Photocure ASA

OSE:PHO

Earnings Call Transcript 2019-Q4

[Daniel Schneider, President & CEO]

All right? All right. Good morning. Good morning, everyone. Welcome to Photocure's end of the year 2019 and Q4 presentation. I'm Dan Schneider, President and CEO. With me today is Erik Dahl, CFO. And I press the button. Usual disclaimers are in place for today's presentation. So quick highlights on 2019. We continued positive growth rates in all regions of the world, Nordics, U.S. and our partner countries. As I mentioned last year, we put pressure on our partners in Europe, Ipsen, and they have responded in some of their countries, particularly Germany. We've had extremely strong revenue growth in the U.S. with fiscal year increase of 43%. It now represents about 50% of our total sales. If you remember, beginning 2018, it represented around 30%. So as this region of the world's business continues to grow, it have a greater impact on the total business of Photocure. Our installed base of rigid and flex blue light cystoscopies is now 223. That was an increase of 66 scopes, 26 of them flexible scopes used in the surveillance market, and that's an increase of 42% year-over-year. We also have experienced a positive EBITDA of NOK 54.8 million for the quarter. Partner grew -- Ipsen grew at 7% year-over-year, which we're quite pleased with, but we think there's still room for improvement. Obviously, there's many parts of Europe that we think they could do a much better job in. Asieris payment of USD 5 million came in Q3 and Q4, and we have additional milestones coming here in 2020 and beyond. And product highlights, we had 2 publications. Our poster presentation -- we had a poster presentation, which will result in a publication at BLADDR, taking a look at the early stage studies show on the potential treatment effect of Blue Light Cystoscopy; and a publication in urology, which is reduced recurrence in the flexible Blue Light Cystoscopy space in the physician's office, so what is the recurrence rate if physicians are using it in their offices, and it's a positive. And then we also have been granted a U.S. patent for the neoadjuvant therapy for patients scheduled for cystectomy, and that expires in 2036. So very quickly, Photocure at a glance. We are based in Princeton and Oslo. Worldwide headquarters, obviously Oslo. We've accelerated revenue growth over the last 8 quarters. We have 23% sales growth in 2019, that represents $37 million in-market sales globally and over 0.5 million patients now treated with Blue Light Cystoscopy using Hexvix and Cysview. Our market cap, if it holds, is $220 million today 175 million average trading volume (sic) [ 175,000 average daily volume ] , and we're traded on the Oslo Stock Exchange since May of 2000. So a little bit of the history of Photocure, where we were and where we're going. In 1997, we were considered a global leader in photodynamic therapies and doing a lot of different research across a lot of different therapeutic areas, from skin to bladder, to other parts and organs of the body. In 2018, we made a conscious and strategic focus on bladder cancer specifically because of our 2 products that are in markets, Cysview and Hexvix. And as we look into 2020 and beyond, we see a real opportunity, particularly in the bladder cancer market, where it's a very fragmented market. This was a market that had -- for the most part of all cancers, had been ignored for the better part of this -- half a century. Only in the last 7 to 10 years has it been gaining interest, and you see it with the checkpoint inhibitors and some of the other things that are coming out. Our strategy is fairly simple. First part is accelerate. We've got to continue the acceleration of Hexvix and Cysview in-market, and we see that with the results of today and the past 8 quarters. We're then looking to expand, and this has already begun. It's both looking at generating sales in new geographies around the world as well as enhancing the value of Hexvix and Cysview, and enhancement can come in the form of life cycle management. It can come in the form of the therapeutic benefits of the product. It can come in the form of the product enhancement in terms of surgical guidance, and we're looking at all those things. The next stage of it is acquire, looking for assets that are either synergistic or complementary to where we are today. We have a unique position in this market. Among all of the urology-based companies, we have the -- probably the tightest relationship with urologists in the marketplace because we are standing side-by-side with those surgeons in surgery every day. We get to know them both personally and professionally, and we believe those relationships are really something that we can leverage. And then finally, transform, looking to build a global bladder cancer company through a pipeline of assets to carry us forward. And we believe this is the future for Photocure. Why do we believe it? Because there's a large unmet need. It's the ninth -- non-muscle-invasive bladder cancer is the ninth most common cancer in the world, but it's the #1 most expensive. And that often shocks most people, including physicians. The reason why it's the most expensive because it has a lifelong surveillance component to it. Once it's diagnosed, it's treated and it's lifelong. It continually reoccurs or can reoccur if not treated completely. It's reoccurring at 78% after 5 years; 61% after 1 year. It progresses 50% of the time to muscle-invasive bladder cancer, and it's debilitating. It's a lifelong follow-up; potential cystectomies, having your bladder extracted. There's patient fear and anxiety and a lot of confusion that surrounds it. We believe that -- the reoccurring, the progressing is a place where Blue Light Cystoscopy can make the biggest difference, and we'll tell you why. The symptoms present themselves. Patient goes to see the physician. He does an in-office cystoscopy. This is not with blue light, this is generally under white light. Not that they can't use blue light, but about 80%, 85% of the time, it's not cancerous. So if they see something in the office, they're going to schedule them into the OR anyway. This is where Blue Light Cystoscopy comes into play. The patient is then referred into the operating room where they're put under a TURBT, it's a surgical procedure to extract the polyps or cancerous lesions. There are about 700,000 of those procedures between the U.S. and the EU. The patient then is discharged out and they're then put into some sort of surveillance calendar. Usually, it's 3 months, 6 months, 9 months, 12 months and then depending on their staging, could come back every year or every 6 months. That's just an ongoing process for the rest of their lives. There are over 1.6 million procedures yearly between the U.S. and the EU. We believe Hexvix and Cysview should be used on every first TURBT. So after they're diagnosed to have -- possibly have something, they should be getting Blue Light Cystoscopy so that it could be seen very clearly where the cancer is. We also believe it should be used for all intermediate and high-risk non-muscle-invasive patients. These are the high flyers. These are the folks that are going to be in and out of that surveillance process over and over and over, so it's a very productive group of patients. The product itself is a razor, razor blade model. The razor is on the right on the screen. That's the capital equipment, the blue light cystoscope. It's produced by KARL STORZ in the U.S., that's our partner in the U.S., Olympus and Wolf worldwide. So there are 3 manufacturers for the rest of the world that Blue Light Cystoscopy can be used on Hexvix and Cysview. In the U.S., we're tied to KARL STORZ at this point because of our product indication through our approval. On the left is Hexvix/Cysview, KARL-less, instilled into the bladder, preferentially absorbed by the bladder cancer tumors and going bright pink under blue light. And this is what you see, and it can be awfully dramatic. On the left is a White Light Cystoscopy. This is what a physician would see under white light typically. To the right of that is what it looks like with Cysview or Hexvix instilled in the bladder and blue light turning on, so glows a bright pink. And the advantage is very, very clear. Using white light increased your risk of 20% to 35% in cancer patients being missed if they don't use blue light. The risk of wrong risk classification linked to mismanagement of the disease if Blue Light Cystoscopy is not used. And also the incomplete resection of bladder tumors linked to increased risk of reoccurrence or progression to more advanced disease if Blue Light Cystoscopy is not used. Essentially, by missing it, the patient goes home believing they're cancer-free, only to find out that they've had cancer in their bladder that could have progressed to muscle-invasive and gotten much more serious. And how much more serious? It's very simple, it's critical for patient outcomes. If you look at the bar chart, this is the goal of treating patients. You want to keep them out of the red, out of the muscle-invasive. It's where life expectancies dramatically drop as low as 15% if you're not catching the bladder cancer in non-muscle invasive stage. So that first TURBT is essential for patient outcomes to get the correct diagnosis and to get a complete removal of all tumors and lesions in the bladder. The 2 most important factors for progression usually are CIS, which are -- can be detected with blue light up to 35% of the time better than white light, and the presence of high-grade tumors. Those are the 2 giant risk factors under non-muscle-invasive bladder cancer. They're exact 2 risk factors that Blue Light Cystoscopy can eliminate, and that's why this is so important. So where are we today? We're the key enablers in place. We're ready for growth. These are the 5 As, we call them, the 5 things that have to be in place in the market for you to see an acceleration in business. The first one is approval. You have to have the right approval, the right product insert. Today, we have both an approval for both the surgical, which was the 600,000 procedures you saw in Europe and U.S. And then as of 18 months ago, we got surveillance, which is the 1.2 million procedures in Europe and U.S. So that opens up a gigantic market for us here at Photocure. We have acceptance in all major and local guidelines, EAU, AUA, SUO, all the major guidelines have accepted Blue Light Cystoscopy and put us in a prominent position with good data behind. We have access, permanent and favorable reimbursement. Up until last year, we had temporary reimbursement. And prior to that, we didn't really have very good reimbursement in the U.S. Starting in 2019, we've got much more favorable reimbursement. We continue to work on it. This is a work in progress. Because you got reimbursement today doesn't mean you have reimbursement into the future. You're continually looking to improve your reimbursement. And we are continually looking at improving our reimbursement in the U.S., particularly in the surveillance market, where the ambulatory surgery centers are. There's an opportunity there for us to really improve that reimbursement as well. Those are the types of physicians who look for economic value over patient outcomes, to be quite honest. They really see the economics behind it. Activated awareness is patient demand via patient advocacy groups. We have a very strong relationship with BCAN in the U.S., also World Bladder. These are organizations that represent patients who are afflicted with the disease and are looking for answers. And us having strong relationships with them means that they can get their answers through them and direct it to us. And then accelerate. You got to have the right commercial footprint, and you got to have the right engine on board to really optimize the opportunity. And all through 2019, we were tweaking that engine. We are putting more reps, as I mentioned in the past, putting more reps into the field, upgrading our reps in the field, getting the right farmers and hunters into the field to do -- to optimize our opportunity. My slides are stuck. Sorry. All right. Here we go. Thank you. I'm a CEO, but not a CEO of a technical company, obviously. All right. Down button, Dan. All right. Supporting environment, this is the key. This is key to increasing awareness. It's our -- I don't know what that is, got all kinds of things popping up. All right. It's our -- we believe that Blue Light Cystoscopy should become the next standard of care. White Light Cystoscopy has carried us this far, but it's time for a new paradigm. We've been included in all the major guidelines, which gives us nice coverage. These guidelines have then translated down into local and regional hospitals, institutions. We have a high adoption rate in the major cancer centers. We've got adoption rates up to 80%. Part of the reason why we don't have 100% at this point is because, as I mentioned to you, we have expanded our sales force to cover all hospitals in all regions of the U.S. So there have been some cancer centers we had not gotten into that we have been working now here in 2019, 2020. I do expect my team to get 100% as we finish off 2020. We have high patient preference. There's a growing awareness and active preference shown in a BCAN study. There was a study that I shared with you last year, where patients had a 99% request for Blue Light Cystoscopy if it had been administered in the past. There's a high preference for it. In fact, I was asked earlier before the presentation started, do patients seek this? And they absolutely do. In fact, prior to this having a larger footprint and over 200 institutions now equipped with blue light, patients would actually get on airplanes and fly to find it, those that were very, very, very sold on it. We have favorable and permanent reimbursement in the U.S., and we're going to continue to improve that as we go through 2020, into 2021. And we've partnered with, obviously, prominent patient associations like BCAN and the World Bladder Cancer. And these guys are very, very influential in the marketplace, not only just with patients, but also with the physicians that are out there. So what has this added up to? It's added up to 8 consecutive quarters of record revenues in the U.S. We had another record quarter of NOK 27,790. This is a phenomenal trajectory. This is after the product's been on the market since 2010. You don't normally see this in pharmaceuticals or devices. You generally see those launch curves in the first 4 or 5 years and then it sort of flattens out. We've got the opposite. We got an inverse curve going here. And the reason why it goes back to the 5 As and getting the right commercial engine put on board, you can get great returns on it. In the early years, I think we didn't have all the things lined up appropriately and so you just sort of muttered along. But in the last 8 quarters, we've gotten everything kind of going our way, and this has accelerated our trajectory. And we don't see an end to this anytime soon. We do not see an end to this. This is probably even more dramatic. This is the sort of to me the KPI. These are the number of cystoscopes that have been installed. As I said, it's 223. That was 66 last year that were installed. We had 53 the year before that, 21 the year before that. And prior to that, it was in the low teens. So you can see this massive acceleration now of cystoscopes being installed in the U.S. Part of that is demand. Blue light is becoming more and more known and more and more demanded by institutions. But majority of it is us putting the right commercial engine out there and selling it. And this is working in tandem with KARL STORZ. The right commercial engine is focusing in on the top 30 MSAs, Metropolitan Statistical Areas, or major cities in the U.S. That would encompass about 700 key influential bladder cancer centers throughout these regions. To do that, we right now today have 28 surgical sales executives. These are our hunters, these individuals going out and selling and trying to get more blue light cystoscopes installed, get Cysview pushed through those accounts. And we have 5 new clinical support specialists. These are the farmers. These are the new type of animal we put into the sales force in the last year, coming in midyear last year. Their role is to farm these accounts. It's great if you can get a cystoscope in. But if only 1 physician out of 5 is using it, only 1 patient out of 10 is being given it, it's not doing any good. We've got to increase the effectiveness, the efficiency of it. And so these particular types of farmers are out there working with physicians, trying to get not only physician A, but B, C, D and E using the cystoscope and then expanding the patient selection. And we're starting to see returns on that as well. The other key part of their role is also embedding the process. This is a new process for hospitals. This is Blue Light Cystoscopy requiring them to instill the patient an hour before procedure. Getting that process set and embedded in an organization and repeatable makes it a lot easier. The average territory peak sales size, we believe, will be between $1.5 million and $2 million. We'll continue to invest as we see opportunities, territories grow to certain sizes. They're no longer manageable by one representative, they will then split like an amoeba. And then we'll then grow them from there. And we see continued development for the culture itself in performance-based organization of expecting results. So these are the 2 interesting pieces that happened late last year. The therapeutic patent has been secured. We had recent study showing the potential treatment effect. We believe it has both a direct antitumor effect and possible immune cell activation effect. And our intention is to explore this a little bit more. Now this may or may not lead us down a path of clinical. We may not have to go down a clinical path. Sometimes just getting this information out into the medical domain, scientific domain is enough to get physicians to think about it, talk about it and use the product. But nonetheless, we do have a patent issue that will carry us out to 2036. This patient is for a neoadjuvant agent in the treatment of patients scheduled for cystectomy. We're also looking at another very, very exciting area for us, and it is in surgical guidance. How can you make Cysview/Hexvix as a blue light cystoscope or procedure even more dramatic? Could be artificial intelligence. So IP strategy. I was asked by several investors over the course of the last year to talk about the IP strategy and why I have -- I go to bed not losing any sleep over this? So this is why Dan sleeps, because I don't believe there'll be generic entry in this space. First and foremost, analogs, Metvix and Visudyne at the very top, those are 2 products that are PDT, PDD, so photodynamic combination, drug-device combinations, have been off-patent for years. They -- I know for a fact, Metvix is growing at double digits still today. No generic entry, no threat of generic entry. From an intellectual property standpoint, as you may notice, we've got 1 issued patent that just came out last week. We have other patents that are being -- that have been turned in, and they're going to be prosecuted and hopefully approved that will again shore it up. Because when you're a generic company and you're looking at a product potentially genericized, what you don't want to see is a bunch of IP around it. It starts making you think, okay, this isn't going to be so easy. I'm going to have to go to court. If it's on the orange book, we'll have the 30-day -- 30-month stay, so that's another 3 years. It becomes really ugly to them. On the desk research and market size, there's no straightforward access to sales data. Under the ATC, the Anatomical Therapeutic Chemical classification, it shows up as other diagnostics. It's not easy to find Cysview and Hexvix out there. So it just sort of falls under bladder care, it falls under all others. It's not easy to find it. So generic companies, it doesn't show up as a real big opportunity. From a technical and manufacturing standpoint, the API sourcing, we have submitted to the EU and U.S. pharmacopeia monograph for specification. So tightening those specifications down, making that recipe so tight that makes it very difficult for a generic manufacturer to copy is also thwarting any interest. We also freeze dry our API under aseptic conditions, the solvent is in a vial or prefilled syringe. The total process is manual/semi manual. Generic manufacturers want quick fast and easy. They want to punch a pill, push it out and drop it into a physician's office and walk away. This is not that type of manufacturing process. We also have the exclusive and only -- exclusive arrangement with the only medical-grade API manufacturer in the world. So if you're a generic manufacturer, you're going to have to find another API source with pharmaceutical-grade API. You cannot use the one that Photocure uses. From the regulatory hurdles, I think this thing becomes even more daunting to the generic manufacturers. First of all, it's a drug-device combination, so they're going to have to work with one of the device manufacturers. In the case of the U.S., it will be KARL STORZ and, obviously, any one of the other 3 anywhere else in the world. I can tell you direct conversation with KARL STORZ, they have no interest in working with anyone but Photocure today. It require them to go for a PMA on the device and an ANDA for the product. This multiple FDA offices, again, it's convoluted. It's not a sure path. Again, generic companies looking for quick, fast, easy, simple way to get through. And it has to be coordinated with the KARL STORZ in the world. And they're -- again, they're not likely to coordinate. And then again, the other part is there's no clear approval standard on how to document bioequivalence. Even we have tried to figure that out, and there is no way to do that. And that's one of the key elements of getting an approval for a generic is bioequivalence. So we believe that in itself becomes another hurdle. So that's 4 hurdles. The fifth hurdle is the commercial challenge. And this one may be the most daunting of them all because this is -- this product demands support. You cannot walk away from the product. It is not a product that you drop samples and walk out and hope the physician uses it. You have to be in those surgical rooms, guiding physicians through surgeries, adjusting the machinery, adjusting the cystoscopes, helping them guide through the surgery, helping them through patient selection and all those elements. Generic manufacturers are not likely to put a sales force out there to do that. So those 5 hurdles help Dan sleep really well at night. And that -- let alone the analogs, that there is no other example of another product like ours that has ever been genericized, so. The other thing I'll also mention here too, we do scan the environment. Every year in the fall, we go through a process with a company called [ TPR ], they are world renowned and one of the greatest in identifying generic progress anywhere in the world. They're looking at imports, exports, filings, API manufacturers, everything you can possibly think of. We have the latest report, there is no sign of generic. And that report carries you out 2-plus years. So again, we'll repeat it this fall, and we'll continue to do so. But that doesn't mean we're sitting still. These are all great hurdles, but there's still things you can do actively. One of them is obviously continuously monitoring the landscape, which we are doing. We could strengthen our customer engagement, building stronger relationships, offering services and support a generic manufacturer would never offer. If I offered you a car and gave you free service for life or just offered you a car for the same price, which would you take? What would be the value of that service? So that's what we're looking at, is what can we offer these physicians in terms of customer engagement and support? Could it be apps on patient flow? Could it be AI? Could it be support within the office, in the nurses? We're going to continue product development in IP. As I mentioned, we have 2 other IP pieces pending and will go through prosecution. And then we also in the event -- beyond all these hurdles, in the unlikely event that a generic manufacturer might enter the market, we are prepared to launch our own authorized generic, and that will allow us to do some other things. It also splits the SKUs. So it now offers up 3 products in the market, and we'll compete like any other company would compete in a marketplace. But that's in our back pocket, if we had to use it, and our last option. Really quickly on Cevira. We completed this deal midyear last year. Its value is up to $250 million in potential. We received $5 million in cash in quarter 3 and quarter 4. We have milestones going out for developmental, $18 million in China, another $36 million for EU and U.S. I did have lunch with the CEO of Asieris last week. I will tell you they are progressing very well. They are extremely excited about this product. They are -- intend to submit their CTA, Clinical Trial Application, to the Chinese Authorities in late spring, May time frame, which is fantastic, which means they've done their negotiation. They've found a path forward. They're going to start their trials. They expect to have the first patients in this fall, is what they're telling me right now. They are very excited about this product. This product, to remind everyone, is a single-use, integrated drug-device technology used for treatment of cervical cancer or high-grade cervical dysplasia independent of HPV genotype. It is a drug-device combination, and it's -- particularly is well suited for women of child-bearing years because it protects the cervix for later pregnancies. All right. Bye-bye. Erik, go.

[Erik Dahl, Chief Financial Officer]

Thank you. Thank you, Dan. Yes. As usual, I will start with reviewing the segment financials for the company. I will then go on with the consolidated income statement, work on the cash flow statement and then finalize with the balance sheet. But first some comments to the impact on the results from foreign exchange as well as from the implementation of IFRS 16 on lease accounting. Foreign exchange impact in the fourth quarter on revenue was positive with approximately NOK 3 million on EBITDA. It was neutral. Looking at full year impact from foreign exchange on revenue, it was about NOK 10 million. And on EBITDA, it was negative NOK 1 million approximately. For IFRS 16, we have very limited impact as we do not have any leases apart from the offices in Princeton and here in Oslo. Overall and simplify, we have a lease payment of, in total, NOK 3.5 million for the year. And that lease payment is now capitalized and put into the P&L as an amortization throughout the year with approximately the same amount. Please look at note #1 and #3 into the accounts if you want to know more about IFRS 16. Then let's go to the financials. I will start with the segment performance. And in the segment performance, we start looking at the commercial franchise. And the headlines for the commercial franchise is very much the same headlines as I had in the third quarter. First of all, we continued the strong revenue growth in U.S. Secondly, we continue our investments in the U.S. commercial organization. However, we have now declining expense growth rates compared to the previous quarters. And we had -- as we have had over the last few years, we've had a positive EBITDA for the commercial segment. The total Hexvix/Cysview revenues in fourth quarter increased 27% compared to fourth quarter last year. Full year growth was 23%. And in constant currencies, we had a growth of 18%. In-market unit sales increased 4%, both for the fourth quarter -- in the fourth quarter and 6% for the full year. We continued the strong growth in U.S. in dollars. We had a 39% revenue growth in Q4 and 43% for the year. This was driven by growth in in-market unit sales of about 34% in Q4 and 36% for the full year. U.S. is obviously the largest and fastest-growing region for Photocure, with a revenue growth driven by improved productivity as well as added resources. Furthermore, we have had significant growth in the installed base of blue light cystoscopes. At the end of the year, we had 223 installed, an increase of 66 cystoscopes, so 42% over the last 12 months. Nordic revenues increased 7% in the quarter, and we had a full year increase of 3%. In-market unit sales in fourth quarter was at level with last year. However, full year unit sales declined about 2%. The decline in unit sales was, however, more than neutralized by the price increases so that we have a -- in constant currencies, we had a revenue increase of about 1%. We've seen positive development in the fourth quarter, particularly in Sweden and Norway. Looking at the partner business, increased 14% in the fourth quarter and driving a full year growth of 7%. In constant currencies, full year revenue increased about 4%. And the full year increase is driven mainly by the increase in Ipsen's main market, namely Germany, but we also had a good development in Canada, where we have a partnership agreement with BioSyent. In-market unit sales for our partner business increased about 3% in the fourth quarter as well as the full year. Looking at total revenue, and that includes milestone and other sales, it increased 19% in Q4 as well as full year. Other revenues includes IFRS 15 adjustment of NOK 2.5 million compared to 2018 of NOK 3.4 million. And full year 2018 also includes a milestone from Bellus Medical for Allumera of about NOK 4.9 million for the year. Operating expenses, excluding depreciation and amortization increased 14% in Q4. And the full year growth for the commercial segment was about 20%. The increase was planned and is driven by the increase in the commercial staff and the commercial activities in U.S. EBITDA for the commercial segment was NOK 1.6 million in fourth quarter and NOK 7.3 million for the full year. If we adjust the [ 2,000 ] in EBITDA with the one-off milestone revenue from Bellus Medical of NOK 4.9 million, we have a full year EBITDA improvement of more than NOK 3 million. So we have more than doubled the EBITDA for the commercial segment in the fourth quarter and in the full year. Now looking at development portfolio. Financials for the development portfolio is driven obviously by the license agreement with Cevira or with Asieris for Cevira. We received $5 million in the third and the fourth quarter. And in addition, the agreement includes 2 development milestones totaling $3 million, which are committed and timed. So the fees from Asieris accounted for -- is accounted for according to IFRS 15, and the revenue recognition is based on contract value of $8 million, applying the currency exchange rate at time of the contract execution. Operating expenses continued to decline. The reduction from last year was 39% in fourth quarter and full year, 28%. And [ 2019 ] expenses include the impact of one-off costs related to signing of the license agreement with Asieris. We'll have limited costs related to Cevira going forward. We will, however, have costs related to IP and maintenance of the patent portfolio, and we may also incur some costs on the alliance management. Moving on to the consolidated income statement. And we're looking at -- we have seen -- look -- we have analyzed the revenue on the previous slide, on the segment financials, but I do want to add some comments here on the expense lines. Operating cost increased 8% in the fourth quarter, and the increase have been driven by planned increase in sales and marketing cost in U.S. The growth rate has been declining throughout the year, and Q4 growth is significantly below what we have seen in previous quarters. In constant currencies, the Q4 increase in operating cost was approximately 3%. As you will see from the chart at the bottom of -- bottom corner of the slide, the operating costs have been relatively flat over the last 4 quarters and have been between NOK 48 million and NOK 53 million. Full year operating cost, 14% above prior year and, in constant currencies, approximately 9% above prior year. Full year EBITDA was NOK 58.9 million compared to negative NOK 10.5 million last year. Both 2018 and '19 EBITDA are impacted by one-off milestones and sign-on fees. But also when we adjust for these amounts, we have an improvement of EBITDA in total NOK 9.2 million, excluding Asieris and the other milestone. Depreciation and amortization were, full year, at NOK 16.2 million. And the increase from last year or from 2018 is driven by the IFRS 16 lease accounting. The main single item within depreciation and amortization is the amortization of the investment in Cysview Phase III program. The item has a quarterly amortization of NOK 2.5 million. The project is closed and the remaining amount net after amortization was NOK 9.6 million at the end of 2019. And at the end of 2020, this amount will be fully amortized. We had restructuring expenses in 2018, driven by organizational changes, including reduction of head count of 5. The changes were done to streamline the organization and increase the focus on commercial targets. And after net financial items and tax, we have full year a net profit of NOK 31.8 million compared to net loss in 2018 of NOK 36.7 million. So it's a great improvement over the year. Look at the cash flow. Net cash flow from operations positive, obviously, with Asieris, NOK 30.4 million in the fourth quarter compared to NOK 11.2 million fourth quarter of 2018. Full year cash flow from operations positive NOK 20.7 million compared to last year negative of NOK 24.1 million. Both quarter and full year cash flow include the payments of Asieris. We have received $4 million in the fourth quarter and $5 million for the year. From an accounting point of view, we booked USD 8 million of revenue. In other words, revenues includes both received cash as well as the net present value of committed but not received cash plus $3 million. The impact of the committed and not received cash is in total NOK 23 million and is offset in the cash flow statement in the other line, other line under operational cash flow. Full year changes in working capital is negative NOK 7.1 million in 2019 and positive in 2018 of NOK 1.4 million. This change is largely driven by the reduction in the restructuring accrual from the second quarter 2018. And we have now paid off almost all of the restructuring cost or the restructuring accrual. Net cash flow, positive, NOK 29.4 million in the fourth quarter compared to positive NOK 14 million Q4 in 2018. Full year net cash flow was positive NOK 18.5 million, an improvement of NOK 41 million from 2018. And this gives a cash balance at the end of the 2019 of NOK 125 million. Few words about the balance sheet. End of 2019, we had 2,000 -- we had total assets of NOK 257 million, included cash of NOK 125 million, so that's approximately 50% of the total. Noncurrent assets, NOK 70.5 million at year-end. This included a tax asset of NOK 38.3 million and also investments in intangible and tangible assets totaling NOK 13.6 million. And these investments are mainly related to the previously mentioned Cysview Phase III trial. We also find an other line totaling NOK 18 million on the noncurrent assets, and this relates to the long-term part of the USD 3 million receivable that we have on Asieris. Remember, we had revenue recognition totaling $8 million, out of which $5 million was paid. The remaining $3 million is booked as a receivable. Half of it is due in 2020, so that's $1.5 million. And the remaining $1.5 million is long-term, is due in 2021. Current assets excluding cash was NOK 61.6 million. And this includes the receivables of Asieris due in 2020, totaling $1.5 million. The remaining inventory and receivables are at level with what we had in 2018. In terms of funding, company had at the end of 2019 no interest-bearing debt. And we had an equity of NOK 208 million, which is about 81% of total assets. Some final comments, summary to the financials of this presentation. Three takeaways. First of all, our investments in the U.S. commercial activities continue to drive significant revenue growth, full year revenue growth in U.S. measured in U.S. dollars was 43%. And this growth is mainly driven by increased volume. Secondly, looking at the operational cost, we have remained relatively stable over the last 4 quarters on the cost side, in spite of significant investments in U.S. commercial activities. And full year operating cost has been -- increase in operating costs have been 9%, measured in constant currency. And finally, both with and without the revenues from Asieris, we have improved EBITDA for the company. If you exclude the one-off milestones of Bellus Medical in 2018 and Asieris in 2019, we see an improvement of EBITDA of NOK 9.2 million. And with that, it's back to you, Dan.

[Daniel Schneider, President & CEO]

Thank you, Erik. All right. The slide you've been waiting for. All right. Accelerate, expand, acquire, transform, these are the underpinnings of what we believe will make us, Photocure, successful in the future. Our ambition in the U.S., guidance is $70 million by the end of 2023, approximately, with significant and sustainable revenue growth in the U.S. market beyond. Again, I went through the generic hurdles, et cetera, et cetera. We don't see this revenue trend changing anytime soon. So our guidance is $70 million in 2023. With that, open it up for questions.

[Daniel Schneider, President & CEO]

Yes. [ Elis ]?

[Unknown Attendee]

So with the patent, the way that it's structured, is it possible even for anybody to use...

[Daniel Schneider, President & CEO]

Oh, you have to do -- first, I...

[Unknown Attendee]

With the patent that...

[Daniel Schneider, President & CEO]

It's -- okay, [indiscernible].

[Unknown Attendee]

With the patent that you've just announced, is it possible to even use Cysview/Hexvix without infringing on it? Because you would have to know that the patient does not have bladder cancer for it not to be infringed. Because it's reverse -- if you think of it in reverse logic, once you have detected that there is cancer and it does have some kind of effect, then you've infringed on it.

[Daniel Schneider, President & CEO]

Right, right. It would be used off -- if someone was to use it for therapeutic use, it would be off-label at this...

[Unknown Attendee]

Well, even...

[Daniel Schneider, President & CEO]

Not off-label, but it would be infringing our patent, I'm sorry.

[Unknown Attendee]

Even if you didn't use it for therapeutic effect, the fact -- mere fact that it does have a therapeutic effect would, by definition, make it that you've infringed.

[Daniel Schneider, President & CEO]

By definition could -- correct, it could. Yes.

[Unknown Attendee]

So you've basically built sort of a wall around the usage of it. So the only time you would use a generic that would look like it would be when you 100% know that you don't have -- the patient does not have cancer. Otherwise, they would infringe.

[Daniel Schneider, President & CEO]

Potentially, or they use it for detection and get the added -- go for the added benefit, but they wouldn't use it intentionally for therapeutic.

[Unknown Attendee]

But do you have to use it intentionally for it to infringe? Wouldn't just by...

[Daniel Schneider, President & CEO]

It's a -- let's put it this way. It's a hurdle, it's a hurdle. It's complicated for them, and that's not what generic manufacturers want is complicated. So...

[Unknown Attendee]

Very good. Second question is, could you go through that, you talked a little bit about the way that you -- it's produced and it's -- and the way it's kept. So that is actually not just a sort of a liquid or a...

[Daniel Schneider, President & CEO]

Right. It's freeze dry powder, and then it's mixed with the diluent in a prefilled syringe and then instilled into the bladder. So that goes through a process through different manufacturing plants through Europe.

[Unknown Attendee]

Right. And the third question would be -- last, luckily, is so when you talk about the Storz and the way that you have -- the fact that you have actually now about 30 people in the U.S. or 33 people helping the operations side and whatever else, does Storz see that as sort of their extension of their own sales force?

[Daniel Schneider, President & CEO]

I think we see it as an extension of each other's sales force for Blue Light Cystoscopy. I mean KARL STORZ is selling all kinds of other things. But when it comes to Blue Light, we see it as a complement. In fact, at the beginning of 2019, KARL STORZ restructured. And they restructured, they used to have sort of call them generic sort of representatives. They handle the hospital and all things within basically. They went into a urogyno division. So they've got folks who are now just 100% focused on bladder cancer and gynecology, et cetera, endoscopies. That actually helped us a lot because then we're working with someone who's got the exact same physicians all day, every day. And there's about 60 to 75 of those representatives. Plus they have, obviously, government affairs people and all kinds of other resources that we're able to tap into. So yes, yes. Yes, it's a very strong relationship. Any more questions?

[Unknown Attendee]

I guess nobody else has. Tell me a bit about this $70 million headline that you put out in 2023. Is that a goal? Or is that something that you're working towards? Or is that -- that's what you're planning?

[Daniel Schneider, President & CEO]

That's what we believe we can achieve.

[Unknown Attendee]

That's what you believe you can achieve.

[Daniel Schneider, President & CEO]

We believe, in the U.S., we can achieve that with the current growth rates that we have and I think also with the investments we made through 2019. I don't think they have all hit the returns yet. Sales force-wise, et cetera, as people get more and more ingratiated to the territories, the physicians and the opportunities, things, that's what we see, accelerators there. We see potential accelerators in the other capital equipment manufacturers potentially. We don't know. We see accelerators with the major IDHNs, integrated delivery networks like Kaiser, who has agreed now to bring the product in sometime later this year. So that all will -- we believe will help feed this ambition of $70 million in 2023.

[Unknown Attendee]

Wow. Good luck on that.

[Daniel Schneider, President & CEO]

Yes. Thank you. Yes?

[Unknown Attendee]

Just one more comment or question regarding the guidance. Subsequent to 2023, you say significant and sustainable revenue growth. But what's in that wording, I'm not quite sure. But do you imply kind of exponential growth in the subsequent years?

[Daniel Schneider, President & CEO]

Well, what I mean by that is, in 2023, if we hit $70 million, it doesn't flatten out, right? It's not like we hit $70 million, flatten out. It's $70 million, and then we'll -- new guidance will come. So we'll probably change the $70 million guidance in the future as well because we're going to continue to see further out into the future. But what I'm saying is there's no -- nothing stopping this trajectory that we're on. We believe Blue Light...

[Unknown Attendee]

Cystoscopy.

[Daniel Schneider, President & CEO]

Cystoscopy, thank you, should become the standard of care, and there are over 1 million procedures between the U.S. and EU that we think could benefit from it, so yes.

[Unknown Attendee]

Do you have -- do you, at the moment, are making an effort to expand into new markets as Asia, China, for instance?

[Daniel Schneider, President & CEO]

Yes. So China -- so we are, we are looking at China. China is interesting. We're not going to China right now, but we will, given the circumstance. But we are -- Asieris -- so one thing that I didn't talk about today that I've talked about in the past. Asieris is a urogyne company. They actually have their own non-muscle-invasive bladder cancer product, it's a pill. They are developing that both for China and they intend to globalize it worldwide. We have Hexvix that we could globalize or bring into China. So we're -- that's one potential partner for us that could commercialize in China. We have other ones that have shown interest. The Chinese market is interesting from a price standpoint and also an access standpoint. So while they have billions of people, they're not all going to be addressable market for us. There's certain subsegment of that, but it is an interest. Korea, South Korea as well, parts of South America of interest to us. We're pushing Ipsen on Europe. We believe there's a lot of opportunity in Europe. I mean if you really look at the way Ipsen is covering Europe, it's really Germany, Switzerland, Austria, France a little bit, Italy even less, and that's it. And we're on the NICE guidelines in U.K. So how we're not blowing out the U.K., I don't know. So unfortunately, we don't have the rights to that product today. But we see opportunities there. So we push our partners on that as well. Yes. Any more questions? Any on the...

[Unknown Attendee]

Could you expound -- I mean this relationship with Ipsen has been an issue for the last 5, 7 years. Can you just expound a little bit more on what you plan to do with that kind of relationship?

[Daniel Schneider, President & CEO]

Yes. I mean we're under contract with them, and it has no end unless someone breaches that contract. So we -- as any reasonable company would do, we are pushing the limits on that contract and saying these are the things you need to live up to. And if you do not, there's repercussions, there's consequences. So that is a little bit of what's behind, I think, some of their response this year in the positive because you saw the year before, I think they dipped, and they've been flat. So we're trying to get some kind of response at them -- out of them. It's one of the difficult things when you do partnerships. The partner you start the relationship with may not be the partner 5 years later. And I think that's a little bit of what's happened with Ipsen. We start with a very enthusiastic partner who was clearly focused and want to do well with it. And they've shifted their focus. And as all companies do, they shift their focus and they're becoming a different type of company, and Hexvix doesn't necessarily fit into that model of the future. So when it gets to Hexvix in their organization, it is almost like a company on its own on the side. It's not a fully integrated, like all the support you'd expect every other product they would have. So it's been difficult for us. But I'm aggressive on it. That's all I can share with you.

[Unknown Attendee]

On Page 1 or the first page, you said there's 500,000 patients being treated with Hexvix/ Cysview.

[Daniel Schneider, President & CEO]

Yes. Over 5 -- have been treated.

[Unknown Attendee]

Worldwide?

[Daniel Schneider, President & CEO]

Have been treated.

[Unknown Attendee]

Have been? History?

[Daniel Schneider, President & CEO]

Historically, yes.

[Unknown Attendee]

Do you know roughly what market share you have today worldwide?

[Daniel Schneider, President & CEO]

Worldwide, depends on which market. So in the Nordics market shares are 40%, 50%. Denmark is up 65%, 70%. You get into Finland and Sweden, and they're in the 25%, 30% range, so overall, 45%, 50%. Europe, depending on the country. If you're in Germany, we're in the 30%, 35% of -- and this is the surgical market, by the way. This isn't surveillance. This is surgical because that's primarily where everyone's been until the flexible cystoscopies came into vogue. And then if -- in the U.S., we're under -- we're in and around 5% today.

[Unknown Attendee]

5%?

[Daniel Schneider, President & CEO]

Yes. That's where the tremendous opportunity lies.

[Unknown Attendee]

Is anything new in Canada?

[Daniel Schneider, President & CEO]

There's still -- you could probably speak to Canada as well as I can.

[Erik Dahl, Chief Financial Officer]

Well, they're working with the authorities and with the hospitals in Canada. They are implementing the process and procedures in new hospitals as we talk. So it's a positive development, but it's kind of -- it's not a revolution. This is a slow process. But definitely, we have seen positive development in last year on the revenue side, and so we are positive. I have one question from the net. And the first one is, is the $70 million revenue in U.S. only from Cysview?

[Daniel Schneider, President & CEO]

Yes.

[Erik Dahl, Chief Financial Officer]

That was an easy one.

[Daniel Schneider, President & CEO]

Just required something behind my back.

[Erik Dahl, Chief Financial Officer]

We can talk about that another day. The statement, the financial position in Photocure is strong. Will you pay dividend for the year 2019?

[Daniel Schneider, President & CEO]

That's a CFO question.

[Erik Dahl, Chief Financial Officer]

Oh, bad. The financial position in Photocure is strong. I mean with the cash that we received from Asieris, we are very well, we are doing very well. And even without that cash, as I said, quarter-after-quarter, we have enough cash to execute on our strategy. But we're a growing company, and we intend to continue to grow. So if anybody asks me, I do not believe we should give any dividend short term. But it's not me to be asked, it's actually the Board.

[Daniel Schneider, President & CEO]

All right. Yes. Any other questions? All right. Great. Well, thank you for coming, and we'll see you at Q1.