 4.2 million. Total Hexvix/Cysview adjusted revenue in Q3 increased 14% compared to Q3 last year. This includes adjustments for the inventory changes in Q3 at Ipsen. And without these adjustments, the revenue decreased 3% in the quarter.Year-to-date, adjusted revenue growth was 8%. Foreign exchange impact was 9% to 10%. In U.S., Q3 revenues increased 20% to NOK 30 million, and unit sales increased 17% in the quarter, a clear rebound from the pandemic. Year-to-date U.S. revenues increased 13% to NOK 80 million, and foreign exchange impact was approximately 10%.We are growing the installed base of blue light cystoscopes, although due to the COVID-19 pandemic, not at the same rate as last year. During the first 9 months, 30 cystoscopes have been installed, driving the total installed base to 253 cystoscopes, which is a growth of 20% compared to third quarter last year.Nordic revenues decreased 3% to NOK 9.7 million in Q3. The decrease was driven by sales from the extraordinary COVID-19-related safety stock purchased by the Danish authorities in the second quarter. Nordic revenues increased 6% year-to-date. In constant currencies, we had a decline of 2% year-to-date.Partner revenue is obviously heavily impacted by transition activities with Ipsen. Unadjusted, we had a revenue decline of 40% in the quarter. However, adjusted for the transition, the partner revenue grew 16% in the third quarter. Quarter FX impact was approximately 8%, and in-market unit sales was up 7%. In real terms, and looking at the development of our in-market sales, this was a good quarter, reflecting a rebound from the COVID-19 pandemic.Year-to-date adjusted partner revenue was at $52.9 million, an increase of 6%. Currency impact was positive 10%. The in-market unit sales decreased year-to-date 7%. The German unit sales was at level with last year.Total revenue, including milestones and other sales, declined 4% in Q3, however, increased 13%, adjusted for transition. Other revenues in 2019 include IFRS 15 adjustments. We have no such adjustment this year, which explains the difference in other revenues.Operating expenses, excluding depreciation and amortization, increased year-over-year 12% in Q3 and 17% year-to-date. Q3 adjusted for transition costs of NOK 1.5 million was 8%, driven by sales and marketing costs as well as FX.Year-to-date, the main contributor to the increase is currency impact. The remaining is mainly driven by costs related to noncash-related share-based compensation as well as scaling of the group activities within regulatory and marketing.EBITDA for the commercial segment was negative NOK 3.7 million in third quarter and negative NOK 13.7 million year-to-date. Adjusted for transition activities, the Q3 EBITDA was positive NOK 4.2 million, reflecting an adjusted EBITDA margin of 7%. Year-to-date EBITDA adjusted for transition was negative NOK 5.8 million, obviously, negatively impacted by the COVID-19 pandemic.Looking at the development portfolio. Development portfolio has been driven by the license agreement for Cevira with Asieris. Last year, we received $5 million signing fee payment from Asieris. In addition, we accrued revenue of 2 development milestones totaling NOK 3 million. The fees from Asieris are accounted for according to IFRS 15, and revenue recognition in 2019 was therefore based on contract value, which was $8 million, applying the currency exchange rate at the time of the executed contract. We received $1.5 million of the accrued milestones in the first quarter 2020, obviously, impacting cash flow but not revenue for the quarter. In 2019 third quarter, we received $1 million in milestone payment from Asieris, impacting the Q3 results for last year.Operating expenses continued to decline for the development portfolio. The reduction for last year -- from last year was year-to-date NOK 4.7 million or 46%, and the decline is partly driven by one-off expenses in 2019 related to signing of the license agreement with Asieris.Let's go to the consolidated income statement. We recognize the revenue numbers, so let's have a look at the cost base. Operating costs increased 8% in the third quarter. Adjusted for transition, the increase was 5%. Year-to-date, the operating cost increased 13% and, adjusted for the transition, 12%. Again, the main contributor to the year-to-date increase in operating cost was currency impact of approximately NOK 11 million or 7%, and the remaining, a total of approximately NOK 6 million was mainly driven by noncash costs related to the share-based compensation as well as scaling of the group activities.We see that many companies have reduced number of customer-facing employees due to the COVID-19 pandemic. We have not done that. We have maintained our sales resources and, as far as possible, maintained customer-related activities during the COVID-19 pandemic. And we believe the benefit of being prepared was demonstrated with a rapid sales rebound in the second and the third quarter.EBITDA in Q3 was negative NOK 5.4 million and, adjusted for transition, positive NOK 2.5 million. Year-to-date EBITDA was negative NOK 19.1 million and, adjusted for transition, negative NOK 11.2 million. Q3 and year-to-date 2019 EBITDA was driven by a sign-on payment from Asieris of $1 million.Depreciation and amortization year-to-date NOK 11.6 million. Main single item within depreciation and amortization is the amortization of the investments in the Cysview Phase III program. The remaining amount will be totally or fully amortized by the end of this year.We had restructuring cost of NOK 10.4 million year-to-date. The restructuring cost relates to the transition activities for the European business that we have already discussed. Net financial income, NOK 8.2 million year-to-date, which is mainly driven by -- related to foreign exchange gains.Tax expenses year-to-date, an income of NOK 200,000. We had significant tax expenses in Q1, which was related to our tax asset and tax loss carryforward and, therefore, not tax payable. In Q3, however, we had a tax income of $8 million.After net financial items and tax, we have year-to-date net loss of NOK 32.6 million compared to a net loss last year of NOK 10.7 million.Cash flow. Net cash flow from operations negative NOK 9.9 million in the third quarter and positive NOK 4.5 million year-to-date. Year-to-date, the improvement from last year was NOK 14.3 million and partly driven by the milestone payment from Asieris of $1 million (sic) [ $1.5 million ] in Q1 as well as improved working capital.The impact from changes to working capital year-to-date was positive NOK 10.2 million and driven by accruals and payables, partly offset by increased inventory. Cash flow from investments was year-to-date negative NOK 166 million and, obviously, driven by the acquisition of rights from Ipsen.Cash flow from financing year-to-date positive NOK 358 million, driven by private placements and bank financing. We had 2 private placements in the second quarter, 27th of April and 24th of June, raising a total net of NOK 302 million. We also secured bank financing of NOK 50 million in the second quarter.So net cash flow was in Q3 negative NOK 177 million, driven by the acquisition of rights for Ipsen. Year-to-date, the net cash flow was positive NOK 196 million, driven by additional funding in Q2, partly offset by the acquisition in Q3. So this gives a cash balance at the end of the third quarter of NOK 322 million. Looking into fourth quarter, we know that we have taken over the European revenue, and we know that, that activity or that revenue will drive account receivables in the fourth quarter. And as we described when we described the Ipsen transaction, this will drive a negative working capital in the fourth quarter. We then estimated about NOK 25 million of negative working capital related to accounts receivables and that -- we believe that is going to be the number.Looking at balance sheet. At the end of Q3, total assets of NOK 608 million. Noncurrent assets, NOK 227 million at quarter end. This included marketing rights acquired from Ipsen of NOK 167 million. It also included a tax asset of NOK 38 million and investments in tangible and intangible assets totaling NOK 6 million.We also find an other line within noncurrent assets totaling NOK 16 million. This relates to the remaining $1.5 million receivable on Asieris. In addition, this other line includes the balance sheet impact of adaptation of IFRS 16 on lease accounting.Inventory and receivables, $60 million at quarter end, reduced from year-end NOK 62 million. The long-term interest-bearing debt is a loan secured under the state guarantee scheme for loans related to COVID-19. The loans carries a floating interest. Effective interest rate at the end of the quarter was 2.7%. The loan is a 3-year term loan, first year interest only, and thereafter, quarterly equal repayments.And equity, finally, at the end of the third quarter, NOK 492 million or 81% of total assets.And this concludes my part of the presentation, and Dan will continue by discussing the U.S. and European business.
On Slide 17, just talking about Europe here. The overall strategy is to move the markets. We have a tremendous untapped market in the U.K., Spain, Italy and other countries. I think recently, we announced in the U.K., we've already formed a very strong relationship with Karl Storz. It has 100% of the scope placements there. We are sharing a booth at BAUS, which is the urology conference in the U.K. It is a fantastic virtual booth, in which we're highlighting Blue Light Cystoscopy, which, quite frankly, has not been highlighted in years. So this is a fantastic opportunity for us.Looking at the DACH region, 30% to 35% penetration, France at roughly around 15% penetration. We believe there's still growth in those regions. Moving to the Nordic, penetration rates of 40% or better. So there's tremendous unlocked potential still in Europe. Many countries have barely been touched, and we're seeing opportunity 30 days into our launch.Slide 18. So all key commercial resources are in place. I also mentioned earlier in the presentation that 100% of the previously Ipsen DACH sales force from Germany have come over, which is fantastic. It's ensured a smooth transition, and we picked up immediately where they left off on the 1st of October. All distribution channels have been built, legal entities established in Germany and France, and all MAH have been moved over of the '19 that needed to be moved over, majority. There's a couple that -- Italy and Greece, which we're working on, but that was expected. We will have Ipsen continue to supply while we do the commercial work in those countries.Moving on to Slide 19. Talking about U.S., Slide 20. I think this demonstrates the growth signs coming out of COVID. I think the slide to the right probably is the best depiction. As you can see, the tremendous trough compared to prior years in April of this year, the quick recovery out and then the exiting out of September back to an all-time high for us, in fact, the highest month ever. So fantastic recovery in the U.S. I think that's attributed to having our commercial people in place and utilizing both personal where we can as well as digital and virtual means to meet our customers' needs and serve our patients. And I think that has bode well for us, and that was always our strategy of slingshot strategy knowing that COVID was a temporary situation.Going into Q4, we know that COVID is making some sort of a return. What we believe is that the institutions, the physicians' offices are far better prepared and are going to want to see the patients. If patients choose on their own not to venture out, that is obviously their choice. But what we're hearing from our customers is that they don't see any major disruption in their ability and capacity to treat bladder cancer patients into Q4. So we'll see. Obviously, no one has a crystal ball to see how it all will go, but we do not expect a trough like April to happen again.Slide 21 is the installations of cystoscopes. We've had 30 on the year so far, 33 Flex and 220 Rigid. Flex is starting to pick up a little bit now. And we think that still it remains a growth engine for us. I think all in all, given in a year like this, having 30 installed to date, we'll have more in Q4, still bodes well for us going into the New Year. And I think I mentioned early in the end of last year's quarterly or end of year presentation that our big strategy this year was to drive more units per scope. So having that strategy in place, coupled with installing new scopes is boding well for us going into the future. And this is all despite the challenges of pandemic, the challenges being that institutions have, in some cases, frozen their capital equipment, or in other institutions, if they shut down, the installations are delayed. So we see the pipeline as having just moved out into the future for those accounts that were queued up for this year.Moving to Slide 22. This depicts the relative penetration rates of the markets. And you can pretty much see the rest of the EU and U.S. as being a major opportunity for us. DACH still has growth in it. We actually see opportunity 30 days in, and we'll be going after it. We have all the right success factors in place from approvals and acceptance to access, activated awareness. I think we've got an engaged capital equipment manufacturers as well as patient advocacy groups throughout Europe and the U.S., and we've now put the commercial engine in place to accelerate the sales.Slide 23. There is increasing media attention on BLC procedures. We were featured in UroToday on the 11th and 24th of June and 13th of September. We've also been in Norwegian patient association magazines in September. So again, the growing interest in blue light cystoscopy continues.Slide 24. Increasing media attention, particularly on the European markets. There was a lot of write-ups on this. I think we can conclude that the transition was fantastic. It was smooth. We saw no disruption, and we're going to carry forward into the fourth quarter and forward. And again, I -- as days go by, I see more and more opportunities to really do some good work in Europe.So moving to Slide 25, on to Slide 26, from summary and outlook. Current year guidance. Q3 rebound will continue into Q4, although we know that there is COVID implications now as we're heading into Q4, both in Europe and in the U.S. But we do believe hospitals are better prepared. Procedures might be postponed but they're eventual. This is a disease that has to be treated. There may be restricted access to the OR, but I've mentioned in the past, we can be there personally. We've also have zoomed in on OR procedures where need be. We also are asked in some circumstances to assist physicians, particularly if they're new in doing blue light cystoscopy during COVID pandemic. And then equipment budgets have been temporarily reprioritized. A lot of those capital budgets were shifted to respiratory equipment and things to treat COVID earlier this year. We do see some of those budgets being loosened where they have been. We're going to try very hard to bring capital equipment in and get ourselves set up in Q4. If not, it will be into next year. Again, the pipelines remain. They just may be pushed out a little bit.So on conclusion, we maintain our ambition of worldwide revenues of $1 billion by -- in 2023 -- by the end of 2023, with approximate EBITDA of 40%. We'll do that through the accelerate, expand, acquire and transform.And with that, I'll move to the last slide for Q&A. I know I ran quickly through those, but with the challenges we had with the audio, I thought it would be better to get right to Q&A. So open it up from here. Thank you.
Okay. So I have a question from the web, and I'm just going to start from the top -- all the comments about no sound, but the one -- the first one here is from Tomas Skeivys. The marketing rights on the balance sheet. Is there going to be any amortization of these rights over time?We are in the process of doing a PPA, a purchase price allocation, these days together with KPMG. There will be either amortization or impairment tests, quarterly impairment tests, depending on how this asset is classified. But there will be amounts between EBITDA and EBIT, certainly. I have another one from Tomas Skeivys. How quickly are you going to enter the markets where Hexvix is not available now in Europe? Any more specific or concrete plans?You want to take that, Dan?
I heard something about Europe and countries perhaps [indiscernible].
Let me repeat. Can you hear me now?
Yes.
Okay. How quickly are you going to enter the markets where Hexvix is not available now in Europe? Any more concrete plans?
Yes. We're actually in the process of assessing that. I was in meetings 2 weeks ago where we were going through many of the other countries where Hexvix is actually in supply, MAH is available, countries in the Baltics, Estonia, Latvia, et cetera. What we're assessing now is would a direct salesperson or persons make sense, would the return be there? Early conclusion is it may in fact be the case. We got to make sure access and reimbursement is set up properly and that the -- that we could put the right amount of effort behind it. But we can move as quickly as the opportunities present themselves.Currently, the European operation is approximately -- including the support staff, is with it around 24, 25, 26 people. There's a finance person and marketing person and market access person, supply person that support. But a majority are sales -- is the sales organization in the major countries of DACH, France, U.K., Italy, Benelux, but we do see opportunities in those other countries. Spain, in particular, comes to mind. Poland, another large country that we think is not only an opportunity, but there's already built pent-up interest in bringing blue light cystoscopy through the KOLs that have heard about it and would like to lead it in those countries. So...
Okay. I have a question from [ Nicolas Teflon ]. You've previously stated that Asieris has estimated to submit its application for market approval in 2022. Does this include the U.S. and EU?
No. This is China, 2022 for China. And I would say, put it towards the end of 2022, assuming they can get a first patient in this year, you're going to look at probably a good year and then they've got to pool the data, submit and then they've got time to -- for an approval. So we think data in 2022, with an approval in 2023 for China. EU and U.S., they'll assess coming out of this trial. They'll do an interim analysis to determine what, how and when they will design and launch the next trials necessary for European and U.S. rights. We expect European, U.S. approvals maybe late '23 and '24, probably more like '24.
A question from [ Anders Lunde ]. When do you think first patient of Cevira is coming?
Hopefully, soon. That's all indications are. They've got everything lined up. Trial sites are in place. Enrollments have begun. So it should be any day.
Question from Tomas Skeivys. Can you comment on cost base fourth quarter versus third quarter? Any significant changes?And I think I'll take that one. Yes, there will be a significant change because the cost base of Europe will then be included in our P&L. What we have said previously is that we will have -- we will incur additional cost annually in Europe of approximately NOK 90 million, full year that is. I don't think that fourth quarter will be -- will reflect that run rate. It's going to be slightly less, but obviously there will be an additional amount on the spending driven by Europe.I have one from Rickard Anderkrans. There seems to have been a stocking in Ipsen territories in third quarter given the increase in volumes. Can we expect that to cycle out in Q4 2020?Let me take that. I -- we might -- it seems that some larger customers have stocked some units at the end of the third quarter in anticipation of Photocure taking over the distribution in Europe. We don't think that is of a significant -- or is significant, but there might be some impact. But it's very difficult to estimate how much that impact will be.I have one from [ Andre Evanson ]. Why do some hospitals choose Rigid over Flex for new installations?
Erik, I can't hear you.
Okay. It's from...
I can't hear you.
[ Andre Evanson ], why do some hospitals choose Rigid over Flex for new installations?You still can't -- he can't hear me.
I can't hear you.
I'll try once more. Why do some hospitals choose Rigid over Flex for new installations?You can't hear?
I can't hear you.
Okay. I'll try this. Can you hear me now, Dan? Can you hear me?
Yes, I can hear you now.
You can hear me now?
I can. Yes.
Okay. I can hardly hear you, but -- yes, the question was from [ Andre Evanson ], why do some hospitals choose Rigid over Flex for new installations?
Well, there are 2 different settings of care. Rigid is -- has a very clear, obvious history of benefit in the OR practice with blue light. And when you're going in for a TURBT, you're going in for a complete. You know the patient has cancer. You're very highly confirmed to have cancer. And so you're going to want to go in with a Rigid and get everything you can see. So blue light is a very easy sale there. In the surveillance market, it's an easy sell, but obviously, reimbursement, some things have to be obviously lined up with it, but that's -- the value that we're bringing is that they can do some of these procedures in the surveillance setting, plus if they're doing a white light surveillance, they may have missed something. And you're doing blue light and doing a low-level procedure and bring them back to the OR, they can assure that, that patient will be discharged and put on the right follow-on treatment. So -- but some institutions have brought in Flex before Rigid, but generally, it's Rigid before Flex.
Another question from [ Eddie Palmier ]. You have quite a lot of cash. Are you currently evaluating M&A targets? Can you hear me?
Oh, yes. Yes. So M&A targets, yes. Yes, that's part of our strategy. Step 3 and 4 is looking for products, small companies. And again, the products can be agnostic to drug or device. I think that's -- one of the fortunate things about being Photocure is we understand the device side as well as we understand the pharmaceutical side, so we can compete -- we also have extremely strong relations in the uro-oncology space, which makes us a very attractive partner to either someone who would want to sell or hand their product to us to do the selling for them or if they want to sell themselves or the company. So yes -- so we'll be looking at those things going into the future. The #1 priority for us this year was Europe.
[ Nicolas Teflon ], I'm not sure if I had this question before. But has Asieris started this Phase III study? If not, when will they start? Will it trigger a milestone payment? If so, what's the amount?
Yes. The milestone payment's already -- it will trigger payment. We've accounted for it. We expect first patient to be dosed soon as in probably this quarter. I will say this about Asieris. So I meant to say in the prior answer, Asieris's development plan and milestone was also dated in terms of a time stamp. So they had to get to this point by a certain time. That time point was actually next July. So if they're bringing the first patient in, in this quarter, they are ahead of what the original sort of development time lines were expected to be, which would be fantastic, and that's what we expect. They've been a fantastic partner. They're extremely excited, extremely capable. I couldn't ask for a better partner right now to take Cevira.
One more from [ Nicolas Teflon ]. You said that the expected cash flow from EU operations will be negative NOK 25 million in Q4. When do you expect it to be positive?I think you're referring to my statement on account receivables and how we expect the account receivables to build up in the fourth quarter as we take over the European business. That's a one-off event. We expect the cash flow from the European business to be positive in 2021 full year.I think we are slowly approaching the end. Let me see -- have one more look here. No, I think that's about it.Okay, Dan, I think we're ready to close.
Okay. All right. Well, great. Well, thank you. And I apologize for some of the technical difficulties. Hopefully, you got a lot out of today's presentation. We look forward to speaking to you at the Q4. Thank you very much. Bye-bye.