Photocure ASA

OSE:PHO

Earnings Call Transcript 2023-Q3

[Daniel Schneider, executive]

All right. Well, good afternoon to everyone in Europe, and good morning to anyone in the U.S. Welcome to Photocure's Third Quarter 2023 Results. With me, I'm Dan Schneider, President and CEO. With me today will be Erik Dahl, CFO; and on the line, also David Moskowitz, Vice President of Investor Relations.Next slide, please. So just to remind you the usual disclaimers are in effect for today's presentation.Slide 3, please. Let me just start off by definitely acknowledging there's been some headwinds, but there's a lot of good signs the business is progressing, positioning for growth despite the headwinds of discontinuation and economic forces out of our control. On this slide, Panel 1, I think it displays the level of interest remains high and continues to grow. Karl Storz's promotional program continued into the third and into the end of this year, fourth quarter. We have a good stockpile of POs over 100. They take longer to come through and also the quotes themselves require access to capital budget. The 1% was -- growth was -- or negative 1% was a phase-down of the Flex equipment impact on U.S. and outweighed the growth of the rigid business, which we estimate to be roughly around 9% to 10% growth.In the second panel, we'll talk about the strong balance sheet. Holding costs and headcount plant for over 8 quarters as we build operating leverage throughout the company. PD was minimal this quarter, but there are several initiatives that we believe will materialize and leverage our prior spend in this area, such as collaborations in the areas of Flex, new business coming from future deals with Blue Light. In the third panel on the right, we also had a very good news flow in the quarter. Both products partnered to Asieris, Hexvix for China and Cevira worldwide met the primary endpoints. I will say that Hexvix in particular, for China was interesting data that will be leveraged throughout the world. This was the first trial ever done randomized controlled trial with the high-def LED equipment. It showed unequivocally Blue Lights Cystoscopy, whether it's LED, HD or even SD is superior to white light. And I think that's very, very notable as we continue to press for a standard of care using Blue Light.And Cevira was pleasant news to see that it met its primary endpoint and that they will also be pursuing regulatory approvals in China and eventually the rest of the world. The Hexvix data was presented at SIU in Istanbul. And like I said, it was met with a lot of interest. In fact, last evening, our medical team had a KOL evening, European KOLs, and they were quite interested in this -- the Chinese data with the high-definition LED equipment.Cevira will be the world's first non-invasive non-vaccine investigational product for cervical HSIL. This is extremely interesting to us. As everyone knows, the original headline on this deal was north of NOK 200 million. We do have ongoing milestones that we anticipate as this progresses through its regulatory submissions, approvals and then eventually commercialization. It's important to note that these milestones on both of these products are very important to Photocure, and we'll expect them in the coming years.Post period, there were just 2 interesting things. One, the new health economic analysis, basically is saying in France that the extra cost of Blue Light Cystoscopy is basically negligible compared to white-light. In other words, you gain all the clinical benefits, and you really don't have additional costs. there'll be future publications in the same area of economics for Blue Light Cystoscopy.And then the final part is the Karl Storz's Citizen’s Petition, which began roughly a year ago. The process remains ongoing. There's nothing new necessarily to update other than very notably Stryker, one of the world's largest med tech companies has written in, thus expressing interest in Blue Light market. I think that further underscores the demand that's out in the marketplace with all the manufacturers upgrading their equipment and now interest externally from the Blue Light space willing to come into this market, at least interested in looking at it. This reclass will have an impact, a significant impact on the U.S. and Stryker's interest and Blue Light technology on a global scale will also have impact on this market as we move forward.Next slide, segment trends. Let's go to Slide 5, please. So there's been -- there's pressure on the U.S. market from the Flex discontinuation. I'm going to stumble over that word today, I guess. The discontinuation has continued. As you know, we had roughly 69 Flex accounts in the U.S. When the year started, we had a pipeline of 22 for the first quarter that were going to be installed. Those 22 did not get installed. We found out towards the end of the first quarter that Karl Storz was contemplating the withdrawal or the stop of production. I shouldn't say withdraw the production of Flex. After back and forth over the course of several more months, it was determined that Flex would sunset out at the end of this year. We are down to the remaining 30 or so Flex accounts in the U.S. market. Of those, about 21 of them, maybe slightly more are dual accounts. They service both. These are accounts that have both rigid and Flex -- those 21 accounts Karl Storz has said they will do their best to keep up and running for as long as they're willing to continue using Blue Light Cystoscopy. However, I caution that this still remains a market that will continue to sunset throughout the rest of this year and into 2024.Right now, we estimate we've lost approximately 60% to 70% of our Flex business to date, which was initially expected to be a growth driver this year. Our rigid business is up approximately 9% or 10% in unit growth. We had a 5% price increase, but the loss of Flex has outweighed this growth. It's not offsetting the degradation of sales from Flex at this point. However, we do expect that our hypothesis that upgrades in Saphira on the old SD equipment, standard definition equipment in the U.S. will start yielding increased growth as we progress through 2024. To date, we have had 49 upgrades. That's 49 out of the 300-some-odd accounts that are out there. I know everyone is eager to see what is the impact of Saphira increase. What I can say at this point is we do know that as accounts go up over time, reaching peak sales at some point, which we call end-of-life end-of-service, those accounts start degrading down again. We have now seen that Saphira, where it's been installed to stop the degradation and starting to build the sales back up. So we look to report on that.It's still early, but the hypothesis holds true. And this holds true for the world as we talk about Europe as well. And the number of upgrades to date being over 130 with 15 new installs and 27 POs in the wings. This continues to be a very strong driver.In Europe, Q3 was flat. There's continued pressure from the Nordics. As you recall, the Nordics is primarily Olympus territory. Olympus' equipment is still old. They intend to launch an upgraded Blue Light or total system in the middle of -- somewhere between second and third quarter of next year. A lot of this depends on the MDR process. It's had particularly impact on Denmark, as we know and also Norway. But they are -- they -- we believe that these markets are recoverable in time. The priority markets are taking a little bit longer to come through, but I will say, as we turn the quarter into fourth -- turn the quarter into fourth quarter, the priority markets of U.K. -- growth markets of U.K., Italy are looking to start really starting the double-digit growth we expected from them. And of course, Germany is a key market for us, and we expect mid- to high single-digit growth out of Germany as well over time. So we'll see how this all progresses.Next slide, please. All right. So here are some of the trends in North America. We had 2% in-market unit sales -- increase in revenues of 2% in-market unit sales decline of 9% because of the phasedown of Flex. The good news is there are well over 100 quotes for Saphira that are outstanding. We had 15 installations and 6 upgrades in the Q3, which is a very strong quarter for us. The demand for Blue Light rigid towers remains strong. It's a key topic in urology. We will come out strong at AUA at EAU this coming year with a lot of new data. Even this past year's topics around bladder cancer were very strong with Blue Light.The patient registry, a couple of key points to make about the U.S. The patient registry has now become a very valuable asset company owns with over 3,000 patients that are in this -- with data that goes back 7, 8, 9 years with follow-up. Major centers are wanting to be part of it and other bladder cancer stakeholders see tremendous value, and we look forward to leveraging this data into the future. Key initiatives, the new and upgrade towers, a strong pipeline, as I mentioned, over 100. The VA system, the BRAVO data are extremely important to us. Right now, currently, we have approximately 30 VA hospitals that are equipped with Blue Light technology. These are highly productive accounts because of the nature of the patients that they treat. We aim to leverage this BRAVO data to get wider access to the entire VA system in the United States, which would be very, very interesting for Photocure.And the final part on this is on Flex, the 21 or so -- the 30 that are out there, I should say, we aim to keep as many of those moving forward and productive as we can with the help of Karl Storz. So the reason for this is twofold. Number one, the data that they generate, especially the accounts that are feeding into the patient registry is extremely important in our research and also our future publications and presentations. Secondly, we don't want the market to completely evaporate because our intention is to relaunch Flex in the coming years, and we want to make sure that the market hasn't gone completely hollow. So that's very important to us, and we're going to try to keep at least the key accounts running into the future. Two key activities, reclass in the U.S. We're getting great support from the KOLs, equipment manufacturers, patients, patient advocacy groups and manufacturers of therapeutics. Its uncertainty still remains on the timing. We have not heard any recent updates. The only thing that I had shared with you today in our report was that Stryker has written in. We do expect other manufacturers of Blue Light equipment to write in as well. Typically, this process can take anywhere from 11 months to maybe upwards of a decade. There is no reason why this system should not meet all the criteria for a reclassification to Class II. The reason for that, it's highly safe. It's already being used by 3 manufacturers throughout Europe. There's -- it was already on the list of interesting technology that the FDA had put out for reclass. You've got tremendous support and assistance petition. So we do expect this to come sooner than later. But again, it's not statutorily dictated the timing on it. But I feel like the company has done and continues to build the support for Blue Light reclassification, cystoscopy reclassification.Let's go to the -- I guess one other thing on Flex discontinuation. We had estimated the Flex business at the beginning of this year to be roughly around 15%. It could be as high as 20%. It was a very -- it was a growth driver for the organization. Flex accounts, in general, tended to be highly productive, reach peak much faster. Of course, they're servicing a market that's 4x the size of the rigid market. So you would kind of expect this. It's difficult to assess Flex. There's -- because -- especially the dual accounts, these are accounts that are buying Cysview, but they could be using on the rigid side or the Flex side and you just don't know for sure. So it's a little bit hard to assess it. But what we do know is that Flex is here. It's important. We know that the therapeutic manufacturer out there are very interested in proper diagnosis and staging. Only Blue Light technology can get you the proper staging and also the surveillance that goes along with it. So we intend to come back out with a proprietary Flex on a worldwide basis, and we look forward to reporting that in the future. And that was part of our BD efforts that you've been told about in the past. All right.Next slide, Slide 7. You see the continued growth of rigid towers. We expect this year to be the largest rigid tower installation year ever in our history. Upgrades also continue to be a focus, particularly as we look into -- back in time on the old standard definitions. We got the new Chinese data showing its -- again, it's superior over white light, high definition. So I think we will continue to push forward. Over half the Flex has now been returned, and we have taken Flex out of this slide because it's no longer really relevant to the installations or at least live accounts as that continues to sunset.For the full year, we have maintained our tower installation guidance at 65 to 75 new Saphira systems. We anticipate Karl Storz will receive a large single order later this year. Given the logistics of that kind of order, we do expect it to hit this year. It could happen in early 2024. I can't say anything more than that about this time. We're really excited about this opportunity and look forward to reporting out on it at our next quarterly in February.Next slide, Slide 8, please. So EU is beginning to gain momentum. I think it's evidenced through a lot of the key initiatives. We were actively targeting about 600 hospitals. Approximately 2/3 of those are underpenetrated. Much of it is tied to older equipment. So we continue to execute on image quality upgrades. We have 130 year-to-date. That already exceeds what we thought we could do this year, and we still got a full quarter to go. That is 22% of the targeted clinics. I think what's also very interesting is after years of this market being ignored, KOLs losing interest, manufacturers not upgrading. In the short time, we've had it with COVID and all the other economic headwinds we faced. We have 15 new Blue Light towers opened this year-to-date, and there are 27 Saphira POs pending. I think we'd even have more if the Olympus equipment were upgraded and launches.So we're looking forward to that launch next year, midyear approximately. So that's pretty exciting.The other key initiatives, we had a successful webinar with physicians focused on the quality of TURBTs. There are over 500 subscriptions to that. We had the bus tour throughout Germany. I would tell you that the last time we ran the bus tour 2 years ago, about 50% of the hospitals from the bus tour had double-digit growth after the bus tour. So we're expecting that similar impact on this bus tour. I believe there was a large number of stoppages. We are in 14 congresses in September and October combined, again, exposure of Blue Light technology and cystoscopy and its importance of bladder cancer patients. As I mentioned, 130 upgrades so far. Hopefully, those 27 POs will turn into installed towers by the end of the year. But the good news is POs nearly have 100% probability of installation, whereas quotes generally quotes or when the accounts ask for what would it cost, when they turn to a PO, that is a future purchase. So -- and then the final part in Denmark, we have gotten word back from the Danish Treatment Council, who is willing to listen to our petition for our product to regain its status in Denmark. That will be a process throughout 2024 as they evaluate Blue Light for potential recommendation. So more to come on that.Slide 9, please. So just real quickly, I mentioned it in my kickoff with the Q3. Hexvix China, we had the Phase III trial enrollment completed and primary endpoint was met. It not only was met. The data looks really good. It is the first randomized controlled trial conducted with high-definition LED Blue Light technology. That was Richard Wolf equipment. It's irrelevant to the manufacturer. To be honest with you, as long as they have the high definition and what it proved once again is that Blue Light is superior to white-light whether it's in high def or standard def or any def, I guess. We expect a China NDA submission before the end of this year. They petitioned for a 12-month expedited review, but the Chinese authorities came back and said it will be put on the normal review cycle. So that will be approximately 18 months. So somewhere in kind of mid-'25 is expected to be approval could come sooner.On Cevira, again, first non-invasive candidate for cervical HSIL Primary endpoint was met. Positive results will be presented at a future medical conference. We know as of right now, they are pooling all and putting together their CSR clinical study reports, which will then lead them to a meeting with the Chinese -- I'll call them the Chinese FDA, Chinese authorities to discuss the submission. We expect them if things go well to submit first half of next year. And just to remind you, both of these products are eligible for additional milestones, royalty payments, et cetera, Asieris are tied to the continued regulatory submission/approvals of those submissions and then ultimately, the approval of the product and Hexvix is tied to the approval of Hexvix and then future commercial milestones and I should say, royalties.All right. I think I'd like to turn it over to Erik Dahl. Next slide, please.

[Erik Dahl, executive]

Thank you, Dan. Now Slide #10. And in this section, the financial section, we will review the consolidated income statement. We will look at the segment report. And finally, we look at headlines from the cash flow and the balance sheet. And please keep in mind that all amounts mentioned in this presentation are in Norwegian kroner and as I mentioned another currency or specify another currency. But let's start by clarifying the impact of foreign exchange. I mean as we all know, the Norwegian kroner has depreciated significantly this year. And the year-over-year FX impact for Q3, the third quarter was for sales revenue positive approximately NOK 9 million. And for COGS and operating expenses, excluding business development, it was negative approximately NOK 6 million.So EBITDA impact, including -- or excluding milestones and business development expenses, the impact was about NOK 3 million. The year-over-year FX impact year-to-date was for sales revenue positive, approximately NOK 35 million. And for COGS and operating expenses, excluding business development expenses, negative approximately NOK 28 million. So for EBITDA, excluding milestones and business development expenses, the FX impact year-to-date was positive, approximately NOK 6 million. If you look at the reported numbers, I mean, including all items like business development as well as milestones. We see the impact on EBITDA was for the third quarter, NOK 2 million and year-to-date, NOK 8 million.Slide #11, please. So now looking at the consolidated income statement. Total revenue, NOK 107.5 million in Q3, an increase of 1% from Q3 last year. The Q3 last year, however, included a milestone revenue of NOK 9.3 million from Asieris. And adjusted for Asieris sales revenue increased 10% year-over-year. And the main drivers were FX impact as well as increased average selling price due to price increases. Year-to-date and including milestones, our revenue increased 24% year-over-year. Consolidated Hexvix/Cysview revenue in Q3 increased 11%, and consolidated in-market unit sales was level with last year, impacted negatively by the ongoing flexible BLC phase down in U.S. The year-to-date consolidated Hexvix/Cysview revenue increased 18% year-over-year. Total operating expenses, excluding business development expenses was NOK 96.7 million. Adjusted for FX and the inflation, this is level with the last 7 quarters of OpEx.Business development expenses were minor in Q3, about NOK 600,000. Operating expenses within business development are mainly related to life cycle management for Hexvix/Cysview. And the expense level, obviously, may vary from quarter-to-quarter given the one-off nature of these expenses. Looking at EBITDA in third quarter after business development expenses was NOK 3.3 million, and this compares to NOK 4.7 million in Q3 last year. However, adjusted for the milestone revenue last year, we had operationally an improvement of EBITDA of about NOK 8.8 million in the third quarter, and this in spite of the ongoing flexible BLC phasedown in U.S.Depreciation and amortization was NOK 7.2 million in the third quarter, and the main cost item as before, the amortization of the intangible assets related to the return of the European business from Ipsen in 2020. Net financial items in third quarter net cost of NOK 4.8 million, which is at the level with last year third quarter. Tax expenses for an income of NOK 3.9 million for the quarter, the net tax expense is mainly driven by group results but also intercompany items in the parent company. So after tax, we have for the third quarter a net loss of NOK 4.8 million compared to a net loss of NOK 9.9 million in the same period last year.Next slide, please, Slide #12. So we're looking at the segment performance. And for the segment reporting, we're focusing on 2 main segments, our 2 main segments, which is North America and Europe. And the North America segment includes U.S. and Canada. North America first, revenue increased 2% in the third quarter, and the drivers of foreign exchange impact of 5%, a price increase of approximately 5% in U.S., partly offset by a decline in volume of 9% due to the ongoing flexible BLC phasedown.Q3 direct costs decreased year-over-year NOK 4.6 million or 12%. The decrease is driven by general cost containment, offsetting the 5% negative FX impact in the quarter. Contributing to the decrease is also a reclassification of expenses related to patient registries. And these were previously expensed. Now they are capitalized and amortized. The reduction in direct costs drove an improvement of contribution of NOK 5.3 million to NOK 8 million for the quarter and NOK 5.2 million year-to-date. So it's a good positive development in U.S. Looking at the European business. Europe experienced year-over-year an increase in revenue of 17% in Q3. This is driven by FX by price increases and by an increase of in-market unit sales. Direct cost increased 14% in the third quarter, and this increase reflects the FX development in the quarter. We ended Q3 with a contribution of NOK 29 million compared to NOK 24 million last year.Let's move to the next slide. Slide #13, please. And now we're looking at the cash flow statement and the balance sheet. A few words about cash flow first. And cash flow from operations in Q3 was NOK 8.7 million compared to NOK 21.3 million in Q3 last year. And the difference is mainly driven by the milestone from Asieris last year as well as some impact from working capital.Cash flow from investments was in Q3 negative NOK 2.5 million and includes the capitalization of investment in a patient registry in the U.S. Cash flow from financing in Q3 was negative NOK 10 million, which is driven by the earn-out payments to Ipsen. The term loan to Nordea was fully repaid at the end of Q2. So this gives us a net cash flow in Q3 negative NOK 3.9 million compared to positive NOK 10.8 million last year. Most of the difference relates to the milestone payment from Asieris last year. And with this net cash flow, we ended Q3 with a cash balance of NOK 255 million.Balance sheet. We ended the quarter with total assets of NOK 705 million. Noncurrent assets was NOK 347 million at the end of Q3, and this included customer relationship with NOK 116 million, and customer relationship is the intangible assets identified in the purchase price allocation for the Ipsen transaction. And noncurrent assets also include goodwill from the Ipsen transaction of NOK 144 million as well as a tax asset of approximately NOK 50 million. Inventory and receivables were NOK 102 million at the end of Q3, which was level with Q1 and Q2, and the increase from year-end last year is driven by increased revenue. Long-term liabilities NOK 157 million include the earn-out liability related to the Ipsen transaction, which totals NOK 128 million at the end of the quarter. And finally, equity at the end of the quarter, NOK 469 million, which is 66% of total assets. And this concludes the financial section.Thank you. Dan, it's back to you.

[Daniel Schneider, executive]

All right. Thank you, Erik. Why don't we go to Slide 15, just kind of high-level summary. 11% revenue growth, minus 1% on unit sales. But I think the most important thing to focus on is the initiatives to reaccelerate unit sales momentum is underway as evidenced by the things I presented today. 21 Saphira towers installed. I believe that brings the total number up to 71 -- 120 total Saphira in the U.S., 71 new 49 have been replaced. Key hypothesis here is that these replacements of old standard definition, degrading or declining in use systems. The new Saphira will turn those trends back around and contribute significantly to our growth. So at this point, 34%, 35% of those towers are now Saphira.There are over 100 quotes pending. I would say it's not barely over 100 is significantly over 100 quotes pending. Not all will turn into purchase orders and installations, but I will tell you that to get what we think will come out of that is a very good sign for the organization. Positive EBITDA of NOK 3.3 million, NOK 3.9 million excluding BD. I think showing that we continue to move in the right direction, get operating leverage and manage our OpEx accordingly.Strong cash balance with no term debt. The awareness on Blue Light continues to grow. Last night, with our medical group, there was a meeting with the European KOLs. They were highly interested in the Chinese Hexvix randomized control trial data because of its impact using LED highdef equipment. And the results of that were really, really good even compared to our old trials, which, again, showing superior over white light. And then also some of the immuno-oncology work we're doing on our product, you're showing some of the microenvironment aspects of this technology and proposing and we'll have to prove it out over time with continued work in this area, that maybe there is something else going on besides just the diagnostic aspects of Blue Light Cystoscopy with Cysview/Hexvix.And I think the other notable thing is that Stryker submitting into the system's petition underscores. If you don't believe Dan and Eric and Photocure and the importance of Blue Light technology, you do have Stryker, Karl Storz, Olympus, Richard Wolf, other manufacturers to be unveiled over time that are interested in Blue Light technology because their customers are interested in it because their patients deserve it.Last slide, Slide 16. So we're reiterating our guidance of 65 to 75 new Saphira Blue light tower installations. This large purchase we've been working on for well over 18 months to 2 years. We believe we're going to bring it home with the support of a couple of the partners in the fourth quarter. It could bleed over to the first quarter, but I think this is significant, and we really look forward to talking about what this means for Photocure. We have consolidated product revenue growth in the range of 17% to 20% includes the impact of FX and the ongoing phase down of flexible Blue Light, which I talked about earlier, it's difficult to measure the absolute perfect down impact of this, but we feel really good about the 17% to 20% revenue growth. And then positive EBITDA in the range of NOK 45 million to NOK 50 million, excluding BD spending, it does include a milestone payment that we are expecting from Asieris in the fourth quarter. And we'll -- and again, we continue to manage the BD spending because a lot of that investment will now start reaping returns here as we turn the corner in 2024 and beyond. Continue to grow the base, proactively support the Citizen's petition.We remain optimistic that something could break here and create a potentially exciting and expedited pathway for Blue Light manufacturers to enter the U.S. market. This would be one of the key inflection points for this business. The other one, almost in any medtech/life science company is always reimbursement. If you can get to a very superior place, and we continue to work on that as well. There's no change to reimbursement from this year into next year, virtually no change. We'll continue to look at geographic expansions, but we'll do this smartly because of all the internal work on the core business, we're looking for the right partners around the world. The data, there are over 16 active studies ongoing, and we're working on 20-plus publications, again, across the gamut from economics of using Blue Light to the clinical benefits to some of the microenvironment aspects of the products. So these will continue to roll out in EAU, AUA, SUO, and all the other congresses throughout the world.And we'll continue to support the progression of the Asieris assets, Cevira. As I mentioned, will -- is pulling together its clinical study reports. We'll meet with the Chinese FDA and determine next steps and submission. Hexvix, we expect to be submitted this year. I do want to thank, especially a lot of folks within Photocure on the Hexvix and the Cevira work because we still actively support these. We're not programs where we handed over and stood on the sidelines. Our organization is actively supporting a Asieris in their mission to bring these 2 important assets to -- well, in the case of Hexvix to the China- Taiwan market, in the case of Cevira worldwide over time.So with that, we can conclude on Slide 7 and go to Q&A. And David I think that's for you.

[David Moskowitz, executive]

Okay. Good. So thanks, Dan. Thanks, Eric. Okay. Well, move to the Q&A. We have a pretty full queue and we're going to start off with a 5-part question. I think as it does answer a lot of the other questions that are in the queue. So a lot of interest in the milestones around Cevira. So what will trigger the next possible milestone from us here on Cevira?

[Daniel Schneider, executive]

On Cevira, the next milestone Cevira will be an accepted submission in China will be likely the next milestone. And then there is milestones on approval. And that same dynamic happens for each of the major markets, so Europe, U.S. But I think the one we should anticipate is China, small on the submission acceptance and then obviously, large on the acceptance itself. And then ultimately, behind that will be the commercial royalties and milestones. On all products.

[David Moskowitz, executive]

Right. And I'll also mention that we do have at the end of this year or the fourth quarter, there is a time-based milestone in addition. It's similar size to the one we received in the second quarter. Okay. And we've also got some new disclosure in our earnings report, if you want to look up the subvirus section, you'll see some more disclosure on the milestones there.So I think we covered that one. Do you have a time frame for investigating and potentially concluding on the therapeutic effect of Hexvix and Cysview. And if it's a positive outcome, what do you do with this therapeutic effect? What's the value to the company?

[Daniel Schneider, executive]

Yes. It's really, really interesting. So the work we've done over the last 3 or 4 years is now culminating in these recent publications on the microenvironment and the immuno-oncology aspects of Hexvix. It's not a far flung idea. Dr. Gakis, had proposed this several years ago that there's something else going on with our product. And so what we're doing at this point is a lot of the discovery on this to really try to understand beyond just Blue Light's ability to detect and to say the detection is the reason why we have a better recurrence or less recurrent way to put it, potentially impacts on progression, et cetera.Is it solely because it detects better? Or is there something going on in the macro environment itself? And these recent couple of publications, which build on and we'll continue to build on are starting to point that there's something else going on. I will tell you that last night when our Chief Medical Officer, Anders Neijber, and his staff met with KOLs throughout Europe. They are highly interested in this. Where does this lead us? We're going to continue to pursue this like any life science company would carefully, but it is very, very interesting. And if we can give customers, patients are reason to believe in Blue Light Cystoscopy with Hexvix/Cysview, Hexaminolevulinate, beyond just detection, but that it has a potentially benefit beyond it, that compounds on top of that or in use in combination with other products that are coming on the market, and they get an additive benefit that is big.And when you think about the competition for us, okay, white-light high def, I mean, we proved that in the Chinese randomized controlled trial. We proved our own standard definition trials that were better than that. They bring up NBI. We still prove that we actually have an impact on recurrence. They still cannot prove that. But then you start layering in this idea that there's some more things happening that are beneficial to patient care that white light of any type any version can't compare to. It's important. So we'll continue to look into this scientific and medical community will look into it, and we'll see where it takes us next.

[David Moskowitz, executive]

Okay. And back to Cysview. Yes. So on Cysview, this is about reclass. What is the potential benefit from reclassification if FDA approves that? And I think you covered this in your prepared remarks, but what do you expect to time line would be.

[Daniel Schneider, executive]

Yes. So impact. You guys think about the U.S. market on the reclass side. Karl Storz is obviously the monopoly here because of the way the FDA had approved it. They have approximately 35%, 40% of prime vendor status, we'll call it, in the U.S. market, which means that they have about 35%, 40% of the market. The other 65% 67% is Olympus, Wolf and whoever else out there. By getting a reclass, this opens this market up for a couple of different things. One, competitors can come in, in hospitals that are dedicated to the prime vendors. If they are in Olympus account and they're only going to buy Olympus, no matter how good do you think your Blue Light is, it's still difficult to get in there.So it now opens up the market for Olympus with Blue Light to enter in and it will create a well. Plus, you got to think all 3 have sales forces themselves. You'll have that compounded feature of that, that will take place. So you'll have this added interest. The other key thing, and we have suffered through this is that under this Class III, the upgrade process for Karl Storz has been painful and expensive. By getting it to a Class II, it expedites that pathway, and you will see this iteration of technology that should have followed the light all along.And that just now is barely catching up with the Karl Storz's Saphira launch, but already, there's next technology out there. And that's where Karl Storz wants to take it, and that's where future manufacturers would take it as well. And then you're not lagging technology by 10 or 15 years, which is an owing to the customers. So what's the potential is it just -- it gives us full access to the U.S. market without the barriers of hospitals being dedicated to the prime vendor list.

[David Moskowitz, executive]

Yes. And on the expected time frame, I think you said several months to potentially several years. Product is extremely safe. It's in all the guidelines. The efficacy is clearly there. Flex going away, the FDA has been -- that's been a discussion. So they recognize the need is high to get more manufacturers into the space. So it is possible it could happen soon, but it's really all about the politics, right? And the resources of FDA to take the time to prioritize it and review it. So that's the barrier at this point. Excellent.Okay. This one goes over to Erik. Can you talk about the spend on the patient registry. Can you give us what did you spend in the quarter? And what's the benefit of this investment by the company?

[Erik Dahl, executive]

Yes. What we have spent year-to-date is about NOK 5 million, and the majority of that is in the second and the third quarter. It's -- the patient registry is to us an asset, an asset that we may monetize. And based on input from other companies who are also in the bladder cancer industry, we have -- we regard this asset as to be how should I put this to be capitalized. And we're talking about probably the biggest registry in U.S. for patients for bladder cancer.I think we're talking about 2,500 patients collected data over a number of years and we will continue to collect data, obviously. Otherwise, the asset will be reduced in value. So we will continue to capitalize and incur expenses. How much exactly that's going to be, I'm not going to tell you about because I -- we don't have the right -- exact numbers right now, but we will continue to develop this asset, and it will be monetized.

[David Moskowitz, executive]

Okay. Very good. So that is the decision to start to capitalize it now is that there's value that's capitalizable.

[Erik Dahl, executive]

Yes. I wouldn't change the accounting without being reasonably sure that this will happen.

[David Moskowitz, executive]

Very good. Okay. Do you plan to make an announcement of the large Saphira purchase order that could happen in the fourth quarter? Would you plan to announce that? I guess that's for every.

[Daniel Schneider, executive]

Yes, I'll take it. This is 3 companies that are involved in this without everyone agreeing to exactly the timing, no one of us can go forward with it. I think you can expect it at the Q4, maybe before, but I think the Q4 is going to be the appropriate place because it will be in live at that point, and we'll talk about it more.

[David Moskowitz, executive]

Okay, very good. I think you answered this already. Can you explain the path forward for Cevira over the next 12 months?

[Daniel Schneider, executive]

Yes, I did. I had a slide in there. It's -- they're pulling the data on the clinical state reports, they'll meet with the Chinese -- I call them the Chinese FDA to discuss submission and then they intend to submit hopefully, next year by midyear. So -- but I will leave this with everyone listening. Anything that has to do with Cevira or Hexvix in China, the primary sponsor of all that in determinant is a Asieris. And so if I happen to misspeak, please defer to their answers. I think I'm in line with everything that's been disclosed.

[David Moskowitz, executive]

Okay. Here are a series of questions from our analysts, Rickard Anderkrans. The normal conversion rate of quotes, you mentioned over 100 currently in place or issued. What is the typical conversion rate of that?

[Daniel Schneider, executive]

It range -- we generally say 25 to 40,so say, 30%, 35% and convert. I think one of the challenges we're facing we're not immune to this and any other industry is the capital cost of capital, access to capital, investment costs, et cetera. So could that conversion rate go up or down, it does based on a lot of different factors. But I think -- and the second part of all this is that was the old sort of conversion rate. Saphira is new technology, new work technology. The conversion rates could even be higher. We just -- to be ultra conservative, roughly 30%. And like I said, we're well over 100 votes.

[David Moskowitz, executive]

Got you. Can you elaborate a little bit on the growth in Europe looked a little bit weak this quarter. What can you say about that? And how are we doing in the fourth quarter?

[Daniel Schneider, executive]

Yes. Fourth quarter were out pretty strong. I think there was a little bit of phasing on Germany, quarters, months, they're sort of artificial time frames -- the accounts operate often at a little bit different rate. So we saw an increase in demand and sales in Germany in October. We also saw a significant bump up in some of the high-growth markets, U.K. and Italy and France is starting to come on as well. So we're expecting a good fourth quarter. And I think -- and then turning the corner to 2024, as I talked about, the number of new towers and the amount of upgrades that have taken place throughout Europe, we expect that to contribute to an acceleration throughout Europe. I think in general, you can expect Germany and the sort of the mid-single-digit growth minimally with spikes here and there, and there could be some things that could accelerate Germany. And then on the high-growth markets, significant double-digit growth over time, so.

[David Moskowitz, executive]

Okay. Very good. The Danish Treatment Council, can you give us a sense of timing there when a decision could be made?

[Daniel Schneider, executive]

Decision not until the end of next year, earliest. Where we are right now is the questions are surrounding a lot around the economics. I think clinical is pretty obvious for us. And now it's the economic benefits and the modeling that needs to go along with that. They'll convene their panel, they'll make recommendations, and that will be important for us to reenter in a significant way in that market. We still have business in Denmark. But as everyone knows, we've lost a significant portion of that business. And it's unfortunate for the patients. I'll be honest with you. It really is. But that market was met with a couple influences. Number one, I think, would be Olympus. And it's outdated equipment. So their strategy was let's sell around it by saying NBI despite the data not proving it is as good as Blue Light, and that just isn't the case. But we aim to get it back both through the Danish Treatment Council and also Olympus' commitment to launch new Blue Light technology. So what they'll be offering is Blue Light, NBI, White light, the whole gamut, universal system, but they even on a corporate level, I admit that there is a place for Blue Light NBI and white light. So we look forward to that launch midyear next year.

[David Moskowitz, executive]

Yes. And I'll also add that the Danish Treatment Council review was a competitive process. There were a number of companies working on getting the Danish Treatment Council to look at their technology. I think there were 3 that were chosen, and we were one that was chosen for review. So we're proud of that effort.What do you expect in terms of the timing and size of milestones for Asieris. I guess I can answer that quickly.And we do expect a milestone for at the end of the year, as we said. That's more of a time-based milestone from the contract, and then we would get a milestone on the submission of Cevira and then.

[Daniel Schneider, executive]

Acceptance of the submission.

[David Moskowitz, executive]

Acceptance of the submission, not yet. So after this -- we would wait until it was accepted, and that's when the milestone would come in. And then also on approvals of both Hexvix and Cevira, there would be milestones. We've quantified the milestones for submission and approval in our earnings report and the total for those 2 milestones is USD 13 million.

[Daniel Schneider, executive]

And that's for China only. The -- I know this question will probably come up, what about Europe and U.S. Just Europe, they're still looking at it. Once they get through the clinical study reports, they'll determine they'll try to meet with the European authorities and try to see if there is a path forward or not. And then U.S. is, again, still being assessed. So the European U.S. markets still being assessed, China is a go-forward process for them.

[David Moskowitz, executive]

Do you have a sense of when Stryker could roll out the Blue Light functionality on its 1788 tower in Europe and Canada, respectively?

[Daniel Schneider, executive]

The 1788. Somebody knows something about Stryker's technology. It wouldn't be in my card would it.

[David Moskowitz, executive]

Yes. That's a record question.

[Daniel Schneider, executive]

I knew it. Yes. So they anticipate rolling out everything but the U.S., so to speak. So Canada and Europe next year. I think you'll see Canada probably go first and then Europe following behind by the end of next year. They -- I will say that they had this interest and they were intending it sooner, but we're learning, like with all medtech, even the best intentions tend to find some hurdles along the way. But the good news is we are in active conversations in those markets talking about launching so.

[David Moskowitz, executive]

Excellent. And we have another follow-up question from Thomas Skies, our analyst. I think we talked about how large of a Asieris milestone are you expecting in Q4? And I think what we said there, Thomas, is it's similar to the one that we saw in Q2?

[Daniel Schneider, executive]

Yes.

[David Moskowitz, executive]

Okay. I think that's it. That's the end of the Q&A at this point. Thanks, everyone, for your questions.

[Daniel Schneider, executive]

All right. Well, thank you, everyone, for joining us. A lot of exciting things going on. I think it's -- this is -- when you look at all the activity and all the positive initiatives that are going on for the organization, I think it gives us great optimism as we move into 2024. So look forward to speaking to you at the Q4 once we announce when that will be, usually, I think, what, early mid-February. So date to come soon. Have a great day. Thank you. Bye-bye.