Sedana Medical AB (publ)

STO:SEDANA

Earnings Call Transcript 2024-Q1

[Operator]

Hello, and welcome to today's presentation with Sedana Medical. With us presenting today, we have the CEO, Johannes Doll; and CFO, Johan Spetz. We'll do a Q&A after the presentation.

[Operator Instructions]

And with that said, please go ahead with your presentation, Johannes and Johan.

[Johannes Doll, executive]

Thank you very much for that kind introduction. Very welcome to Sedana Medical's Q1 Report 2024. Let us begin on Page 3, please, with the highlights of Q1. This is now my tenth quarter at Sedana Medical and of course, one that I'm very, very happy with because it really demonstrates the progress that we have made, and it's very satisfying to see that all of our hard work is translating into visible results.

If you have followed us for a while, you know, of course, that the company is very focused on three strategic priorities: first, to bring Sedana back to a steady growth path in our existing business; second, to reach breakeven in our ex U.S. business as the first important step towards our longer-term profitability aspirations. And these two together, so a healthy growing business and the profits from it will form a stable platform for our third priority to make headways towards our U.S. approval and prepare for the launch in our largest potential market, which put Sedana on a different growth trajectory.

In 2024, we've come out of the gate strong. We have set a new all-time high in sales with SEK 48.8 million, which is up 29% versus last year or 28% excluding the minor exchange rate effects we had during the quarter. I'm very, very happy that like lost last quarter, all of our regions have contributed to the growth. We had very solid growth in Germany in the high teens and our other direct markets, the pricing and reimbursement approval in Spain and especially the MHRA approval in the U.K. are showing effect. And in our distributor markets, we've seen the first order from our main partner in South America since 2022, which was worth SEK 1.4 million.

That order is worth noting, is not recurring as it's expected to be enough to meet the in-market demand for roughly a year in Mexico and Colombia. But also excluding this order, we would have seen higher sales in Q1 than in any other quarter before, including the COVID-19 period. Big progress also on the profitability side.

For the group, we were still slightly negative by SEK 1 million but we do show a positive EBITDA of SEK 1.6 million for the ex U.S. business. Admittedly, there was a positive FX effect of SEK 2.3 million. That has helped a bit, but it's very, very clear that we are very close to a P&L with the EBITDA imbalance, which is a very, very important milestone and one to be proud of, especially considering that I had to report the biggest EBITDA loss in Sedana's history only 14 months ago after the post-COVID year 2022.

Therefore, I owe a big thank you to the entire Sedana Medical team that has bought into and also execute with a strategy that focuses on both streamlining the organization and simultaneously investing into profitable growth opportunities and grow the business. The cash balance stands at SEK 361 million, which means that we continue to be financed to execute on our plans, including the U.S. study and the launch in the U.S.

Speaking of the U.S., you might have seen that we have had a busy morning with two press releases going out. Yesterday, we have recruited the last two patients for our INSPIRE ICU-1 trial and also our second trial INSPIRE ICU-2 is getting closer to enrollment completion with currently 23 out of 235 patients that are still remaining. So we will soon be done enrolling patients, which also means that we can again lead our timeline unchanged.

We are still planning for an NDA submission to the FDA in the first quarter of next year. If we then turn our attention to Page 4. We can have a look at the longer-term sales development with a sharp increase during COVID-19 and the following significant decline in 2022, the recent years have been quite a roller coaster right. But with 2024, we are leaving the last shadows of the global pandemic behind us, as we now aim for a new all-time high in sales this year, and Q1 puts us well on track to deliver on that and also gives us a little bit of a head start compared to our financial full year guidance.

And then let's jump to Page 5 please. I like this slide a lot as it shows the impact of all the hard work we have been putting into executing our strategy. We've worked very hard to streamline our entire organization, especially in our headquarters. We have reduced costs in noncustomer-facing activities across the company, and we've also cut back in countries where we did not see the momentum and the bottom line contribution that we were expecting.

And we have done all of this to, of course, improve the bottom line, but more importantly, to be able to free up resources that we could invest in the front line, as specifically in countries where we are operating very profitably and see strong growth momentum. For example, if I look at our German and Spanish teams, both very clear investment cases, we have increased the head count of our field personnel by approximately 40% since the end of 2021. And that's in a time while the overall head count in the company has decreased quite significantly. So quite decisive measures that we have taken, which also translates into quite substantial swings in the P&L.

On the sales side, you can see the typical seasonality with less sales in the summer quarters. But overall, the trend is very much going in the right direction. And at the same time, we have moved from an EBITDA loss of more than SEK 83 million in 2022, which was a minus of 68%, to a P&L that shows only slightly negative EBITDA in Q1 2024 or even slightly positive looking at only the ex U.S. part.

So there's no doubt that we are stronger and healthier business today. If we then move to Page 6, please. I would like to talk about our performance by region. In Germany, we again saw a slightly lower number of ICU patients than the year before. The main reason here is still that ICUs are struggling to fully staff their teams. And as a consequence of the staff shortages have to limit the beds that they fill with patients.

Again, a word of caution here after the end of COVID we do no longer have the same quality and granularity of publicly accessible data. Also for example, these numbers include both incubated and non-intubated patients, but they do show a certain trend. And anyway against those slight market headwinds, we had a strong quarter with 17% growth in euros. What we see here is the impact from having extended the team and new colleagues getting up to speed and also starting to deliver, and also the results from our overall focus on field force effectiveness measures such as maximizing the time we spend with customers targeting the right accounts, enhancing the business effectiveness, et cetera.

On Page 7, we can have a look at our other direct markets, again, year-over-year growth above 50% and another great step forward towards our objective to become a little less dependent on Germany. These markets combined have now reached almost 30% of our total sales, which is great to see. The biggest contributor, at least in absolute terms, is still Spain. We had a great year last year with updated treatment guidelines, pricing and reimbursement approval and an expanding customer base. And we continue to really benefit from that, and the very high growth rates are still not slowing down.

Great news also from the U.K., where the admittedly long awaited MHRA approval together with some changes in our go-to-market approach have indeed led to a significant acceleration of our sales growth. So in that case, it seems we have reached an inflection point in the U.K., and I'm really looking forward to seeing further growth.

In France, growth was a bit slower than we had expected during the quarter due to some unfortunate sick leaves that we had on the team, but that shows also a little bit how much we depend on our teams being out there and present with customers. So in that quarter, we couldn't have present with customers as much as we would have liked, but we still see growth, and there are great further growth opportunities and some important university hospitals that we have started last year and a couple of tenders that are underway as well.

Then let us go to Page 8, please, where we see our distributor business, representing approximately 10% of our sales in the quarter. For that part of the business, we have been through a pretty long period of declining sales as it took a long time to get COVID out of the system, where we saw a lot of extraordinary demand in several regions of the world, and inventory effects have hurt the business a lot. Q1 was then a quarter where we have received the first order from our main South American distributor. It was the first order since 2022. And since the last order was 2 years ago, it's really good news that we're coming back to a normalization here as well.

It's worth pointing out that many of our distributor partners do not buy as frequently as our customers in the direct markets do, which usually has to do with shipping costs, import tariffs, et cetera. So also the South American order is one that is expected to fulfill the demand in Mexico and Colombia for approximately a year or so. And so we will not see this kind of order every quarter. Outside this one order, the other distributors in aggregate showed a small growth of 3%.

Then let's have a look at Page 9, please. So where does all of this put us with regards to our full year guidance that we have published? We have promised to deliver full year sales growth between 14% and 18%, excluding exchange rate effects, which compares to last year's growth of 16% and EBITDA breakeven in our ex U.S. business during this year on the sales side and the Q1 sales, clearly, the growth exceeds what we have guided for. We had 28% excluding exchange rate. So we're, of course, happy to have generated a head start versus the full year target already in Q1 and also on the EBITDA side. Technically, we've already done what we promised with a positive ex U.S. EBITDA in Q1.

So great start for sure. Of course, it's too early to declare victory, and we will continue to work hard on both the top and the bottom line. We believe the guidance unchanged for now as it's still early in the year. But of course, we see ourselves very well on track towards our goals.

So let us switch gears to the United States on Page 10. The U.S. is our largest growth opportunity. And one of the reasons why we are so focused on turning the ex U.S. business profitable as we want to be able to launch in the U.S. based on a stable platform in Europe and one that generates cash. We have estimated the U.S. market potential for our products to around SEK 10 billion to SEK 12 billion, which is 3x as much as in our current direct markets combined. And this is because of course, a higher number of ventilator beds but also a medical practice that favors intubation and mechanical ventilation more than we do that in Europe and also an overall higher price level.

So that's attractive commercial opportunity coincides with the fact that we are dealing with a very concentrated customer base compared to other markets, less than 5,000 hospitals have intensive care units, less than 3,000 units with more than 10 beds. And those tend to be in the metropolitan areas, so you don't need hundreds of key account managers to cover our customers. And based on that high commercial opportunity and comparably manageable investment size. It has led us to the decision to build our own commercial company in the U.S. to launch in [ designation ] on to the U.S. market.

Having said that, as we've said before, we also keep the flexibility to complement our own presence with a potential partnership if we assess that a potential partner could help us get faster sales uptake, broaden our reach, leverage existing relationships, et cetera, we could create more value overall then, of course, we would consider that.

We're still keeping the same time line. We want to submit our NDAs to the FDA in Q1 of next year. So in a year from today, on the list, the dossier has hopefully already gone to the FDA. As we've said, one clinical study is done INSPIRE ICU-1 and the other one INSPIRE ICU-2 is only missing 23 patients.

What will be happening or what is happening after the enrollment is done, is a 3- and 6-month follow-up where patients are receiving a call to assess their quality of life, their cognitive abilities, psychological state, et cetera. And we are using that time where that long-term follow-up is going on to write big parts of the day's dossier already. That work has started already a while ago. We will do a database lock on the main part of the study. So a lot can be done in parallel here, adding the actual long-term data when it comes in, will be relatively quick.

So we can save time overall. If you submit Q1 next year, which is very much the plan, the standard would be a 10-month review time minus potential benefits from the fast track designation that FDA has granted us. There are, of course, cases where fast track products were approved in 6 months instead of 10. But again, as I've said many times before, the FDA is calling the shots here, we can only bringing forward the best possible arguments. But at the end of the day, it's the FDA that decides and they will only do that after the submission. So we're still making no promises on any kind of shortcuts here even though we'd be very happy if we get them.

If we turn to the next page, Page 11. It's worth reminding ourselves that we are dealing with the same primary and secondary end points that we have successfully shown in our European trial SED001. Does that mean this is a 0 risk trial? No, of course not, there's always risk in a clinical trial but as there's no medical reason why our therapy would work in German patients, but not in American patients that risk is at least reduced compared to the average Phase III trial.

The primary endpoint as in Europe is showing that you can keep patients in a predefined target sedation range and it's really the secondary endpoints that will hopefully show the real benefits versus propofol as we have been able to do in the European trial. For example, if I were to highlight one of them, we know from our European trials that our inhaled sedation patients need less opioids, 30% less than 001 and even 50% less in our pediatric trial, without these patients experiencing more pain.

So now that's, of course, a great clinical argument in our everyday life in Europe already today. But if there is one country in the world that is most sensitive about avoiding opioids because of the devastating opioid addiction epidemic that's going on and more than 100,000 truck over those deaths every year. It's, of course, the U.S. and also the FDA due to their own history is very, very much focused on reducing the use of opioids. So bringing a therapy that will reduce the use of opioids in a very vulnerable patient population would be a major plus on the U.S. market.

Then go to Page 12, please. This is also a slide that I like a lot because it really shows the caliber of clinical trial sites that we are working with. You will find the most prominent institutions in America on that list, including, for example, Johns Hopkins, Colombia, Mayo Clinic, Cleveland Clinic, Harvard, Mass General and the list goes on. So I'm just naming a few here. And that is not just great from an academic point of view, seeing how some of these key opinion leaders in the space just gather around this novel way of sedating patients in the ICU is just hugely encouraging and it provides a great platform for future commentary success.

Then Page 13 gives you a little impression on the conferences, symposia, events, et cetera, that we have dealt with -- that have dealt with inhaled sedation in Q1 and always very happy if I am in a room with people that are as excited about inhaled sedation as we are. And if I compare 2.5 years ago, when I started in this role, we did fill the big rooms in Germany, but we're still very kind of exotic in other places. And today, we really see hundreds of S&Ds at many of our events in different countries.

So while you can't one-to-one translate attendance of a symposium into sales performance and nothing happens overnight, of course, I do see that inhaled sedation is developing into a true global movement in the ICU space. It's also worth mentioning here that, for example, the events that you see here in Brussels, ISICEM and also the one in Barcelona. There were very well attended sessions of inhaled sedation without Sedana organizing them.

So in these cases, it was one of the study investigators from the U.S. and a top key opinion leaders from Spain, that were asked directly to present on inhaled sedation. So it's really great to see that there's enough pull for learning about inhaled sedation even sometimes without us having to push.

So if we then move to the next slide, we're entering the finance section, and our CFO, Johan Spetz, will take you through the details here.

[Johan Spetz, executive]

So in terms of the financial results for the first quarter of 2024, Johannes has already mentioned some of these numbers, but it's always useful, I think, to go through in a bit more detail. So we reported net sales in the quarter of SEK 49 million. That's up 29% relative to the same period last year or 28% if we exclude currency effects.

Sales in Germany increased by 18% year-over-year or 17%, excluding FX. Our other direct markets showed very strong growth, again, by 55%, up relative to a year ago or 54%, excluding FX. And as Johannes pointed out, it's mainly driven by Spain, as we've seen in recent quarters as well. And now also the U.K. starting albeit from a lower base but very strong growth rates from the U.K. as well. And the third bucket that we present in terms of our sales, our distributor markets increased by 45% during the quarter compared to last year, 44% excluding FX. And again, that's driven mainly by a large order from our main South American distributor.

Our gross profit for the quarter was SEK 35 million, which corresponds to a gross margin of 71%, which is down from 73% in the same period last year. And this decrease in gross margin mainly relates to the product mix. And in particular, the fact that we are now selling proportionately more of our pharmaceutical [indiscernible] in terms of share of our total sales. And EBITDA for the quarter for the group as a whole was slightly negative, so minus SEK 1 million. But importantly, it's a big shift compared to a year ago when it was minus SEK 11 million. And if we look at the EBITDA excluding the U.S. So looking at our ex U.S. business today, as Johannes highlighted already, we reported a positive EBITDA of SEK 2 million, which, of course, is a massive milestone for the company.

And if you look at what's driving this improvement in EBITDA compared to a year ago, it's mainly sales. And so if you look at OpEx, we report a similar level of OpEx this quarter, as we did in the first quarter of 2023 of SEK 44 million. So we're relatively stable there. What this ties to some extent is that we continue to decrease our selling and administrative expenses due to the organizational efficiency measures that we have put in place.

In the first quarter this year, those gains were offset by increased R&D expenses, which is linked to the fact that we capitalized slightly less or have a slightly lower capitalization rate than the same quarter last year. But overall, OpEx in total, very much in line with last year.

Also worth pointing out here is that the EBITDA is helped, as Johannes also pointed out earlier, by a positive FX effect of SEK 2 million, but still, of course, a clear and an important improvement in terms of EBITDA. And going forward, we continue to find ways to streamline our headquarter and administrative functions in the company to find further cost reductions, while at the same time also investing and adding resources to our frontline teams and customer-facing functions to really continue to drive sales growth. So this can be seen also in our staffing numbers.

So during the quarter, we added four colleagues in Sedana Medical. So we're now at 90 people, including consultants at the end of the quarter. That's up from 86 at the beginning of the year. And again, that's related to us adding field force personnel in our prioritized markets in Europe. And then if we turn to the cash flow and cash balance on the next slide, we report a cash position at the end of the quarter of SEK 361 million. That's compared to SEK 382 million at the beginning of the year. And this decrease is driven by investments in capitalized development expenditures, which is primarily our U.S. clinical trials.

If we look at the components of the cash flow during the period, we have cash flow from operations of positive SEK 8 million. That is including interest received of SEK 4 million and also a positive working capital effect due to delayed payments related to our U.S. clinical studies. Cash flow from investments in the quarter. There you see, we report a large positive number of SEK 103 million compared to a larger, even larger negative number in the same period last year, and those numbers are very much influenced by us investing last year and this year getting repaid our deposits that we invested in to achieve better interest rates than we would in our normal bank accounts.

So trying to adjust for those flows, we can see that investments in intangible assets, so mainly again, our U.S. clinical program, those -- that's type of cash flow from investments totaled SEK 52 million in the quarter.

And then finally, in terms of cash flow, the total cash flow, again, if we adjust for the deposits and the impact of that in this quarter and the corresponding quarter of last year, we see total cash flow amounting to minus SEK 45 million for Q1 2024. Then perhaps just to add for some further explanations. So we have that total cash flow amounting to negative SEK 45 million. But then if you look at the top of the page here, you see that our overall cash position only reduced -- was only reduced by SEK 21 million in the same period.

So the difference there is related to the FX gains that we made on our cash position that we hold in U.S. dollars. So as you may remember, we have approximately 75% of our available funds in U.S. dollars. So that's that effect coming through and helping our cash balance at the end of the quarter, compared to our cash flow during the period. And again, we expect to be fully financed until breakeven and to be able to execute on our strategic plan, including U.S. approval and launch. And as a reminder, we have no long-term debt in the company. And then on the next slide, you can see our largest shareholders at the end of the quarter, and we remain very grateful for your continued support.

And with that, I will hand back over to Johannes.

[Johannes Doll, executive]

So to wrap it up, as always, let's take a step back and recap the investment case for Sedana Medical, our business model lends itself to quite attractive profitability over time, and that is for two reasons. We continue to see good gross margins of 70% and up. So by definition, we can become quite profitable as a business when we reach scale. And on the customer side, we're dealing with intensive care units, not primary care doctors, who are relatively small target groups that can be covered with a reasonable operating expense level on a local level.

And we already have proof of concept for that in our main market, Germany, the majority of ICUs is already our customer today. The team is generating really attractive EBITDA margins on a local level, and while we're maybe not at the same scale to other countries like Spain and now soon also the U.K. are operating with similar EBITDA margins on a local level already. So we do have the proof of concept that we can run the business in a profitable way.

So it's all about reaching scale, convincing enough hospitals to use inhaled sedation more broadly and achieving profitable growth. Here, we have convincing clinical data on our side, showing that patients really benefit from an inhaled sedation. And equally importantly, these days, we can also show that hospitals save real money with inhaled sedation compared to the previous standard of care.

We have lots of places to grow, to create new [ Germany ], and we're well underway in several markets, as you've heard today, a regulatory approvals in 18 countries in Europe, and the largest commercial opportunity in the U.S. is still completely untapped. We're getting closer. And the FDA has given us fast-track designation. So FDA permitting, and we will see a launch in 2026.

And let's not forget, very important because these days, we still have, Johan just described to have a balance sheet that is still strong and that commitment to get to probability outside the U.S. not being dependent on external funding.

So that concludes our presentation. Again, a quarter that we are very pleased with to see the progress. Thank you again for listening, and we'll be very, very happy to take your questions.

[Operator]

Now I'll jump into the Q&A section here.

[Operator Instructions]

[Mattias Vadsten, analyst]

This is Mattias Vadsten from SEB. I have a few questions for you today. In the U.K., you indicated in the report that you're improving here quite clearly. And you have an MHRA approval, of course. What I am wondering is that if you could put this a little bit more into context, are there further sort of customers willing to listen to you now? Or are you even seeing full effect maybe a bit more sentences on the U.K. would be appreciated. That's the first one.

[Johannes Doll, executive]

So then let's take them one by one. Good question. So yes, the U.K. is definitely one of the markets we are very pleased with this quarter, the U.K. has been operating with a little bit of a disadvantage because we didn't have the full regulatory approval now that came late in the year after waiting a long period of time. And what we've seen then is a combination of things.

So it has been customers that started up that maybe were waiting for that approval to be in place. So sometimes the dynamics in the hospital are such that, it's quite easy to use the lack of approval as an excuse to delay the implementation of the treatment. So that has definitely helped.

What's also helping us is, remember, we got a very positive nice guidance before we had the regulatory approval, which is kind of the unusual order here. And in the U.K., a nice guidance. I mean, it's not mandatory to implement it, but there comes -- it comes with a certain implementation expectations. So as a health care professional you should follow what NICE is recommending. And now with the fully approved therapy that has caused more customers to use our therapy more broadly. And what has come on top, and that's always a very, very important factor.

We've also made progress on the execution side with better focus, better go-to-market model and the team that is really performing well at this point. So it's difficult to point to just one reason that the approval, of course, has helped. It's been a mix of new customers and old customers using more plus better execution. So it's really a mix of things that has led to very, very positive development and a true inflection point if I compared to the growth before.

[Mattias Vadsten, analyst]

No, I think that's a good answer. In terms of Spain, are you willing to give the sort of run rate, growth rate in spend just to get a feeling of at what pace we are growing there. And then also on Spain and perhaps also U.K., if you put it into context to like Germany where you have a very high penetration in certain hospitals or ICUs, could say. Is that the same in Spain and the U.K. where you have sort of a few successful customer accounts that they have a very high penetration?

[Johannes Doll, executive]

Yes. So we're not -- as you know, we are reporting the sales for these markets in aggregate. So it's basically the sum of Spain brands, U.K., Nordics and Benelux together. What we've also been saying is that Spain has the lion's share in the sales both and also in the growth.

So obviously, as markets on average grow more than 50%, then with your very, very good canals capabilities, you can probably figure out that the growth in Spain was even higher than the 50%, probably a bit higher without giving you a precise number, sorry for that. And in terms of penetration, these markets are still a little less mature than Germany, of course.

So what we have in Germany is really a couple of accounts that use inhaled sedation as the standard. So with almost a majority of patients that come in to the ICU receive inhaled sedation. Those type of customers are still quite rare, both in Spain and the U.K. We have a few that are coming close but it often takes a little bit of time of getting used to the therapy to really implement it as the #1 choice.

So probably the average customer in Spain and also in U.K. is still a bit smaller than the average customer in Germany. But what I find quite important, and that's what gives me a lot of confidence is we do see a really good momentum. And let's not forget, Germany was not built over 1 year or 2 years, either that took a long time.

So the team has a big head start. So compared to the development that we spent in Germany, I'm very pleased with the speed at which we progress right now in both Spain and U.K., the two countries you mentioned.

[Mattias Vadsten, analyst]

Good flavor. Next one is on OpEx in the U.S. Because it almost looks like you will be profitable on a group level -- you don't need to talk about actual cost in numbers in the U.S., how it will develop going forward, but maybe a bit more on how you -- how you thinking about adding personnel and sort of what kind of personnel that you need end of this year and sort of into next year. That's the next one.

[Johannes Doll, executive]

Yes, sure. So for that question, you always have a little bit of a balance between, on the one hand, wanting to prepare for the launch as diligently and as good as possible. and you need to balance that with the financial realities and us not wanting to have a big organization sit on the P&L too early before launch, right? And the way to solve this is for us now that we have concluded the enrollment of INSPIRE ICU-1 where we're getting very close to INSPIRE ICU-2.

So it's not very far away that we will get the top line data in the second half of the year. that will inform us. There's no guarantee, of course, but we will know how likely it will be that we will have a product on the U.S. market. Of course, we very much hope that those news will be positive. And once we have those data, we can feel more comfortable ramping up the team. But then also, as you say, we have to be very smart about the timing here depending on the different role. Of course, you want somebody to lead the U.S. team to come on relatively early.

So let's say, late this year, early next year. And you would want to have a bit more medical staff because these kind of profiles like an MSL or medical affairs can speak to physicians pre-approval. They can attend the conferences. They can build a KOL network, building on the great relations we already have with the different clinical trial sites. But then the more sales-related roles, for example, the key account manager that will, at the end of the day, cover the hospital.

Those you would want to bring in relatively late, let's say, a month or 2 before the launch such that you have enough time to train them and for them to get comfortable with the territory, do account mapping and so forth, because there's not very much they can do at the customer interface before you have the label approved. You're not allowed to sell, you're not allowed to do any preselling in the commercial roles. So it's kind of a staggered approach where the trigger point will be the top line data, as I said, and then depending on the growth between launch and later this year, we'll ramp up a bit.

[Mattias Vadsten, analyst]

Good. And the next one is only on -- if you could give any sense of how the cost for the U.S. studies will level off here maybe talk about it in the context of when you have recruited all the patients also in INSPIRE ICU because I imagine patient enrollment cost a lot? Or how should we see it?

[Johannes Doll, executive]

Yes. So if you look at the cash flow that Johan has been through, there has been quite a few effects this quarter, but if you cut to the essentials here. The biggest cash out, of course, is capitalized expenses and in that, by far, the majority is the U.S. trial. And the way we pay for the U.S. trial, of course, we're not running that ourselves. We're working with the clinical research organization, there's essentially three elements here that we need to pay for.

One is most sites asked for -- clinical trial sites ask for a startup fee. So just to include them in the study, you pay a certain amount. Most of that is behind us because we are not opening any new studies anymore now that we are so close. The biggest part by the margin and the cost is per patient fee. So every patient that gets included in the study, we paid to the hospital a certain amount. That amount is different by clinical trial side, but it's quite a substantial amount.

So that directly correlates with the enrollment speed right now. Of course, we're running full speed as you saw a higher number of that in Q1. And Q2 will also still be quite high as we are enrolling a lot of patients, and then the last one is simply a fixed fee to run the project for the clinical research organization, which is why we have such a big interest in finishing the study on time, so we don't run over budget on that.

So what all that means now is as soon as we have stopped enrolling patients, the bulk of the spend will be behind us. So we said that 23 patients are still missing in ICU-2. So it's a matter of weeks or a few months until that's done. And after that, you would supposed to have a little bit of a lag effect until -- from a cash perspective until all the invoices are paid and so forth. But with the study recruitment ending, that cost will come down quite dramatically.

We will still have U.S. cost for preparing the dossier statisticians, medical writers and so forth, but it will be nowhere close to what we have seen. So we will have a few quarters still with a little bit of a lag effect where the cash out on the U.S. is quite high, but then that should be reduced quite a bit, which is also why we are confident to say that the cash level we have at hand will be sufficient to bring the product to market because we will not see SEK 50 million cash out on the U.S. trial per quarter for very much longer.

[Operator]

We'll move on with the Q&A here.

[Operator Instructions]

[Unknown Analyst]

[ Bao Pareto ]. I think most of my questions have already been answered actually, but I just have one on the growth side here. So you seem to acknowledge that you got quite a head start towards your financial target now for the year, but I'm just wondering what it would take for you to update them. Is it just to see another quarter with similar results? Or what would you want to see?

[Johannes Doll, executive]

Yes, I can understand your question, for sure. We are off to a good start. As I've said, we are trending above or quite a bit above our full year guidance. Also, if you take out the South American order, which will not be recurring every quarter, as I said, still, this was 1 quarter out of 4, right? So the seasonality we have in the business looks a bit different every year. For example, Q2 last year was quite strong in relation to Q1.

So let's see how things develop and then we can assess what that means for the full year guidance. As a general note, as I've said before, I like to be a bit cautious when planning for revenue side because it makes it easier to stay very disciplined on the cost side. We want to build a company that does not need 28% growth this year, every quarter to breakeven. We've made very good progress over the last five quarters as can be seen in our P&L by both growing the sales and saving costs at the same time. But we cannot at all afford to become sloppy and where we invest and where we don't. So we must keep the focus and as much easier to do, I think, with a slightly more cautious revenue planning.

Now of course, if during the year, we come to the conclusion that the guidance should be changed. And the Board of Directors sees more upside in this year than we have previously guided, then we will, of course, adjust that. But I think doing that after actually one with still the majority of the year to come, that would be a bit premature.

[Unknown Analyst]

Okay. And just the other one. So this South American distributor that can be counted as a one-off, but were there any other such that can't be counted as recurring revenue?

[Johannes Doll, executive]

No. So we singled out that one because it is -- for the distributor business compare -- comparatively large order. But the fact that is on recurring is actually not so unusual for the distributor side. So a normal hospital will buy our products, let's say, every 6 weeks, every 8 weeks.

So they have a little bit of a stock, but they buy quite regularly for many of our distributors, not all, but many of our distributors. It's like a once a year purchase sometimes even less often. And therefore, that has to do with like import tariffs, shipping costs and so forth, it's a different dynamic in that business.

So we always have a little bit of that phenomenon but depending on whether an order falls on one side or the other side of the quarter, a quarter is stronger or weaker but we did single out this one because it was a little larger than what we usually see. But there's no other effects in the sales of that size or even close to that size that would be worth mentioning as nonrecurring.

[Operator]

And we'll move on with the written questions that we got. And we'll start with the first one here. Can you please explain which factors will have the most impact when you set the pricing of inhaled sedation in the U.S. given FDA approval?

[Johannes Doll, executive]

Yes. So it's probably a little premature to answer that question, as we still have some time. But the way to think about it is, of course, it will depend to some extent on the clinical trial results that we will get. So in Europe, we were, as you know, fortunate enough to show that in many aspects, inhaled sedation is better than propofol when it comes to how fast patients wake up, how much spontaneous breathing, you see how much opioids that they use, et cetera. The more of these benefits we will see in the study and the more of these claims we get approved.

So we can talk about it, of course, the more pricing flexibility that we have. And of course, what we will also take into consideration when setting the price is that a hospital, and we hope to show these results in the U.S. trial as well. But it's similar to what we've seen in Europe, we will be able to say that a hospital has a financial -- direct financial benefit from using our therapy because our patients would leave on average the ICU 3.5 days earlier, based on the European results.

And that, of course, makes a big, big difference for us but because the intensive care unit is the most expensive place to do care in a hospital. So from that perspective, it's very important for us to also consider how much value we are actually creating for the customers.

Now giving a price level at this point in time is, as I said, it's too early. What of course, we hope for is that we can benefit from the fact that a lot of comparable therapies are sold a bit more expensively in the U.S. and medical devices on a general level are a bit more expensive in the U.S. So from that perspective, I think there is some opportunity on the pricing side. But let's see that we get the data first and then we can think through how to price it appropriately.

And of course, we also I want to make clear that we want as many patients to benefit from this therapy as possible. So we are not going for something that is sitting in a niche at a very, very inflated price. We really want to make sure since we are, of course, convinced, we are not neutral, but we are convinced that this is the best way of sedating most patients in the ICU. That's of course, we also want to make sure that most patients get access to that therapy.

[Operator]

I would take one final question here. Considering the strong start to 2024, how do you plan to maintain this momentum and achieve your financial goals for the remainder of the year?

[Johannes Doll, executive]

Yes. So I think we've at least partly addressed that, that question is a great start into the year. We're trending above what we have given out as our goals for the year. So we can be guided for 14% to 18%. Now we have 28% growth in the first quarter that definitely puts us on a great track. We always have to be a little bit careful because there's some seasonality in the business that is a little bit different every year depending on how flu seasons go and different infection rates and personnel shortages in hospitals and so forth.

So since we are exposed to a very specific market, which is mechanically ventilated patients in the ICU. There will always be some volatility and maybe not every quarter, we will show 28% growth but what's very important for me is that we really see good momentum, both in our mature market in Germany, where we've continuously grown at good rates now for a while and especially also in the other direct markets, Spain, as I mentioned U.K., also France, that have shown growth rates of 50% and up very consistently for a pretty long time now.

So we can maintain that and at the same time, keep some discipline on the cost side and continue to focus on profitable growth opportunities. I see a very, very good future for us. And then of course, when we then get to a point where we can add the U.S. to the mix, which is by far the biggest potential market, 3x the potential compared to the European markets. I think this can be very exciting.

[Operator]

We have Mattias from SEB with another question.

[Mattias Vadsten, analyst]

Maybe it requires a long answer, but if you could dig a little bit about [ bar of ] success in the INSPIRE ICU studies perhaps. What do we want to see, perhaps looking at the secular end point, some of the more important secular end points? Also in terms of sort of the most common adverse events what you want to avoid to see? I mean, it requires a long answer, but maybe a few thoughts.

[Johannes Doll, executive]

If I get to pick my own clinical study results, which would have pose luxurious positioned to be in, and the one thing to note is that we've built that study based on the study we've run in Europe and what we know works and what we know didn't work. So that's, of course, a great advantage to be able to design the study based on that level of experience.

So the basic that, of course, we want to see is that we meet the primary endpoint and show that you can today patients with isoflurane as well as you can do that with propofol. That is important from a regulatory perspective so that the approval will depend on that. At, the same time, commercially, it's not a fantastic story yet. If you basically just say, "Hey, we will be launching something that can do the same what you already have".

So that, of course, is not enough. And this is where the secondary end points come in where we -- as you know, we've shown benefits in spontaneous breathing, wake-up times and opioids use in Europe and then also show the health economic benefit by the shorter ICU stake. All of these would be great to show in the U.S., wake-up times are important from just a workflow perspective in the ICU. It's, of course, much better for the patients if they can interact with their family earlier, if you can start physiotherapy faster.

I mean there's only benefits in the patients being awake faster. But if I were to pick one in the U.S. that I think will play a larger role than it does in Europe. It's, as I alluded to before, opioids because there's just so much more so much more attention to avoiding opioids after having used opioids very liberally for way too long and having caused an addiction, that is just probably one of the biggest health care crisis that the U.S. has seen or the world has seen.

So from that perspective, if we can show that patients on inhaled sedation need less opioids. That, I think, will be a big, big swing factor in our favor in the U.S.

On the side effect sides, as you were -- or maybe just to complete the efficacy, I think another wish, of course, is any data that is pointing in the direction that a hospital saves money without therapy. So that would be ventilator time, that could be ICU 3 days, there could be things like that. So everything that is saving the hospital money. And that is extremely important in the U.S. because the financial incentives and also the awareness of purchasing decision-makers of the impact on the hospital economics is much more pronounced in the U.S.

So it's much more important whether or not you save the system money or whether you cost the system money. So that definitely would be great to show again as we have done in Europe as well. So essentially, I'd already be happy if we get to the same label that we have in Europe.

On the side effect side since you asked for that. I'm not so concerned because Isoflurane is a well-known well-studied molecule. We've used inhaled sedation and several hundred thousand patients. We know the side effect profile very well. If something unforeseen severe has happened during the study, we would know because you have to report these things, but the side effects that have come up are very much in line with what was expected.

So that would be a very negative surprise if something comes out, that I don't expect. So the short answer is everything that's showing superiority in the secondary endpoints, especially opioids, everything that helps building a health economic case towards hospital decision makers would be fantastic.

[Mattias Vadsten, analyst]

Good. Maybe I mean you covered my second question as well. But if you show, let's say, a reduction in operations as you did in the European study, that would be sort of good results from that perspective, also for the U.S. and the FDA?

[Johannes Doll, executive]

Yes, for sure. Absolutely. So I think that will be very important. So yes, let's hope for that. And we show 30% reduction in Europe, even 50% in kids. So we know that the starting base for opioids in the U.S. is even a bit higher than in Europe, so more potential to show a reduction. So let's hope for the best. I'm quite confident.

[Operator]

That's a wrap for the Q&A section here. Thank you very much for everyone tuning in to Sedana Medical's Q1 presentation here. And also thank you very much, Johannes and Johan, for presenting and answering all of the questions. And yes, thank you very much, and until next time. Have a good day.