Q linea AB

STO:QLINEA

Earnings Call Transcript 2022-Q4

[Jonas Jarvius, executive]

Thank you very much for that. I also would like to welcome everyone to our presentation for the last quarter of 2022. So I will start with showing our disclaimer slide in case me or Anders will make any forward-looking statements. Having read through that, I suggest we're going into the highlights for the fourth quarter. I mean, you know now that we are working with development of disruptive solutions for faster infectious disease diagnostics, and the first product targets sepsis.It has been a very busy quarter end of last year. And also, we have incorporated a couple of events and news that came after the quarter or period end. One of those news is that we have founded a subsidiary in the U.S. as of December last year, and that also means now that Q-linea is a group of companies, and we are, of course, working on a consolidated financial statement in accordance with IFRS.You can also see that we have decreased our number of employees and consultants a bit over the last quarter. And this is an overall process in moving into our new and updated business plan for this year and onwards. During the last quarter, we had discussions with the FDA regarding our 510(k) application for market clearance of ASTar and gram-negative in the U.S. And I will come back to that because we have also signed the press release recently after that feedback.Another absolute key activity for our company was that we did pass IVDR, the new regulation for in-vitro diagnostic devices as of last year. And we've also now received the certificate to prove that, so to speak. We have also been quite active in participating in customer-driven evaluations. And in particular, what I will talk about today is, one, where an independent hospital are now evaluating different rapid AST systems.Of course, after the separation for Thermo Fisher Scientific, we, our commercial team together with Thermo Fisher has been very active in handover and customer visits. And as we also submitted today is what we have been working with planning our commercialization strategy, I will present that today of the main parts of that strategy. Another thing that was very, very positive, as we could also announce today is, from last year, next to be our major shareholders of the loan facility of SEK100 million, and that has now been doubled to SEK200 million. And this, of course, together with the cash we have in bank means that we can now work according to our plan, and we have a long runway. So extremely positive to have that support.I would just like to show a little bit what ASTar is doing here. And of course, as you know, the care for septic patients, the time to actionable result is important. And actionable result for a patient with a severe infection is what antibiotic or antimicrobial should you treat that infection with. Today, it's a fairly long and cumbersome process as you can see on the top part.And what ASTar really aims is, to do that much faster, so the patient will have the right treatment guidelines faster, but also in a very smooth way for everyone working at the lab. So very little have some time, very easy to integrate in the workflow. And to do that with a very comprehensive panel, meaning that if you have a broad panel, the likelihood of you will receive a treatment recommendation is, of course, very high.And as we mentioned, the first application in blood stream infection is sepsis, the most severe condition, and this is very common, and it's another increasing problem. So when we look at our most common deceases like lung poster and breast cancer, if you combine the death of all of them, sepsis is still the #1 killer in our hospitals. It's also very expensive to treat, where the patient is always -- often admitted to the intensive care unit, which has a very high running cost for the hospital. And really the time to correct treatment is critical, and that is what we do in Q-linea.If we then move into the activities during the quarter. As I said, we together with Thermo Fisher Scientific has been very active in visiting a number of customers either who have purchased ASTar or have evaluated ASTar. Because during last year, there were several of these evaluations during the year. And what we have now done is after these customer visits, we have sort of further qualified these tentative customers. And of course, we now plan to move into a commercial discussion with a prioritized sales leads.I would also say that the overall handover and discussion with customers or potential customer has been very positive. So one fear tentatively could be that when you move from a big company such as Thermo Fisher to a small company that some customers may shy away from that, we have actually seen nothing of that. We have a strong support and interest in ASTar. So I think that's very positive to see.I think the big news this morning was that we presented a press release describing our new commercialization strategy, which, of course, will be a state strategy. And I think on the high level, the goal is really to demonstrate ASTar commercially available and how it performs, but also build a solid platform to enable a strong ramp-up for next year. As you know, there are long sales processes, so a lot of work we do this year will be presented during next year.But if we start with Europe, we have really decided to go deep rather than broad. So our focus will be the U.K., Italy and of course, expanding to Southern Europe and the Benelux. The drivers for selecting U.K. and Italy is, first and foremost, they are big markets. In the U.K., they have a very, very active sepsis campaign. They are -- there is a high awareness of sepsis. And of course, we have quite a high number of large hospitals.Italy is also, again, a large market, and we typically see Italy being one of the first movers when you come into new technology or to duck new technology. And of course, also these three regions have a very high resistance rate in their bacteria infections, so rapid AST provides high value for those regions. In the U.K., we earlier announced that we signed a distribution partnership with Pro-Lab Diagnostics. And I really look forward to working with Pro-Lab, we have known them for a long time, it's a very experienced and professional team, but have a very deep knowledge in the U.K. market. So I really look forward to see what that partnership can generate during this next year.In Italy, you don't typically sell via distribution networks. You use sales agents, I would say that's the most common way to sell in Italy. But then, of course, you need a company, we look at a very small commercial team that can then work together with these [Technical Difficulty] agents to put us start to commercial use. Also, we see that since we have been planning and working for our health economic study in Italy, we have had a number of instruments there, and of course, very pronounced hospitals participating in that. We see that have a good awareness of ASTar in Italy.Benelux is also a region that we focus on, not necessarily because of its size, but we see that there are typically or in this case, in the forefront of how to treat patients with the severe infections. So that could be pharmacokinetic driven treatment. We absolutely need the mix value. And as you know, ASTar provides true mix values and to really help and guide that treatment. So that's more of a strategic region for us that we think can be very positive in the overall sort of expansion in Europe.Of course, we have the Swedish market, it's not the biggest market. We have around 20 hospitals that could be customers for ASTar. But we, of course, serve the Swedish market and also the Benelux area from Sweden initially instead of forming a company in value, for instance.If we then look at the last, of course, U.S. market, we see that to be the most important market over the next couple of years. One reason being that, of course, first of all, it's a large market, it's a very consolidated market. And it's a market who has been using Rapid AST for a number of years, primarily done with the pheno system from Accelerate Diagnostics.So there, we look at a very focused effort, we'll start in the East Coast, most like Boston, and then use that sales team to really do focused efforts. We know the market well, there's very good statistics. And of course, also, we've been running clinical studies in the U.S., we also already have a good connection with a number of hospitals there. We've also received a very positive interest in ASTar. So we're now planning to go with a couple of pre-FDA evaluations, some more research testing. And if they turn out well, which I do believe and hope, I think that's also very good pre-market activity for the U.S. market.So when we sort of summarized the effect, we want to do a focused effort, because we also want to be aware of how we spend cash. And we want to be able to demonstrate a good traction where we do focus, and then we can, of course, then put additional layers to that. And we have signed an agreement outside with Pro-Lab. I don't think that will be the last agreement we signed. We are, of course, looking at multiple ways to extend the reach for ASTar.As I mentioned in our last quarter report, what we have seen during last year is a clear trend. I mean, customers have basically for the first time, more or less seen more Rapid AST solutions coming to the market during last year. And we see that the customers are really interested in trying to assess these various product offerings to see how do they fit in our lab, how do they compare performance-wise and so on. We think this is important. And I think that's one lessons learned that Europe still need to see more Rapid AST, need to test more Rapid AST before we see a large adoption of this technology.So we are participating on a customer-driven evaluation. Focus is to value three different Rapid AST systems, fairly sizable study around 240 samples. And we believe, and I believe that these type of relations is going to be very, very important to demonstrate not just how ASTar performs, but also how the respective solutions fit in their lab, and also in the patient care. But of course, I need to mention, this is an independent customer-driven activity. That means that we have no control over it as it should be, but it also means we cannot say exactly when it's expected to be presented.My estimate is that, if everything goes well, we should be able to see some results coming out during the spring. And we, as a company, absolutely promote similar studies, and we are in active ongoing discussions for additional studies of this type. I think it's important. I think we have built a very good product, and I think we will present very well in these types of studies.I mean, what we have seen over the last year is that people who really has performed it or our commercial customers have seen that the breadth of the panel, the ease of use of ASTar truly means that you can for a high number of patients, in this case, over 95.4% of every sample put into ASTar, be able to act upon those results. So I think that as soon as we get more and more of these type of information out as Europe matures, and of course, coming into the U.S., I really think that ASTar and Q-linea will have a successful future, because sepsis is not going away, it's increasing.We have more bacteria resistance and the lab are more and more crowded. So they need, in my opinion, full automation. So yes, it has taken some time to come to this point, but I do think that as we move forward, and if we see more and more of these type of studies being published or customer testimonials, I think that will support our strategy.If I move to some highlights after the period and then, is that we did announced just a couple of days ago that after discussions with the FDA in the U.S., we have now started extended testing. And really, if you look to the right, we can see how ASTar's sort of software is assigned on a high level. You have image capture data, you do base image analysis and sort of growth data. But then finally, we have a software module, which is called MIC analysis.And that software model is designed in a way so you can easily change that module, make updates to it. And when do we do that? Well, first of all, it's important when you have new breakpoints, I mean, UCOS in Europe will present new break points every year. So if you're going to be up to date with the system, you, of course, need to be able to be up to date with breakpoints. The other part is that, as we in parallel on separate sample, of course, do training of our algorithms and optimize them, we can then increase performance of ASTar.I think this was quite noticeable more or less a year ago, where we could extend the coverage with around 18 bug/drug combinations six months after the CE Mark of the product. So we have this strategy implemented. And really the purpose of that is to have the best care for patients. And we know it's working, we have done it in Europe, so that's fine. But of course, we made an upgrade to the algorithm after we have completed the patient sample collection in the U.S. study.So FDA would now like to see more data on that latest algorithm again on clinical sample, which I do understand and of course, obviously respect. So we are now planning to run around 300, 350 additional samples with that algorithm. We expect that sample collection will be done during the spring, and then we can sign into an addition to that application before summer.And of course, we're working with the same hospital as during the first phase of the study. So an update, and of course, obviously, what I would have wanted and I'm sure you as well would be to see an approval coming up now within the next week or so. But this will not happen. We have to do this. And of course, that's important to have a good product launch in the U.S.On the other hand, since we have the separation of Thermo Fisher, we then need to build our sales team, build our presence, discuss with partners. So this at least means we can do that now in an orderly fashion, and we are working quite hard on that, so that we are ready for the U.S. market as soon as we have clearance. And as I mentioned before, we're also going to run these pre-FDA evaluations.Another very positive news for us is that we are now a fully IVDR certified company. This is a new regulation, so much, much more strict than the directive. And basically, that was a shift during May this year. And that means that if you have launched a CMM product on the market before sort of end of May, you can still sell it on the market even without IVDR. However, you cannot launch a new product to the market or make upgrades or significant upgrades to a product unless you have IVDR.And we know that this has really been a bottleneck, there are many companies that has struggled to get the time start at their respective notified bodies to get this. We planned it many, many years ago. So I think that having this certificate now really enables us to provide new product releases or improvements to the market. And I think this is going to be a competitive advantage, because I see that many, many companies are not IVDR are certified, and I know that it will take them quite some time to do so. This might also be a project to say in response to tenders going up into the year. So I think this is very, very positive.Then if we look at Nexttobe's offer, of course, that these are tough times, the market is fierce as it is right now. Having a strong owner that support the company and the company's strategy is an absolute key. And of course, there is no shying away. We had a very negative trend on our share price of the Thermo Fisher separation. We also have not been able to present a lot of news during the period. I think we are now in a process where we can start seeing that all the work we have done is now being put to practice. So that's what I look forward to be able to be more open and provide news to the market going forward.I'm also fully understandable that this cost stress among shareholders, not just private smaller shareholders, but of course, also large institutions, because it is a difficult time. So the board and management has really been working on updated commercialization plan and also development strategy. And of course, in these type of times, we are looking our overall cost budget and spending to make sure that we position the company in the best cash position, but, of course, also be able to demonstrate market traction, because that is really important for us right now.And next to be our major shareholders clearly supports us. And being a CEO of a company with that type of support is of course, very, very positive. So we see support for what we have planned for this year and of course, onwards. But we are now moving into a big transition. We are setting a new strategy. We are setting up companies and partnerships. There's a lot of trading activities going on.So I think realistically that our sales estimates for this year will be more or less in line with last year. And I think that if we reach that, it's actually quite a good job, because we are moving for a very large company, Thermo Fisher Scientific to our own sales organization. And really, my absolute goal is to be able to build that solid base for us to both attract customer this year, to really demonstrate a very positive development for next year.So that's sort of the highlights from my part of the presentation. I will now hand over to Anders Lundin, who will go through the financial numbers for the last quarter. Go ahead, Anders.

[Anders Lundin, executive]

Thank you, Jonas. Yes, so if we start with the profit and loss statement, we had the net sales of 0 in the quarter, which might be a little bit disappointing, but I think that reflects the focus of handover activity that was covered in the quarter. The operating result was minus SEK59.6 million, and we reported a loss after tax of minus SEK63.7 million. Earnings per share was SEK2.18.So if I move to the statement of financial position, we have cash equivalents of SEK72.9 million. And we had during the quarter and last quarter, we sold the interest funds and the bonds, so that had been transferred to cash. And on the inventory side, we have now inventory worth of SEK42.3 million. And during the quarter, we reversed the write-down reserve of SEK4.7 million, which we had from December last year. And the reason for that is, we have a little bit more positive view on the net sales price when we have divorced with Thermo Fisher.And then if I move into the cash flow statement of the fourth quarter, we see that operating activities. Cash flow from operating activities is close to minus SEK80 million, and that is down SEK10 million from the same quarter last year, and that follows the trend from third quarter where we were down SEK8 million from the quarter three last year. So we have minus SEK10 million, I would say, as an operating results unfavorable compared to last year, but we have a good -- we have an offset of almost SEK20 million on the favorable side in the working capital section.Investment through investing activities is [Technical Difficulty] net divestment of interest funds and bonds in the quarter, and we have invested [ SEK3 ] million in [Technical Difficulty] lab and production equipment during the quarter. Financing activity is very low, minus SEK1.7 million, and that only reflects the implementation of IFRS 16. So it's the repayment of lease basically our lease payments during the quarter.So all in all, if we summarize what we have in cash in bank and together with the extended loan facility of total SEK200 million from deemed, the Board of [Technical Difficulty] they assess this liquidity is -- that will cover the planned operations for the next 12 months.So by that, I will hand over back to Jonas.

[Jonas Jarvius, executive]

Thank you very much, Anders. And that was the last slide of our presentation. So we'll hand back to the operators and prepare for questions. Thank you very much.

[Operator]

The next question comes from Gonzalo Artiach from ABG Sundal Collier.

[Gonzalo Artiach Castañón, analyst]

I have a couple of them. The first one is on the U.S. market. I mean, you are planning to submit the new data before the summer -- around summer. And when would it be fair to assume that FDA clearance for that region? I mean, how is the process once they receive the data? Would it be fair to assume that this can happen by the end of the year or a little bit before or a little bit after?

[Jonas Jarvius, executive]

Yes, I mean, what I can say is that, we have -- or this is my assessment that the workload on the FDA has been very high during the last year. So we see very long response time, but very positive professionals. So we all see that they are long. So -- it's very difficult for me to assess when possible clearance can come on the product. And really, in these type of process, the only thing we can do is work as fast as we can in our work streams and do it. And I mean, if we answer on an open way is that, if the extended submission is favorable for the FDA, and there is no additional testing. Then you might see, of course, an approval during the second half of the year.But it's very difficult to say that will mean making a number of assumptions. But of course, we are working as fast as we can to provide that updated answer and additional testing to be able, of course, to have an approval as swiftly as possible.

[Gonzalo Artiach Castañón, analyst]

Okay. That's useful. Okay. Another question is on the European market. I mean you're saying that, let's say, for example, to Italy, several ASTar have been tested already during the summer, I think you mentioned in your report, and this has increased awareness. And based on the way you communicate, I feel that people like ASTar. But, however, this is not materializing into sales right now? I mean, what are the key things that you guys are missing, let's say, in Italy to see positive sales?

[Jonas Jarvius, executive]

Well, I'm not saying that Gonzalo, because what we do see is materializing is that, we are now seeing that there are preparations for tenders coming out. And of course, as we said, there are a long sales process, you first need to review and test the instrument. If you do like it, I want to move on, that's typically followed by a tender. So what I estimate here is that, activities last year will now be that we see more tenders coming out in Italy, and of course, we would like to respond to them. That is not equal with the sales because we are more than one company starting Rapid AST solutions.But I can clearly see that the work last year now is coming up, so you can actually act upon it on a commercial basis. So -- and I think that's also a difference from us as a company this year. During the partnership with Thermo Fisher, we could not really present much about the market or progress. Our definite time for this year is to be much more open, I think that's needed. So as soon as we move into those discussions, we will be more active in presenting that. So you, and of course, other shareholders can follow what's happening.So I would look at it actually that the work done last year and the positive response on ASTar is now moving on to the commercial activities. So -- but of course, the sales are still in the pipeline, but we are moving along the correct trajectory to be able to reach sales for this year.

[Gonzalo Artiach Castañón, analyst]

Okay. And another question is on the terms that you have, let's say, now with your U.K. distributor and also the one that will come. And are you planning to communicate what the split that you will have with distributors? I mean, is it something similar to what you had previously with Thermo Fisher? Or I don't know if you could give us some color there.

[Jonas Jarvius, executive]

So the true commercial terms will not be disclosed. I think that is something that should be a secret in a contract. What we have said is, is a transfer price model, meaning that we will register sales on a transfer price model basis, one, the order instruments. And also the second part is, of course, we have together quite sort of a goal for U.K. for this year and the next years and, of course, follow that development. So the exact terms will not be disclosed. But of course, we will disclose as we see orders coming in from the U.K.

[Gonzalo Artiach Castañón, analyst]

Okay. And one last one, if I can. It's on Podler. You had -- on July, you announced that you received a letter of intent for evaluation of Podler for potential for future commercialization. But now it seems, based on what you disclaim in your report that this is not a priority anymore. Could you give us some words on that? What happened with this agreement that you had there?

[Jonas Jarvius, executive]

That's a very good question. So what we have discussed in the company is, of course, what I think we need to demonstrate to the market right now is actually ASTar's commercial success and steps towards commercial success. So during the separation with Thermo Fisher, we took a decision to very actively focus on that work. I mean, it is actually quite a lot where we're setting up the subsidiaries, plan the market, negotiate agreements and so on. And really that is because, we want to be able to push on with ASTar.So we just basically have taken a bit of a pause in Podler. But as we know, that technology is very, very further advanced, it's more or less moving in that to manufacturing. So what we are going to do now is assess during the first quarter, I would say, this year, to really see are we going to go aggressive with Podler and either go for licensing deal. Or should we keep focus on ASTar for a little bit longer and then move on with Podler. So it's not -- it's just that we have taken a step back on our side to be able to really fully launch a new commercialization strategy for ASTar.So it's one of the things you have to do as a company also because, as you know, there's a tough market out there, and we did not want to press on with the development cost for Podler moving into manufacturing right now. We actually pause that a little bit. That does not mean that you have to pause discussions with Podler, but we have decreased spending on Podler development for now and really focus on ASTar.So hopefully, we'll come back with a more plan for Podler. As you know, I think that what Podler can bring to the market is truly transformative and really provide bad side care to patients that are not sick during the daytime at university hospitals. So I think that the Podler by itself is very interesting. But you have to make choices in a company and priorities. And now we really put a high focus on ASTar, at least for now.

[Operator]

The next question comes from Ulrik Trattner from Carnegie.

[Ulrik Trattner, analyst]

And I also have a few questions. And perhaps starting off with top line results in Q4, so in sales -- and we have had this discussion before where we discussed that sales is lagging behind evaluation and installation and the sales in the quarter should have been derived from earlier activities this year. And what is happening there, essentially? You're talking about the transition over to the Thermo Fisher, but what happened with lagging sales?And can you give us some understanding on how many systems have been placed in total for 2022? It doesn't sound like you achieved your full year guidance of 10 systems. That would be my first question.

[Jonas Jarvius, executive]

So the fourth quarter is probably easier to sort of respond to that question. When we were in the take-up situation with Thermo Fisher, neither Thermo Fisher nor we could actually accept the sale. We were in a period where we -- they are moving out from the agreement, and we are moving in. So we simply didn't have the possibility to do anything on the sales basis for that year. We could have sold consumables, but that's also driven from when customers or the consumables, that's typically done, I mean, to have some sort of stock.So that was more that from the, I would say, administrative purposes, we actually had to do it that way because none of us could actually commit to sales for the different reasons. So I don't think that is necessarily strange in that way, but I do understand it looks strange when you look at the numbers. So it was very good that you brought that question up, Ulrik.Again, what we are saying there is looking at the number of instruments. We have not commented on that. We had around SEK12 million sales last year, more or less, and that corresponds to a little bit over a handful of ASTar instruments trading hands. So what I can say now is that from now on, we're fully in control. We are going to disclose to the market when we do sell, when we do place an instrument, so you can start building that book from now on. I know it's not ideal, but I think that the best we can do now is to be very transparent on -- from now onwards on sales.

[Ulrik Trattner, analyst]

Great. A follow-up on that. So we're expecting these sales that could not be concluded in Q4 to be transferred into Q1, or are the sales gone? And secondly, it's great to hear that you're going to be more transparent on sales, but will you also be able to provide the market with some more granularity regarding pricing of ASTar and its consumables? Previously, it's been a no-go due to Thermo Fisher being in control, but they're not around anymore. So will you be able to provide those metrics? And as well, will you provide in future reporting a split between system place and consumables?

[Jonas Jarvius, executive]

So that's also good questions, when we look at that. So I do say that I do not expect the first quarter to be a high sales quarter, because what we're doing now is we are setting up Pro-Labs, of course, in the U.K. But before we are being able to move in, we need to do the training of sales reps and service engineers. So we are fully operational, because what I think is absolutely important is that when you do sell an instrument, you need to provide a full package with [ what gave ] service, if needed and so on.So I think that this year needs to be looked as a transition as more and more of these distributors and our own teams become operational, then we can start responding to sales. So I don't think the first quarter will be a big jump, that would not be my idea. But rather that we can see a successful development throughout the year. And that's really because I mean when you look at it from numbers, the Thermo Fisher agreement was ended at sort of end of October.And I think that the company has really progressed well with setting up subsidiaries, working with hiring, signing distribution ships, so we need to give it a little bit more time for that to be fully operational. But of course, that's going to happen during this first quarter. But maybe sales will be more shifted even throughout the year, I would say.If we then look at split between instruments and consumables, I would say that, that decision has not been taken. I don't think that's actually ready to do it yet. I would like to see more systems space, you have a better statistics on pull-through on consumables before we start doing that. I think in the long run, definitely, that's a way to go. I don't expect that to happen this year. Regarding pricing, yes, I think we're going to be more transparent on pricing. The reason we have not been very open with that is also that we, of course, work in a competitive market. And our colleagues or competitors as you see them are not either that transparent.So I think that from a competitive standpoint, we really want to make sure that if we do that, we would like to see that we think it's best interest not well, for every shareholder basically. So that's more of how the entire field is moving. So I can't give you a guess on that today, Ulrik. But I am thinking that it will become more transparent. And also, I know that being an analyst, if you see sales being coming into the books, and we are more transparent with them, it will give you a very good way to, let's say, do some back calculation and make assumptions.

[Ulrik Trattner, analyst]

Okay. Great. And since you mentioned competitors, there are now more companies moving into the market in Europe, specific quantum matrix. Do you still feel reassured that ASTar is the industry-leading instrument? And since you don't really know the price of the competitors, do you believe that ASTar is good enough to win tenders in Europe based on its technical qualities?

[Jonas Jarvius, executive]

No. I mean, of course, we do see more competitors, they are more or less the same companies as we had even when we went public close to five years ago. So we have been moving alongside each other. I think we know our value proposition as well. I think ASTar will stand very strong in the competition, that's my opinion. Does that mean that we'll take 100% of the market? No. Of course not, because I think every Rapid AST system will have benefits for various and different customers. Our goal has been from the start to really address the more larger size hospital, which do a 24/7 operation. And I think we have a very good value proposition there.Of course, we don't know yet. We have very good intel on our competition, [ of course, and they ] most likely on us as well. So I think that as we move along to these comparative customer-driven studies, I think it will also be more clearance, what are the different value props for the various solutions out there. And I actually think it was quite good, because one lesson learned last year was that the European market, although everyone, of course, knows about the importance of AST and Rapid AST, there really hasn't been many providers in Europe.So I think that we now are more or less three, maybe four, depending on how you count, I think that has actually educated the market. And we now saw a clear trend towards the end of the year where people are asking for these evaluations to really cross-compare instruments. And when I look how ASTar has performed in the studies we did -- or Thermo Fisher and we did last year, I think we have built a very competitive system.

[Ulrik Trattner, analyst]

Okay. Great. A few more questions on my end. First would be the timing of the upgrade on the ASTar system. What led you -- you talked a little bit about this, but what led you to do this update so late in the process of obtaining a 510(k) approval? And wouldn't it make more sense to just have it approved and then update the system?And the second question is also on the FDA approval, and you talked about this regarding sort of -- with the previous speaker here. You can't really give us any more precise guidance on when ASTar will be approved, which is, in my book, a bit puzzling. And if you can give us more information on that. You have fast track, I'm guessing given that we are quite far along in the process already of having ASTar approved in the U.S. that FDA have gone through a majority of your technical file and the general time it takes for FDA to review this is 90 days. So sort of question here is, how come you can't be more reassured that ASTar will be approved in the U.S. before year end?

[Jonas Jarvius, executive]

Yes. So if we start with the first question, I think the clear answer is, yes. After what we have learned, it would have been better two years ago with one algorithm and then to upgrade. That's true. The reason we did it was that we continuously develop our algorithms. That's how we operate to really provide the absolute latest to our customers. So since we've done that in Europe, and we are also again scrutinized under IVDRs, that entire process was part of the IVDR application.We really did not see that to be a problem, to be fair and honest, I do, of course, understand FDA, they express a different view on that. And of course, they are the one that guides that decision. So in retrospect, yes, we could have done it a different way. On the other hand, with this, we will now -- when we do come to the U.S., we will have the latest algorithm, and I think that's really important for the patients actually and to have that.Coming back to your answer, why I can't be more reassured. It's more that, what I have seen is, as you know, that when the FDA works, they have an eye today, but that's a time that starts and stops when they do look at the application. And also, what I've seen, and this must be my personal view, but we have breakthrough, which is absolutely essential, I would say, during this process, but we have seen that the lead times in the process has been extraordinarily long.So I see that the lead times and response times have been very long, and I know that there's a lot of workload. And since I can't predict how that will change, hopefully, that will sort of be better on the resource side. But I would not like to see here and say that, yes, it's going to come in October, for instance, because I know that everyone out there will be very disappointed if it doesn't happen. So I'd rather say what we can do is do everything we can as fast as possible and, of course, as thoroughly as possible, so that the follow-up review will be faster. But I can't put a guarantee.What we do, however, do is, of course, start and plan these pre-FDA evaluations, and we see an interest to do that. So, of course, what we try to do now is how do we prepare the U.S. market. So when we do have the FDA clearance, which, of course, is our goal, than we should have already been active in the market. So it's not the first time you hear about ASTar. So we try to do as much activity as before to have more of a running start there. But yes, obviously, I would love to see that come faster. But I'm rather taking the cautious side here.

[Ulrik Trattner, analyst]

Yes. Great. Just to clarify, will this be a completely new filing to FDA? Or is this just an update of your current ongoing filing for approval?

[Jonas Jarvius, executive]

So we're updating our ongoing filing.

[Ulrik Trattner, analyst]

Okay. So this will essentially just be added on top of the work that FDA already done with ASTar?

[Jonas Jarvius, executive]

That's correct.

[Ulrik Trattner, analyst]

Okay. So the 90 days per se have already started half sort of -- half a year ago.

[Jonas Jarvius, executive]

That's correct.

[Ulrik Trattner, analyst]

Okay. So the 90 days might not even be a good proxy for obtaining approval?

[Jonas Jarvius, executive]

No. I think that's been clear in a similar type of filings over the last years. So that's true.

[Ulrik Trattner, analyst]

Okay. Great. Last question on my end, and that would be your strategic plan going forward here. You mentioned that you are stating a few sales reps in the U.S. that is planned. And for Europe, you're highlighting a few markets. First question would be how many sales do you think will be sufficient to cover the selective European market? And secondly, could you give us your view now on both the short-term and long-term strategic prospects of finding commercial partners, both for the European market as well as for the larger U.S. market.

[Jonas Jarvius, executive]

Yes. So I mean, today, we have a commercial team of around 15 people in various parts in Europe in the overall functionality of that and supportive functions. I think when we do look at Italy, we are looking at a couple of more heads because of the sales agent strategy there. We want to support it with sort of an additional people or so in the Benelux. And then, of course, we use Pro-Labs in the U.K. So in Europe, we really don't see a massive increase of the personnel, because we already have some, and I think we have chosen a good strategy to reach effect with our sales market. So maybe say around five more people in Europe for this year.In the U.S., we're looking at typically eight to 10 people, because we want to have a focus effect. We know what hospitals to address, and we already -- as we had during our discussions and work with clinical studies, we have a good start there. So we don't see a massive amount of salespeople that needs to be recruited this year. But, of course, it will be an increase. And, of course, we look at the overall cost for Q-linea and see how we can offset that in a smart way to reduce costs overall in the company.But then, of course, if we look at the long-term, as you say, I mean, first of all, I think some regions definitely will be a distribution partnership, and we have announced Pro-Labs now that will most likely not be the last and only one we announced at least for Europe or surrounding regions. For the U.S., I think -- and I know we had this discussion on other quarterly calls, Ulrik, we have seen an interest in Q-linea products from several large players. So I would not disqualify the possibility that Q-linea in the future signs a deal with a larger player for perhaps coverage of a larger region.But as of today, I think the most important part is that in parallel with that type of discussions is also to demonstrate how ASTar performs. And I think that's not important for the market only, but also for large companies.

[Ulrik Trattner, analyst]

Okay. That's great. And so what additional data are you then awaiting? Or is it just customer feedback? I guess, as you mentioned before in this call, it takes some time to get an adoption of this type of new technology as well as awareness for sepsis, this could potentially be a year long process if you were to go alone in the market, whereas if you have a partner with more financial muscles and pull in these hospitals, the adoption could actually go faster. So how should we view this?

[Jonas Jarvius, executive]

I think that the only thing we can say right now is that, what I can say right now, we've not signed a partnership with a big distribution partner in the near-term, because of several reasons. One is that even if we were under SaaS discussions, that's quite a long process, followed by training and all of that. So that is a process by itself that's quite long. So I really would like to see it more as we focus on Europe today and with our distribution partnership. And then, of course, throughout the year, we might be able to present some more flavor on strategy, expanded strategy for the U.S., for instance, or for other regions.But I think a difference with a strategic partner compared perhaps to just the general market is that, such a partner are oriented well into the technology and what we do, and probably need to see much fewer data points to sort of move on in one direction or the other. But as we said, this is the plan we have present right now, and we will follow-up with more details coming up during the year, I would say. But as of today, I can't provide any more details, more that we are looking to expand reach either big with big partners or more small partners. It might be a mix of those ingredients or it might be, yes, either of them, so to speak.

[Operator]

There are no more questions at this time. So I hand the word back to Jonas and Anders.

[Jonas Jarvius, executive]

Okay. Thank you very much for that. Thanks for the questions. I think there were very good questions and understandable. I would also like to thank you to everyone who is listening in today and are continuing to follow Q-linea. But with that, Me and Anders will say thank you very much for your interest in our audiocast, and goodbye.