Photocure ASA

OSE:PHO

Earnings Call Transcript 2021-Q3

[Daniel Schneider, President & CEO]

Well, good afternoon to those in Europe. Good morning. This is Dan Schneider, CEO of Photocure. With me today is Erik Dahl, CFO, and we're proud to present the results for the third quarter of 2021.Next slide. Just a reminder, today's disclaimers are in place.Third slide. So I believe we delivered another productive quarter in the shadows of COVID. We've shown growth. We continue to generate data on the advantages of using blue light cystoscopy. We strengthened partnerships and entered new markets like Canada, and we ended the quarter with a strong balance sheet.Keep in mind, a couple of important factors. Last year's Q3 was a catch-up quarter for postponed procedures in quarter two. So we're up against an inordinate amount of backlog that hit Q3 last year. And this year, we dealt with the onslaught of the delta variant as we got into Q3. However, we did show growth in many markets like the U.S., France, Italy, U.K. and held tight on some of the other markets like Germany. We are essentially breakeven and demonstrated throughout these six quarters of COVID that we are managing our money and making smart investments for maximum returns, while the opportunities present themselves.We are present at two very prominent and the largest urologic conferences this year, albeit virtually, presenting new and compelling data on the benefits of blue light cystoscopy. At EAU, our first special, but important group. 40% of the patients approximately fail on BCG. We know that white light cystoscopy does not find them all until it's too late. We showed in our publication that blue light cystoscopy with Cysview/Hexvix showed remarkable ability to find these patients and begin the intervention. Think about products like KEYTRUDA's recent approval, second-line and how blue light cystoscopy can play an important part in finding those patients who under white life would otherwise have been undiagnosed and due to cystectomy. This offers a tremendous advantage to those patients.At AUA, we presented blue light cystoscopy in the surveillance market, our surveillance setting, where we showed about 100% sensitivity to finding the cancerous tumors, and this was confirmed 100% by pathology, again, showing the advantage of blue light cystoscopy being used in the surveillance setting. And new market opportunities will launch in 2022 with Canada and also Chile will be launched by Genotest in first half of next year. In conclusion, we are weathering these external challenges and the uncertainties, grabbing growth opportunities wherever we can and managing our resources and commercial investments smartly through these unpredictable and trying times.Next slide, a quick update on COVID-19. If you recall, at Q2 earnings, I expressed a certain level of caution as the hints of the delta variant started to permeate the airways and the vaccination rates in some countries lagged and impacts to staffing on hospitals began to impact OR throughput, things like nurse support and pre-op anesthesia, et cetera. We all hoped that second half of this year would gradually return to normal sooner. It's quite maddening and unpredictable. But what is predictable is that Photocure is well positioned, and we are capitalizing on every opportunity in the market that the market offers.We are determined to get through this unpredictable environment and regain pre-pandemic growth rates in the U.S. and build a strong and vibrant EU marketplace that for nearly nine years was neglected by Ipsen who had also engaged the capital equipment manufacturers and the key opinion leaders. I can tell you that both of those groups of individuals, the equipment manufacturers and the KOLs are extremely engaged and excited to move blue light cystoscopy throughout Europe.While the COVID impacts are starting to roll into 2022, I'm hopeful that we will once again beat back this incredible pandemic and deliver on our promise to make blue light cystoscopy the standard of care in non-muscle-invasive bladder cancer detection surgical guides. This is a temporary and unpredictable situation that will resolve and we will return to significant growth rates.Next slide, quick, just kind of looking past the last six quarters. We've sustained the business despite the volatility and predictability. Again, I mentioned we hoped that the second half of this year COVID would start waning and we get on with regular business, but that has not been the case with the delta variant. And now additional closures throughout Europe and parts of the U.S. However, we remain well positioned to come out of this quite strong with great momentum. I am satisfied with this performance given the unpredictability of markets we are working in. In summary, I think the chart demonstrates the resiliency and determination of our people and the company that we're well prepared to take this company to the next level once COVID-19 is less a factor in the marketplace.So let's take a look at the segment trends. Slide 7, an update on the U.S. business. We're still driving unit growth despite the impact of COVID access restrictions, OR our staffing challenges compared to the Q3 2020, where we had a catch-up of the Q2 postponed procedures last year. The volume-based contracting that we instituted is proving to be a great mitigating strategy against the volatility of COVID, keeping accounts on track to deliver on the volume of cases that we expected. We have a very strong demand for blue light cystoscopy equipment despite the manufacturers' ongoing -- are going through the upgrade transition and we're really excited about the future.The pipeline and the interest in blue light cystoscopy and installations is extremely high, and many of the accounts are waiting for the new equipment. COVID remains challenging with opens and closures, but finally, we're seeing better access in the Northeast, which quite frankly, is our largest segment in the U.S. geography. And fingers crossed, we get through the winter with open access.Next slide. So we've had quarter-over-quarter growth despite COVID's volatility. On the left panel shows continued growth every quarter despite COVID's ongoing impacts. On the right panel, you can see the volatility every quarter. While that might be unpredictable, the fact that we remain poised and agile to capitalize on any and all opportunities and find creative ways to reach our customers and patients, we will weather through this.Next slide. So this was -- I was quite pleased with this. We were able to place 14 new scopes in quarter three. As I mentioned, in quarter two, there were four that were postponed into quarter three, but 10 additional new accounts were brought online. There will be additional accounts in Q4, but I do caution that as we get closer and closer to the launch of Karl Storz's new equipment, there will be a little bit of a slowdown. I think this demonstrates sort of the publication that came out that with the headline, some accounts decide to turn on blue lights now rather than waiting a Karl Storz's new version, and they will all upgrade when the new version comes out.And the advantage of the new system, when it does come out is it improves visualization significantly. It improves the reliability. It has improved processing and sterilization. And all of this will positively impact the throughput of the new systems for both existing and new customers. So we remain conservative on placements into the future months ahead of Karl Storz new equipment launch, but we're extremely excited about the partnering activities that are going on behind the scenes in preparation for this launch in 2022.Next slide. So some key initiatives. As I mentioned, contracting continues to drive fast uptake and increase patient volumes and mitigating the volatility of COVID impacts. The VA, we're finding that the VA segment is a very lucrative segment with both flex and rigid or the surveillance and operating room, both being equipped with blue light cystoscopy for this high-risk patient population. BLC brings a significant improvement to the continuum of care for those patients suffering bladder cancer in the VA. Opportunity in 2022 is the Karl Storz equipment. We're well involved in the launch planning. And we believe this will have a very positive impact on both the new customers, but also the current customers who are on the old equipment. And this robust pipeline is anticipated to carry us well into the future.And I think excitedly, if anyone who had been watching some of the news, particularly in the U.S., we had a direct-to-patient campaign that launched on Monday this week on the Lifetime channel. It was on a really well-known program called The Balancing Act. And the topic was patient and caregiver guy to bladder cancer in which blue light cystoscopy with Cysview was featured. It was in the beginning of the show. Dr. Neal Shore, one of the key opinion leaders in the U.S. led this program, and they spoke to the importance of using blue light cystoscopy. This show is broadcast throughout the United States is heavily watched and we believe will have an impact on patient demand.In fact, I'll give you an example about patient demand. There was a patient in the Sutter Health System in Northern California this quarter who went from one hospital to a different hospital because they wanted blue light cystoscopy. That prompted the doctor at that hospital to champion bringing blue light cystoscopy into his hospital to avoid that patient going outside of his care. So these things are going on. There's a lot of this kind of activity in the background despite COVID's impacts. We still move forward. And I'm really getting excited about where this is going to go into the future.Next slide. Update on the EU. The EU had a backlog of Q2 patients that hit in Q3. In a majority of countries like Germany and France, there was a level of safety stock-in ahead of the transition last year. So we're up against two kind of interesting dynamics. As we were going to take over the business last October, there were accounts, particularly in Germany and parts of France, where they did prepare in case there was some sort of hiccup. There was no hiccup, but they did stock-in a little bit in Q3 last year.In addition, the backlog of patients, particularly in Europe where the lockdowns were very, very significant, patients were in a catch-up phase in Q3 last year. So our numbers were up against last year's inflated numbers, I would say. But what's exciting is that who's who of urologic KOLs are excited about joining us and bringing blue light cystoscopy back to Pan Europe. Some of the key names that were involved in a big advisory panel we held back in July were [Indiscernible] These are the who's who in urologic bladder cancer in Europe, and they all are engaged with Photocure. And I think that, if nothing else tells you about the level of interest and the engagement level that we're getting and seeing throughout Europe. And again, as COVID lifts, I think this will all have a very, very positive impact.In addition, the equipment manufacturers who had all been ignored by Ipsen are all reengaged. Karl Storz and Olympus both are updating their equipment in 2022. Richard Wolf has been extremely aggressive in all the EU countries. There was a -- I think we had press release the Bladder Cancer Bus that drove throughout German hospital systems in October, late September and early October, which was met with tremendous fanfare, local press releases, local press showed up, KOLs showed up, patients showed up. In fact, that bus was so successful that it will be rolling into EAU in March. The European Urologic Large Conference on to the floor of the conference, first time ever, and we'll talk about blue light cystoscopy, its importance in bladder cancer care.So I think we've awakened the sleepy giants throughout Europe. And I again can't wait for COVID to lift, and you see the full impact of all this effort has been going on for the last nine months. So looking forward to it. France and U.K. continue to grow sequentially. Italy has stabilized and is now beginning its growth, and Germany will return back to normal as well.Next slide, Slide 12. So again, stabilizing and building momentum in the EU. COVID has had its challenges, but I think overall, we're weathering it quite well, having taken over a marketplace with limited access over the past nine months. We stabilized most of the markets. In fact, units to units are virtually in line with prior year. And this, I would say, also argue that in 2020, we had two quarters of COVID where this year we've had three quarters of COVID impact.We have the growth in the high growth markets of the U.K., France and Italy and Germany is fairly stable. And what's most important is that we've now mapped out and have business plans for growth in all 200 sites throughout Germany. And as I mentioned, the Bladder Cancer Bus that rolled through had a significant impact on really exciting the institutions and the physicians that are associated in using blue light cystoscopy. So more to come. And by the way, I should also mention, the bus itself was so successful that after it leaves the EAU in March out of Amsterdam, it will be traveling up through the Nordics and making it stops along the way at all the major hospitals and health systems. So if you're up in those places, look for it coming your way soon.Next slide. So again, exciting things going on, more to come in Europe. The blue light cystoscopy equipment manufacturers are heavily engaged with upgrades and commercialization partnerships. The bus tour was extremely successful. It will make its way through the Nordics and probably through the rest of Europe over time. I think we've caught the attention of all the manufacturers. They're interested in both the rigid and the surveillance markets, which I think they were all but falling asleep in the days of Ipsen. The KOLs are excited that they now have an organization that is committed to bladder cancer and patient care. And in fact, the new campaign was launched and is basically Don't Go Home With Cancer campaign, and it shows a patient on a bus and without having blue light, that patient would be heading home with cancer. But with blue light, you can make -- you can be assured your patient does not go home with cancer.So again, very, very exciting. I'm looking forward. I'm certainly -- I'm sure as everyone else is tired of the COVID and the impacts, both on our professional and personal lives. But again, I am very proud of where the company has sort of weathered the storm, has been agile and took advantage and continue to take advantage of all the opportunities it presents.So with that, I will turn the financials over to Erik. Erik?

[Erik Dahl, Chief Financial Officer]

Thank you, Dan. Well, I will start with the financial review of our two main segments, U.S. and Europe, and then follow with the consolidated income statement and headlines from the cash flow and balance sheet. Foreign exchange has to be mentioned, had a significant impact on our results year-to-date. Measured as average U.S. dollar has declined 10% and euro 4% compared to same period last year. In short, the FX impact for Q3 was for revenue negative approximately NOK 3 million and for EBITDA negative approximately NOK 1 million. And the year-to-date impact was negative approximately NOK 18 million for revenue and for EBITDA negative approximately NOK 3 million. When we go through the financials, please keep in mind that unless other currency is specified, all amounts mentioned in this presentation are in Norwegian kroner.So segment performance. And we will focus, as I said, on the two main segments, the U.S. business as well as the European business. And starting with U.S., we conclude that our sales are still impacted by the pandemic. The company increased the U.S. volume in Q3 by 6% compared to the last -- the same period in 2020 and revenues increased year-over-year with 6% to NOK 32 million. Measured in dollars, the revenue increased 11% in the quarter. When evaluating the volume increase in Q3, we need to keep in mind that we had a rebound of sales in Q3 last year after the first wave of the pandemic in the second quarter.Year-to-date volume increased 18% and revenue increased 26% to NOK 90.6 million. And some of the revenue growth was driven by an accrual of NOK 11 million taking in the second quarter 2020, which was due to a potential discount. This accrual was released in Q4 2020, and year-to-date growth adjusted for this accrual and measured in constant currency was approximately 21%. Direct costs in Q3 increased 9% to NOK 32.9 million. Measured in dollars, the increase was 13% to 14%. Direct costs include local costs within sales, marketing, medical and G&A. We have had on a number of occasions said that we are investing in the U.S. market. However, with COVID-19, it has made no sense to increase these investments due to limited access to our capital. Therefore, cost containment has been and still is important. However, as the pandemic loses its grip, we should expect increased activity level and expenses to drive further revenue growth. And we saw the first sign of this in the second quarter, and it has continued in the third quarter.The contribution was negative NOK 2 million in Q3 and year-to-date negative NOK 6.8 million. EBITDA was negative NOK 9.8 million in Q3 and year-to-date negative NOK 26.4 million. This is an improvement of NOK 14.8 million from year-to-date last year. We are not where we want to be over time. However, the potential in the U.S. market is great and it makes sense to continue our investments in this market and balance our investment with the revenue and growth potential.Also, our European business continues to be impacted by the pandemic. Volume, the in-market unit sales in Q3 decreased 8% compared to Q3 last year. The decline was to some extent driven by the rebound of sales in Q3 2020 after the first wave of the pandemic in the second quarter. More importantly, however, the Q3 2020 volume was driven by inventory increases by customers and field safety, and this was prior to the transfer of the business from Ipsen to Photocure, which took place on October 1. And this was particularly the case for Germany, our largest market. The third quarter 2020 German volume was 20% higher than the average quarterly volume before the pandemic, meaning in 2019. A 20% increase alone accounts for more than the 8% overall decline in the volume for total Europe.By country, we find that unit sales in the priority growth markets like France and U.K. in Q3 was at level or higher than average quarterly sales in 2019. Revenues in Q3, NOK 54.5 million, an increase of 189% from Q3 last year. The increase was mainly driven by the inclusion of the European revenues from Ipsen. However, the comparison to last year were also impacted by one-off reduced purchase of inventory by Ipsen as well as return of inventory from Ipsen, which was prior to the transfer of the business from Ipsen to Photocure on October 1. The revenue impact of this transfer of inventory and reduced purchasing by Ipsen in Q3 last year was approximately 8 points.Foreign exchange had a negative impact on the growth rate. In Q3, FX negatively impacted European [Indiscernible]. If you adjust for the inventory-related adjustments last year and the FX impact this year, the year-over-year growth was approximately 104% in the third quarter. Year-to-date volume was at level with last year and year-to-date revenue increased 96% to NOK 166 million and was driven by the inclusion of the European business and driven by added resources.Direct costs increased year-over-year with NOK 18.6 million in Q3, almost at level with Q2. The year-over-year increase witnessed in the local European commercial structure. During the pandemic, cost containment has been important. And we have deferred hiring and kept spending without disrupting the business. We expect to increase headcount and cost as COVID-19 resolves. And we ended the quarter with a contribution of NOK 28 million and EBITDA of NOK 14.5 million, which is 27% of revenue. Year-to-date, we had a contribution of NOK 92.3 million and EBITDA of NOK 54.2 million, which is an improvement of NOK 22.6 million from year-to-date last year.Let's move to the next slide, Slide #16, which is the consolidated account. Total revenue was NOK 87.4 million in the third quarter, an increase of 75% from last year. Main drivers were the inclusion of the European business from Ipsen as well as overall growth of the business. However, the revenue growth was partly offset by a negative FX impact of approximately 4%. Year-to-date revenue, NOK 266 million and was impacted by the same drivers, but in addition, we received an upfront payment from Asieris of $750,000 or NOK 6.4 million in the first quarter. And this payment was for the partnership agreement with Asieris for Hexvix in China and Taiwan.Operating expenses before restructuring and excluding depreciation and amortization was NOK 82.2 million in third quarter, an increase of NOK 30.3 million or 59% compared to Q3 last year. Sequential growth in operating expenses from Q2 to Q3 was NOK 3.8 million or 5%. The expense growth is mainly driven by the inclusion of the European business from Ipsen in terms of establishing a local commercial organization. EBITDA in Q3 was negative NOK 0.2 million, an improvement of NOK 5.2 million from same period last year. Year-to-date EBITDA was NOK 23.8 million, an improvement of NOK 42.9 million from last year. This is a significant improvement and is driven by increased revenue from the inclusion of the European business as well as revenue growth in U.S., combined with cost containment throughout the organization.Depreciation and amortization was NOK 6.2 million in Q3 and NOK 18.1 million year-to-date. The main cost item is the amortization of the intangible asset related to the return of the European business from Ipsen. We had restructuring costs of NOK 10.4 million in 2020 year-to-date and the restructuring costs related to the transition activities for the European business. Net financial items in Q3, negative NOK 5.1 million and year-to-date negative NOK 4.3 million. Year-to-date, net financial items were driven by interest on long-term loan as well as accrued interest costs included for the deferred earn-out liability. And these items were partly offset by net currency gains and interest income from financial assets. After net financial items and tax, we have year-to-date net loss of NOK 2.7 million compared to a net loss of NOK 32.6 million same period last year.Now let's move on to the cash flow and balance sheet. Net cash flow from operations, positive NOK 5.5 million in Q3 and NOK 17.6 million year-to-date. Improvement from prior year was mainly driven by EBITDA improvement, partly offset by working capital development. The year-to-date working capital is driven by the inclusion of the European business. Cash flow from investment was year-to-date NOK 2 million negative, while cash flow from financing was year-to-date negative NOK 20.3 million, driven mainly by repayment of loan and earn-out payments. And that gives us a net cash flow in Q3 negative NOK 10 million, a year-to-date negative NOK 4.7 million. And net cash flow includes repayment of loan of NOK 6.3 million in the quarter. And with this net cash flow, we ended Q3 with a cash balance of NOK 338 million.Looking at the balance sheet, we ended the quarter with total assets of NOK 780 million, non-current assets NOK 365 million at quarter end. This included customer relationship with NOK 150 million and customer relationship is intangible assets identified in the purchase price allocation for the Ipsen transaction. Non-current assets also include goodwill from the Ipsen transaction of NOK 144 million, a tax asset of NOK 46 million and fixed assets totaling NOK 25 million, including leases.Inventory and receivables NOK 84.1 million at quarter in Q2 and an increase from year end 2020 of NOK 6.7 million. This increase is driven by the inclusion of the European business from Ipsen. Long-term liabilities, NOK 176.2 million include the earn-out liability of NOK 126 million and a long-term interest-bearing debt, of which NOK 25 million is due after one year. Total interest-bearing debt, including the short-term part, was NOK 43.7 million and is a loan secured under the state guarantee scheme for loans related to COVID-19. The earn-out liability totaling NOK 126 million represents the capitalized value of estimated future earn-out payments to Ipsen, and reliability is subject to a 10-year annuity. And finally, equity at the end of the quarter, NOK 523 million or [Technical Difficulty].Well, this concludes the financial section, and Dan will continue and take us into the Q&A at the end. Thank you. Dan, the floor is yours.

[Daniel Schneider, President & CEO]

Thank you, Erik. And I apologize, I did not knew -- I was trying to be as quiet as a church mouse, and apparently, I interrupt at the very beginning of your presentation. So I apologize.Let's go to Slide '18. We're going to talk about shareholder value and value creation. So Slide 19, we're still remain extremely excited. We are a monopoly in this space. We are the only blue light cystoscopy product that can identify and detect the cancerous cells throughout the bladder. We know that this is a NOK 2 billion addressable market. Where we are currently today, if you take a look at the lower large circle opportunities, the rest of Europe and U.S., relatively low penetration rates. Our goal and our intention is to move those large bubbles up the curve to the Nordic and dock levels. Getting them to those levels will be a multi-hundred million dollar revenue company, and we believe this is completely achievable.We have the right things in place from the approvals and the acceptance on guidelines to the excess with favorable reimbursement. We have activated awareness and I think demonstrated again today with some of the ongoing work whether it be the Bladder Cancer Bus touring Europe or the program that was put out on The Balancing Act on the Lifetime channel in the U.S. This again, is activating the patient awareness. And we continue to make the right commercial investments even through the COVID situation.Thinking about COVID, there are three things that can affect the businesses. One is the access, both patient and sales rep access, and that has had its impact, but we've been ready and willing to take advantage of where we can when it opens up. There's been staffing issues on the hospital systems themselves, limiting some of the throughput of the hospitals. And the third one is supply. I guarantee you, we have no issues in the supply, and I got to ask that question after Q2. That has -- with all the supply issues going on on a global level, is there any issues for Photocure and there is no issues. We are well stocked, have no hiccups in our supply chain. So we're well positioned. We do not have any direct competition. We're a monopoly in our space. We have KOLs and equipment manufacturers eager and willing and wanting to work with us. So we are controlling our controllables.Slide 20, investment highlights real high level. Again, Monopoly, leader in the superior detection non-muscle-invasive bladder cancer. We're on all the national local guidelines with good reimbursement. We are in the early moments of launch, if you really take a look at those launch curves on the prior slide, except in maybe markets like the Nordics and Germany, which are a little bit more mature, but we still see tremendous growth opportunities there as well. So overall, very large upside potentials. We intend to be the leader in bladder cancer care, both through organic and inorganic means, looking for strategic opportunities.Slide '21. So what we're going to look forward over the next 12 months or so? We believe we'll regain the pre-COVID sales momentum in the U.S. and ignite the European sales for once in a long time. It's been well over seven, eight, nine years since GE handed the business over to Ipsen. Whether we're going to get past the COVID-19 or COVID-20 or COVID-21 or COVID-22, we will regain it. This is a temporary situation. And we remain poised to really take off. We'll continue to geo expansion via partner optimization. I think you've witnessed over the last couple of years where we have swapped out partners or gone direct in certain markets.I'm particularly excited about the Canadian opportunity. The more we've gotten into this market, the more excited we are getting about what the upside potential is here. The engagement with the KOLs is already taking place. We've got -- we announced recently the Ontario Health System has approved the coverage or the reimbursement for blue light cystoscopy. We expect the rest of provinces to fall in line as well. And then of course looking for additional expansion opportunities like down in South America with Chile and the company Genotest who will launch in early 2022.We'll continue to leverage the contract in the U.S., which not only mitigates account volatility, but also accelerates penetration. We're going to be co-launching the Karl Storz's new equipment in the first half of next year. It's very, very exciting. It's been 10 years in the making I think. So this is a big development for the U.S. And I think it's going to have a very, very positive impact on hospital systems and the use of blue light cystoscopy. I think we're going to be present in a big way in the large congresses at AUA and EAU with more and more data coming out underscoring the importance of blue light cystoscopy with Cysview and Hexvix and also in the important smaller regional conferences as well. And we'll continue to evaluate strategic business opportunities that will accelerate our overall growth as a company.So going to Slide 23, final close. Let me just end with this. It's a huge opportunity in the large underpenetrated markets. The demand for blue light cystoscopy remains very strong, evidenced by the robust pipeline with 14 installations in Q3 in a pipeline that carries us well into 2022. And this is also on the heels or on the cusp of the launch of the Karl Storz's and new equipment. All the major equipment manufacturers are reengaged, even the independents are winning in this space. When I say independents, these are outside of the Karl Storz, Wolf and Olympus, there are other blue light equipment manufacturers that want to get in the space. They see this as a real and untapped market. And I would argue that these other organizations would not be making these investments if they didn't see the potential that we see as well.The Karl Storz equipment is a real opportunity to expand the installed base of blue light cystoscopy in the U.S. and approved the TURBT usage of performance next year. We're executing and capturing on all of our European sales that we acquired during the transition from Ipsen, and we see a potential strong upside potential for Europe, particularly in the high growth markets. We remain opportunistic and on partnering and licensing front, leveraging our commercial infrastructure. We have now a global footprint in North America and Europe. And I think that's very attractive to anyone looking to place their assets in a hands of the company that can demonstrate performance. And we continue to set the table to capitalizing the growth opportunities post-pandemic.So with that, I should also mention, we do also have a survivor upside as well, you will see. And there's no new news on that. I know I'll get asked that question. Enrollments continue as planned.So with that, I think we can go to the Q&A.

[Erik Dahl, Chief Financial Officer]

We do have some questions. I have one question from Lars Hevreng. Will there be income from the Chilean market in Q4?

[Daniel Schneider, President & CEO]

Q4 of this year, no. They have not launched as of yet. That intends to be the first half of next year.

[Erik Dahl, Chief Financial Officer]

Next question. What is the situation with regards to scopes and towers in China? How many is installed today? And can they be used for Hexvix also?

[Daniel Schneider, President & CEO]

There are -- right now, we're working with Karl Storz and Richard Wolf. As you know, we partnered Hexvix to Asieris. Asieris is going to be doing a small clinical trial with Chinese patient population that will take place beginning of next year. I expect them to launch in 2023. At the same time, Karl Storz and Richard Wolf will be prepared in market to place the blue light scopes accordingly.

[Erik Dahl, Chief Financial Officer]

Another question. What do you do to increase the utilization of the existing scopes in U.S. and Europe?

[Daniel Schneider, President & CEO]

Utilization is a big topic for us, and it's a key one for us. Everything from talking to -- working with the accounts to increase the throughput, training the staff. I think one of the things we learned through the COVID situation is that the staff turnover has been significant, and we can't take for granted that the staffs understand that the pre-op process and installation prior to a procedure is going to take place. So we need to make sure that happens.We work really hard on patient identification and expanding it. I've mentioned today, thinking about the checkpoint inhibitor, KEYTRUDA, which has recently been approved as a second-line to BCG non-responsive. 30%, 40% of those patients in the past have gone undetected, and those undetected patients ultimately face the fate of cystectomy. So we're talking to physicians about using blue light cystoscopy after every TURBT or every BCG installation to double check, make sure that it's either worked or if it hasn't, they can then move them on to the next phase. So it's a constant process of moving physicians from high grade, high risk patients to intermediate to low grade.What we focus in is that every patient under the suspicion of cancer is -- use blue light cystoscopy or blue light TURBT, in the first TURBT, the follow-up TURBT in all high-grade and intermediate-grade patients should have it on every surveillance. So it's a constant work in doing so. More and more data coming out, which you see us continuing to publish the advantages of using blue light cystoscopy. I think also the Karl Storz equipment will have a positive impact when the new equipment comes out because of the processing times and things that you have to go through to clean the machinery and stuff will be dramatically reduced. And therefore, we'll be able to push more patients through the ORs.

[Erik Dahl, Chief Financial Officer]

I have a question from Jakob Lembke. Can you give an update on the timing of new Karl Storz system? And also, if you expect to recover potential lower placements following launch?

[Daniel Schneider, President & CEO]

So on the timing, we're not -- no one can predict the FDA and its approval process, but we believe it will be in the first half of next year. It's really hard to predict. Probably first quarter, but I can't give the exact timeline on that. As far as regaining, yes, the pipeline is extremely robust. There's a lot of accounts that are highly interested in the new blue light equipment, and they're waiting it out. Some have elected to take on the old equipment with the intention to swap out when the new equipment comes on to the market. The demand continues to grow. And as we transition, I think we'll see a nice rebound. I will tell you this, from Karl Storz's planning perspective that we've taken a look at, they expect an extremely strong launch once it's out on the market. So stay tuned?

[Erik Dahl, Chief Financial Officer]

I think the last question is, when can we expect an MAA for Hexvix in China? Not easy to answer.

[Daniel Schneider, President & CEO]

Yeah, it's hard. I mean, they have to do -- they're going to do the clinical trial next year and anticipate submitting to the Chinese authorities. So 2023 is probably the likely timeline. But until they get the small clinical trial, which I think will be a fairly quick enrollment and package submission, I think we're looking at probably a 2023 launch. More to come.

[Erik Dahl, Chief Financial Officer]

Regretfully, no more questions to come. All set, I think.

[Daniel Schneider, President & CEO]

Very good. Thank you everyone for joining. Thank you for your continued support. Look forward to updating you on Q4 in I believe in February, right, Erik?

[Erik Dahl, Chief Financial Officer]

Yeah.

[Daniel Schneider, President & CEO]

Until then, thank you. Have a great holiday season. Bye, bye.