Sedana Medical AB (publ)

STO:SEDANA

Earnings Call Transcript 2020-Q3

[Christer Ahlberg, President & CEO]

Welcome to the interim report presentation for the third quarter of Sedana Medical. And we can go directly then to Slide 3 to introduce you to the company. I think you're well aware of the company today, but I just wanted to give you some updates on where we are and where we are heading. And Peter will end this meeting and give you updates of the clinical development. And also, I will summarize the financial update in the end of the meeting as well. So I mean, as you know, our purpose and what we are looking to in our focusing on our company is we improve life during and beyond sedation. And our vision is to make our therapy inhaled sedation with our product to become a global standard therapy for critical care patients.And going to Slide 4. Many of you have seen this before. But I think it's good to remind you sometimes that there are definitely medical need out there to improve the sedation within ICUs around the world, where we can see inhaled sedation have advantages when it comes to wake-up times, reliable wake-up times and reduction of ICU stay and ICU-free days. We also see a benefit when it comes to the safety profile, regarding cognitive recovery. And we are also -- interesting to see also that we can have a possibility to reduce the usage of opiate, which is important for -- I mean, for our patients, especially under discussion in the U.S. We also lately, I mean, during the last years have a huge interest regarding potential organ protection, especially regarding the lung functions where we can see nowadays also with inhaled sedation improvement of oxygenation and gas exchange. So these are the benefits for inhaled sedation.Going then to the next slide, Slide 5. The potential of the market, you also have seen before. And it is still not updated, but it's very much current. And this EUR 2 billion to EUR 3 billion is the total -- total potential and that should be divided into 3 different regions, where U.S. is very interesting with also a high price level. Europe level is -- average price in Europe for the entire therapy, including both device and pharmaceutical, is also relevant in the price level of EUR 100 per day. Then what are our strategies to actually -- to reach and penetrate this market then?Looking to Slide 6. You can see that we have there some visions based on that we should make in inhaled sedation with our product to become a new standard and the golden standard in how to sedate the patient in the ICU. And how would we do that? And we -- as you know, we have already started in Level 1, where we entered the market and the objective is to register AnaConDa, the delivery device for delivery of volatile anesthetics in as many markets as possible, as fast as possible. And that's we are -- have ongoing gas right now. And of course, that will continue over the next years as well.But then we need, of course, as a level 2, we need to go from off-label treatment as we have today to get to full-label treatment and therapy where we are owning the therapy. And that is the establishment of this and the entrance ticket to start to promote it fully, the therapy. And that is what we're aiming now for the end of -- in the second half year of 2021 in Europe and then ending up in more markets step by step.But actually to start to grow this market, then we need to have evidence-based medicine. We need to have more supportive study showing that inhaled sedation are superior versus IV sedation. And there -- therefore, we are focusing very much on sponsoring investigator-initiated trials as well as our own studies, Phase III studies and introduction of Phase IV studies in the future.So -- and that will also end up in a Level 4, where we -- with both superior inhaled sedation together with organ protection, so you actually catch two birds with one stone with the treatment. And when you have achieved that, when we have achieved that, then definitely, we have the possibility to become the standard treatment all over the world actually. So that is the step. These are the steps that we are looking into.And then going then to Slide 7, what have we achieved in according to this plan, strategic plan? Going to Slide 7, you can see the map and the blue countries become more and more. They are more and more. And still, we are lacking U.S., obviously. But out of that, we are coming closer to a very nice blue map here.Also going to the Slide 8. As you know, we have an increasing adaptation of this treatment despite the off-label situation. We have sold more than 500,000 units of our treatment. We have a rolling 12-month growth of 86% of the sales of our devices. In Germany, which is the first country, it's more of the test market, we have a capture rate of the 5% to 7% of the market. We have example of even better capture rates around the world or penetration rates. This shows, obviously, that there is a need for this medical need. And also that we are also adding up coming -- or are included in more and more guidelines. Also shows that this is an alternative. I mean -- and that this is a medical need despite of the latest situation.And looking into the sales in the third quarter on Slide 9. We have today announced that we had a growth in local currencies by 39%. And in Swedish kronas then, that is 31% growth. And that is looking to a 12-month rolling, it's 86% growth, which is massive, I would say, in interest. And as you see on sales, on 12-month rolling, we are up SEK 160 million on the AnaConDa sales.Going then to the next slide, Slide 10. We -- I mean, we are now preparing for the full launch in next year. And we have direct sales now organization in Germany, Benelux, France, Spain, U.K. and Nordic, and we will add up some more markets before or just after the launch next year. And the intention is to have approximately 15 countries with direct sales. In Europe and in the rest of Europe, we will have sale via distributors. U.S. organization and the commercialization setup will be -- we are looking into that different pathways and alternatives just now and working on that. But we will not decide before 2022 what to do here, if we're going to do it ourselves or together with a partner. Another strategy is actually to be included in guidelines. And actually, [ BRIA ], that way, become a standard treatment.And on Slide 11, we -- during actually, after this quarter ended, we actually announced that we are now also reviewed by NICE and the Medtech Innovation Briefing. So there is a review on AnaConDa saying that this is a good alternative to IV sedation in the ICU. And that's, of course, an interesting -- very interesting reference additional to the German guidance actually.And another step in this evolution is to also not only working through the guidelines and sales organization in Slide 12. We are also, of course, focusing very much on the evidence and the increased number of studies and the number of patients that are evaluated through controlled studies like this. So this is the package that we have now. There are some other studies ongoing in parallel, which are investigator-initiated as well, but -- which is not included here. So we will have more studies actually coming up later on. But these are the most important one. And the blue ones are our registration studies in Europe on top with SED-001, Peter will come back to that, as well as the pediatric study. And I think the interesting thing with the U.S. studies is that we are very much aligned with -- in line with the plans. And we foresee that we should initiate these studies after next summer. And then we'll have different focus, as I have said before, while we'll focus on lung protection and improved gas exchange. And the other one will really focus more on the cognitive recovery effects such as reduction in delirium and hallucination.And that will be the same thing with the green ones. SESAR study is the one that is looking to the ARDS and improved gas exchange. And the INASED is looking into much more on safety side and cognitive recovery and reduction of delirium. The ISCA trial is interesting, of course, because that is looking into COVID-19 patients and comparing and that's an observational retrospective study comparing IV sedation and inhaled sedation.So that's what we have now, and Peter will go into the update of the clinical development here now on Slide 13. And maybe go directly to Slide 14.

[Peter Sackey, Chief Medical Officer]

Yes, please. So Slide 14. The European market registration study, the IsoConDa study. So you may know that this study is completed. It is still a Phase III trial at there it was on Germany and Slovenia. The study was completed in January this year, which was randomized, controlled, open-label study, confirmed the efficacy and safety of inhaled sedation with isoflurane in mechanically ventilated ICU patients. And this was a study that design-wise was discussed with the general content authority, which will be referenced in United States in our application. And the study, we will associate our study with regard to treatment and with a follow-up up to 30 days.And the primary endpoint of the study was sedation efficacy assessed at [ ocean ] time within the target RASS, on the sedation scale called RASS, minus 1 to minus 4 and secondary endpoints included wake-up times, proportion of time with spontaneous breathing, opiate requirements, ventilator and ICU-free days.

[Christer Ahlberg, President & CEO]

Could you just mention about spontaneous breathing, what is the clinical benefit for such a indication?

[Peter Sackey, Chief Medical Officer]

So spontaneous breathing has various benefits due to the risk of diaphragmatic atrophy and the -- improves the pressure ventilator conditions for the patients and associated with better pulmonary function. Yes. And so the top line results, that NICE [ connotated ] and presented earlier.In short, we'll now present the primary endpoint, which is on Slide 16. So if you can move to Slide 16, the primary endpoint, sedation efficacy. We assessed as a proportion of time within the target interval on the RASS, Richmond Agitation Sedation Scale. And for isoflurane and propofol, the proportion of time was above 90% for both and with quite a tight confidence interval. The non-inferiority margin was a 15% relative difference, meaning that the lower boundary of the [ confidence in drug ] could go down to 77%. And as you can see on this picture, the [ confidence in drug ] is far away from the non-inferiority margin, indicating non-inferiority of isoflurane to achieve sedation in patients on chemical sedation.Moving to the next slide. Adverse event, a few adverse events on the test, and there was no safety signals. No concerns regarding this and no treatment emergence against the safety to have any impropriety. So all in all, looking at the data in more detail, we are confident that we -- merits to be registrational study for our marketing authorization application in Europe.We move to Slide 18. Sorry, so the secondary and exploratory endpoints have been analyzed and will be communicated as the standard in scientific publication sometime in 2021.Now let me move over to Slide 19, clinical developments for the U.S.And we go back to Slide 20. After scientific advice meetings with the FDA, the road map to the USA was - U.S. was clarified and consists of a number of steps. As you can see on Slide 20 here, one step is long-term studies, given the fact there's NDA program as another step. And after those, we move over to 2 clinical trials from like blinded studies. And after completion of these and compiling a safety database, the NDA application submission will be in 2023, 2024.So we move over to Slide 21, where we see the time line for the activity in Europe and in the U.S. As mentioned before, we have had the last patient in the IsoConDa study and we have high-level data. We are submitting the market authorization application in this fourth quarter 2020 and also initiating first patients in the pediatric study, which is the IsoConDa study, which is taking place in France, Spain, Germany and Sweden. So we are currently doing the final preparations to include the first patient in that trial. And further, for Europe, we anticipate to have marketing authorization approval in the second half year of 2021 and in the second half year of 2022 to complete the pediatric study and have a pediatric indication in 2023.For the U.S., we are currently completing the human factors formative testing together with Harvard Medical School. And we are underway with the patient study and we'll be going to the FDA to -- or advocate to move to an IND in early 2021, and thereby, we will be -- start focus. As anticipated, we will be able to start to go study after the summer and do the additional preclinical studies the FDA request, for example, for pediatric approval.And then we will be discussing and planning for the launch. In 2022, we'll be doing the planning. And in 2023, we are submitting the NDA and then an approval in 2024.And we move to Slide 22. And that is for Christer?

[Christer Ahlberg, President & CEO]

Yes. Thank you, Peter. And looking to the financial highlights for the quarter. What we could mention here added to what I already have said is, I mean, the same. You saw now SEK 21 million -- in SEK 21.4 million in sales, which is an increase by 31% in Swedish kronas but 39% in local currency. We have a slightly lower gross margin this quarter due to different reasons. Mainly, it's a leftover from the [ cow tick ] second quarter and the increased transportation and transportation costs. And also, it's a little bit different product mix compared to what we have seen. Normally, it should be -- we are estimating that it should be on a normal situation around 70% plus.EBITDA margin. EBITDA, we have a loss of SEK 10 million. Compared to last quarter, we were approximately breakeven, but of course, then we had a higher sales. OpEx is increasing because we are preparing us for the full launch next year. So we are increasing number of people, both in sales and marketing, but also within medical, regulatory and quality because, I mean, we have soon have a pharmaceutical in place, and we are also -- pharmaceutical companies will need that. We are growing the number of employees, as you see.Cash flow operation. Last quarter, we were positive in cash flow, thanks to the increased sale. This quarter, we are negative. Total negative cash flow is minus SEK 27 million, which is, I mean, a relevant figure, especially as we're looking forward when we're starting up in U.S. as well. I mean, the cash flow will be negative significantly also, especially during next year when the clinical studies start up in U.S. But on the other hand, we are prepared for that.Since we have also good -- looking into Slide 24. We have a good cash situation. SEK 406 million by the end of September in cash. So that is okay, and there, we are fully funded for European commercialization, which is the focus now as soon as we have the registration in place here. And then we also are funded for the clinical development in the U.S. as well. So it looks good from that point of view.And next slide, looking to the shareholder list. It's not -- no big changes compared to last time. Still, we are a combination between institutions, long-term institution, both Swedish but also international, German and French and the British ones and together with the founders in the company as well.And that was the last slide going to the -- I mean, just a reminder here, I mean, on Slide 26. This year has been very strange for many different ways. It has been -- I mean, from us, from our perspective, has been a door opener for many new ICUs to look into this business. And -- but of course, it has been challenging from a clinical development perspective to collaborate with ICUs that are in the middle of a huge crisis. And -- but I think we have done it fantastic over these first 3 quarters. And I'm looking really much forward actually to all of the rest of the year, but also into -- going into 2021, which will be a very interesting year from many perspectives, both in Europe and in U.S.So that will be the last slide on Slide 27, where you have the question slide. So if there are any questions, you are -- we are open for that now.

[Operator]

[Operator Instructions] Our first question comes from the line of Peter Östling from Pareto Securities.

[Peter Östling, Life Science Analyst of Equity Research]

Yes. I have a couple of ones. First, I would like to ask you about one of the investigator-sponsored trials that are ongoing, the ISCA trial. I noticed that there is this venture capital company called [ Roe Capital ] that has done a launch map over potential COVID-19 treatments, vaccines, diagnostics and Sedana Medical is on that list. And I just noticed that they put completed for this specific COVID trial. I was just wondering if you could give us an update when you think that the results would be published or announced.

[Peter Sackey, Chief Medical Officer]

So I wish I could give a straightforward answer to that. This is Peter Sackey. But I believe the most recent communication we had with the main investigator there who was given a grant for data collection is that data being currently entered by the -- in the different countries. This is an observational trial, so there's not a prospective recruitment target. And it is just as I said with it, there would be sufficient patients already available. But I can't give it a time line for when they will be -- when they will have completed the data entry or when there will be a publication out there.

[Christer Ahlberg, President & CEO]

It should be during this year.

[Peter Sackey, Chief Medical Officer]

Yes, absolutely. I mean I would anticipate within the next 6 months, possibly, but it's a question mark now.

[Peter Östling, Life Science Analyst of Equity Research]

Did you say within this month or...

[Peter Sackey, Chief Medical Officer]

No, no, no. I think within -- I would anticipate that they can get something in the next 6 months. That's my guess. It's not our study so, of course, if COVID-19 largely leads to heavy clinical duties, then this might be delayed.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. So maybe they have misunderstood it, the [ Roe Capital ] that they put completed on their map. But as...

[Peter Sackey, Chief Medical Officer]

Completed means that the patients are there. In each country, there is sufficient number of patients treated with inhaled sedation and IV to actually compile the data. But the people who are doing that, the clinicians who work in the ICUs, so it's not that -- they don't have the same time line as we do. In case the situation that they need to work with clinical patients, that will go before publishing this unfortunately.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. I understand. Then a quick question. If you could give us some updates about China. And then how many employees do you expect that your U.S. operations would have at the end of 2021?

[Christer Ahlberg, President & CEO]

I can start with China. The registration process is ongoing. And so it will come within the time line that we have said before, and that was before next summer. That is the time line that we have given before. And that we are following that path. Regarding U.S., what we will do in U.S. now and as long as we can go there, which we don't know when we can go, but expecting to go there at least in the beginning of next year. That is our aim. And then, of course, we will employ a handful of people during the next year taking care of the clinical studies and networking with key opinion leaders and -- I mean, more intelligence work for the American market. So that is what we foresee now. It could be changed depending on what the outcome will be there, of course, in the future. But that's what we have now.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. And lastly, before I enter back into the queue, I might have misheard you, but when you talk about Germany and said that you had market share there of between 5% and 7%. I believe you said that the market share in other markets are higher. Could you give a clarification of that?

[Christer Ahlberg, President & CEO]

No. I mean -- but I mean, in -- well, of course, when you look at the penetration in the market, in different markets, there are different penetration rates, of course, in different markets. Germany do have 5% to 7%, which is the -- I mean, it's a huge market and then -- I mean -- and then it could differ in different markets, obviously. And yes. And -- but most of them do have lower than that, of course.

[Peter Östling, Life Science Analyst of Equity Research]

Yes. So there are markets where this -- the uptake already now has been better than the penetration of 5% to 7%?

[Christer Ahlberg, President & CEO]

Well, I cannot comment on that. I don't know why I said it actually. So I actually won't comment on that. Sorry for that, Peter. I'm not concentrated today. Sorry for that. Yes. Okay. I have another question, which I should not answer, but I mean, we -- I mean, regarding the trends, what's happening now in the ICUs around Europe. I mean, we see everywhere that COVID is hitting us -- hitting all the countries quite badly. What we have seen in third quarter, what we have already said in our report is that the sales that we have in the third quarter is back to normal, I would say. So ICUs around Europe in the third quarter were not affected. So very much of COVID patients actually, so there were a few of them. And that shows that we have a very strong position now after the first wave. And then it's up to you then to explore, I mean, now when ICU are starting to get more occupied again, what that will -- what kind of impact that will have. But I mean, that is -- I mean, that is the only thing I can comment on that. And -- but obviously, it's not like the first. You can see that the -- nowadays, they know much more how to treat this -- I mean, this disease compared to what they knew in the beginning. So obviously, there are much less people that are dying, and that is, of course, relevant when we're looking into the figures in the ICUs as well. So that is what I can comment on that. Any other questions?

[Operator]

[Operator Instructions] There are no further audio questions. I'll pass back to the speakers for more questions. Thank you.

[Christer Ahlberg, President & CEO]

Okay. Thank you very much for this meeting, and all the best. And see you around. And if not before, we hear from you after the fourth quarter. Thank you. Bye-bye.