Sedana Medical AB (publ)

STO:SEDANA

Earnings Call Transcript 2021-Q4

[Operator]

Hello and welcome to the Sedana Medical Q4 Report for 2021. [Operator Instructions] Today, I am pleased to present CEO and President, Johannes Doll; CMO, Peter Sackey; and Head of Group Finance, Linda Frolen. Please begin.

[Johannes Doll, CEO & President]

Good afternoon and good morning to those of you dialing in from the U.S. Welcome to Sedana Medical's Q4 and full year report '21. As the moderator kindly introduced, I'm Johannes Doll, the company CEO. And I'm here with my 2 colleagues, Peter Sackey, our Chief Medical Officer; and Linda Frolen, who is heading up our group finance. Thank you very much for taking the time with us. On Page 2, as always, I recommend you give a quick read to our disclaimer as we will be talking about the future in this presentation. If we then go to Page 3, please. Let me again start with why we are here. Our purpose is to improve life during and beyond sedation. And in order to live up to this purpose, the entire Sedana Medical team gets up in the morning and works on only one thing, which is to make inhaled sedation a global standard therapy for critical care patients. And these are very exciting days for us in Sedana because we made some significant steps towards that vision.We've just had the first shipments of our own proprietary Sedaconda drug. So now we're moving from a company that was aspiring to offer the first and only on-label therapy for inhaled sedations in the intensive care units to actual patients out there benefiting from our therapy and that's of course a major milestone for our company. On Page 4, if you look at the highlights of the quarter, we are looking back on to an eventful quarter where we've made progress on our key priorities and we are also looking at a financial performance that we are quite pleased with. We've seen all-time high sales for both the quarter as well as for the full year. We've seen a 2% growth in the fourth quarter compared to the year before, which probably sounds like a modest increase. But keep in mind that the fourth quarter of 2020 was an exceptional quarter where we had the first COVID winter and we saw a lot of demand from customers with building significant stock.So I'm quite pleased that we could reach these high levels of the previous year again. We've seen a gross margin of 71% in Q4, which is up from 64% in the year before driven by the country mix, which we will get back to, and also by the fact that we were able during the quarter to avoid air shipment to a large extent. On the operational side, you know that we have 2 main priorities in the company. To execute an excellent launch in Europe and also to already now prepare for what one day will become our largest market the United States. 14 out of 15 countries that were included in the European application have to date given us the green light on the national levels. The first bottles of Sedaconda are shipped out of the door and in January, we had a very nice highlight when NICE in the U.K. recommended inhaled sedation with Sedaconda as a cost effective option for intravenous sedation. On the U.S. side, we took an important decision to build our own commercial operations in the United States.We got the IND approved according to plan end of last year, which also means that we will in all likelihood be able to keep our timeline and start our clinical trials on time. If we move to Page 5, I already mentioned we had a new all-time high sales for both the quarter and the full year. And on this page, you also see the significant jump that we have seen in Q4 2020 when a lot of customers built up significant stock as a response to the COVID-19 wave in the winter of 2020, which then also negatively affected the first half of 2021 in some countries. I'm very pleased about these results. On Page 6, if you look at the regional breakdown. We continue to see very strong performance in our main market Germany with 12% growth for the quarter and 9% growth in the full year. In the other direct markets; which is France, Spain, U.K., Nordics and the Benelux countries; we've had an interesting year with very low sales in the first 2 quarters as customers were still working through that significant inventory that they had built up in Q4 2020.So we were chasing a pretty significant gap throughout the full year and I'm very pleased that now we do see quite good momentum in most of these markets and we have actually reached the high levels of 2020 again and I'm looking forward to seeing that positive momentum continue going forward. On the distributor side, so these are markets where we do not have our own commercial presence, but we sell our product through distributors. We had a very strong year overall almost doubling the business. Having said that, we've seen a decline in the fourth quarter, which is again also we need to be a bit careful with the comparator here because Q4 2020, especially in the market in Latin America, there was a propofol shortage which was not available so people were basically buying whatever they could get their hands on to sedate their patients and our distributors have overproportionately profited from that situation.If we go to Page 7, you see our 2 main priorities, Europe and the United States, which I will now go through in a bit more detail. Page 8. After receiving approval on a European level last summer, we have now received national approvals in 14 countries. The only one that is still outstanding and is taking a bit of time is Poland. We've not received a negative answer from Poland. It's just that they are taking a lot of time to get the product approved so we're expecting that hopefully soon. And then there's 3 countries in Europe that are on their own path. Switzerland of course is outside the EU, U.K. due to Brexit also take a lot of pride of having their own process now and Italy is the only EU country that was not part of the initial application with these 15 countries. And we have submitted in Italy before the end of the year in December, a little bit ahead of what we had planned. So in these 3 countries, we are expecting approvals in 2022. Some of these timelines are a bit difficult to predict especially in the U.K. where MHRA is quite under pressure from COVID and Brexit and other [ sorts ]. If we then move on to Page 9. We have finally launched in Germany and sold the first bottles of Sedaconda. Of course an event that everybody in the company has been looking forward to for a very long time. A lot of work has gone into this and we will have more countries have launches over the coming months. Launch timings are mostly driven by of course the availability of supply, but mostly from the local pricing and reimbursement processes and how fast we are able to navigate those. But of course we are aspiring to launch as soon as possible in all of these markets. And assuming we get the U.K. approval by the end of the year, we will have the product on the market in all of our direct markets. Now the big question of course is what can we expect in terms of uptake? How quickly will we be able to convert what is now off-label sales to on-label sales?And as you've already seen in our vision, we are aiming at becoming the standard of care. So we are not chasing a small market share, but believe that most patients will benefit from getting inhaled sedation rather than intravenous sedation. So of course the level that we are aiming at in the long term is to convert the majority or a significant part of the off-label sales to on-label. But I will also say that we are not expecting a straight line and now that we have the approval, the flood gates will just open and we will see these sales automatically. But we are expecting a gradual ramp up over time and that is because, a, countries don't launch at the same time so we will see launches over time. And within each country, it of course takes a bit of time to convert the accounts. So from experience in every launch, sales never come automatically. It's a lot of work. You have to convince the ICU staff to prefer this over generics.You have to convince pharmacists to pay a premium for our branded product over the generics. And sometimes you have to navigate kind of committees purchasing organizations and we can't always influence those processes. So it will be a gradual ramp up rather than a straight line. If we then go to Page 10. We've had a great milestone in January when NICE in the U.K. issued a Medical Technologies Guidance. which was great in 2 ways. First, NICE recommended Sedaconda ACD for inhaled sedation and, as you probably know, NICE does not give out recommendations lightly. So that's a great quality stand for us. And they also came to the conclusion that Sedaconda leads to significant cost savings compared to intravenous sedation of almost GBP 4,000 if you look over a 30-day time frame per patient. And a nice assessment of this sort, as you probably know, is a very, very thorough process. In our case, it took more than a year.They looked at 21 clinical trials including our own and if they issue guidance like this, it also comes with an expectation that they get implemented. So it does not force health care personnel to implement the guidance, but there is a clear expectation that they are being considered and put into practice. And as of course you also know, NICE is a very reputable institution also beyond the U.K. so we're getting a lot of tailwind from this assessment also outside the U.K. If you then go over to Page 11. This NICE guidance puts us into a very nice position where we cannot only talk about the clinical benefits of our therapy, but we show then the clinical trials SED-001. So less opioid use, more spontaneous breathing, shorter and predictable wake-up times and at the same time being as good as propofol when it comes to the sedation as such. So nobody has to worry about the patients not being sedated.And on top of that, now we can also point to the health economic benefits that NICE has confirmed of almost GBP 4,000 per patient. And this is of course a stronger message that NICE has given this assessment as an independent assessment as opposed to a situation where we would have created a health economic model and tried to convince customers that way. If we then go to Page 12, let's switch gears a bit and talk about the United States. As I said previously, we have no doubt that the U.S. is our largest potential market with 5x the number of ICU beds compared to today main market in Germany and also 3x to 4x the net price levels when it comes to the recurrent therapy with propofol, which of course is not the only input factor into what will be our pricing strategy in the U.S. But it's quite comforting to know that propofol is being sold, if you look at the net prices of what customers are actually paying, which is at quite a bit higher level than we see in Europe.So even if the approval in the U.S. is still a few years out, we are already today starting to be very focused on the U.S. We are on the ground and preparing that market. On the next page, Page 13. In light of this opportunity that I just talked about, we have assessed different go-to-market strategies and have decided to build our own commercial operations in the U.S. This is because of the size of the potential market, but also because the target universe is relatively manageable. So it's not like we have to cover 300,000 general practitioners in the U.S., but there's less than 5,000 hospitals that do have ICU care in the U.S. And even for a company our size, that investment level and the staffing level required is manageable. So we have defined a target organization that we want to have in place at launch and we will build that organization over time trying to strike the right balance between not taking the investments too early, but at the same time also making sure we do have the proximity to the market so we can generate the insights, understand the market, build a network.So by the time that we launch in U.S. in likely early 2025, we are well equipped and well positioned to do that. I will of course also say that this strategy that we have chosen will keep open the option to complement our own presence with complementary partnerships if we decide that makes sense. For example, to further increase the reach or to get access to hospitals that otherwise we wouldn't get access to. But I think strategically, it's very important for us to take our destiny in our own hands and then have that choice rather than being dependent on signing partners.Let's go to Page 14 and Peter will talk us through the progress in preparations for the clinical trial in the U.S.

[Peter Sackey, Chief Medical Officer]

Okay. So as we communicated before Christmas, we received the IND approval for the clinical trial in the U.S. and we also had the study protocol reviewed by the Central Review Board of Ethical Committee and they've approved the study protocol. So contracting the study sites is running on and we expect to have our first patient included in the trial in April. The studies have been given the name INSPIRE ICU, which stands for inhaled sedation versus propofol in respiratory failure ICU. If you move over to the next slide, which is Slide #15. So looking at the overall timeline, we're recruiting in our European pediatric trial Iso-COMFORT and will continue throughout the year. 2 years trial starting recruiting patients in the spring and we expect to have the last patient in in Q3 2023 and that would lead to an NDA in late 2024. Finally, the investigator initiated trial, the INASED trial, which is ongoing in France is still recruiting and will contribute the data to the NDA submission.

[Johannes Doll, CEO & President]

Thank you, Peter. So if we then move on to Page 16, please. A very brief update for what's happening outside Europe and the U.S. So we are very clear that our priority lies in Europe and the U.S., but there's some activity of course also outside. We have during the quarter got an approval in 2 sizable markets, Turkey and Argentina, both of them are sizable countries with a decent number of ICU beds. And we've also seen a submission for marketing authorization in China, which our partner Kyuan has put into the Chinese FDA end of last year and they are now in very close dialogue with the Chinese authorities. And while I cannot predict exactly the timelines of the Chinese registration process because that has a lot of variations if you look at examples. I'm very happy that we have submitted and we are now looking forward to getting started and also seeing Chinese patients benefit from our medical device.We've also filed for marketing authorization of the device in Brazil. Brazil of course is also a sizable market with 200 million people and it's an interesting expansion opportunity because we're working with the same distributor that is already working with us in Colombia and Mexico. And if you followed our reports over the last year, these 2 markets were the ones that came up as the second largest markets behind Germany. So it's a sizable business that we have in Latin America and strengthening that with Brazil once it is approved will of course further strengthen our presence there. Overall, we are active either directly or through distributors in more than 40 countries so we have sales in more than 40 countries with of course a very large majority of these countries selling the device and in Europe we are now starting to also sell the drug.On Page 17, a very brief update from the supply side. We are running a dual sourcing project, a strategy to reduce our dependence on individual suppliers. And it's also not a secret that we are producing the majority of our devices in Asia and shipping from Asia not just due to COVID, but also due to COVID is of course not the cheapest way of shipping and it's also related to some supply risks. So in order to mitigate that risk, we have started to look into production in the European Union. We have started actually the production of our Sedaconda syringes. So that's an important accessory, every patient needs between 2 and 3 of these syringes every day. They are now being produced in our production site in the European Union and step by step we will add more products to production that is closer to the customer.With that, I will hand over to Linda, and to Page 19, and she will take us through some of the financial highlights of the quarter.

[Linda Frolen]

Thank you. I'll skip the comment on sales since Johannes did that quite thorough. For the quarter, we ended up on a gross profit of SEK 33 million corresponding to a gross margin of 71%. The increased margin for the quarter is mainly an effect of a positive market mix and also lower shipping costs due to more sea freight. When it comes to EBITDA, Q4 ended up at minus SEK 13 million corresponding to a margin of minus 29%. The increase in cost is mainly increased selling expenses due to higher costs related to the prelaunch activities of Sedaconda (isoflurane), a larger commercial and market organization and a higher level of activity compared to last year. Also increased R&D expenses mainly due to a lower degree of capitalization attributable to the initial scale-up of the organization.Slide 20, please. When it comes to cash flow, cash flow from operations were minus SEK 2 million for the quarter, minus SEK 41 million for the full year and cash flow from working capital of plus SEK 12 million mainly due to high levels of accounts receivable at year end last year. When it comes to investments, cash flow from investments for the quarter were minus SEK 33 million, minus SEK 110 million for the full year and it's mainly related to expenses for clinical studies, work on registration of Sedaconda ACD and Sedaconda (isoflurane) in the United States as well as investments related to the pediatric study in the EU. The total cash flow for the quarter ended up at plus SEK 571 million where SEK 607 million is net from the December capitalization. And total cash flow for the year was SEK 454 million, which ended up -- at year end, we had SEK 836 million in cash compared to SEK 262 million at the beginning of the year.Slide 21, please. When it comes to the list of our largest shareholders, that's roughly the same as the end of the previous quarter apart from AMF entering the list after its share issue in December. And on this slide, we can also mention that we have started the project to upgrade [indiscernible] and we will come back to you with the timeline for that. Thanks.

[Johannes Doll, CEO & President]

Thank you very much, Linda. So if we then move on to our last Slide 22, which is again the highlights of the quarter, which I will not repeat of course. But I hope we could give you a sense that it's -- these days at Sedana; it's very eventful days, exciting days and we're looking forward to an eventful year of 2022 as well.And with that, I will give it back to you, moderator, and open it up for questions.

[Operator]

[Operator Instructions] Our first question comes from Peter Ostling with Pareto Securities.

[Peter Östling, Life Science Analyst of Equity Research]

I know it's a little bit of a cliche, but I have to say it anyway. Congrats, guys, for an outstanding quarter. So over to my question. I have numerous ones, but I will limit myself to 3 initially and then go back to the queue. If you look at the statistics for Germany on patients on mechanical ventilation, the numbers have come down since the recent peak in mid-December, but are still on almost the same average level in Q1 versus Q4. Can you confirm that the demand has been high also in Q1 or was it some stocking at customers as we have seen in some previous quarters? That's my first question.

[Johannes Doll, CEO & President]

Sorry, were you going to ask your 3 questions or should I answer them one by one?

[Peter Östling, Life Science Analyst of Equity Research]

Yes, take them one by one. That one was quite brief.

[Johannes Doll, CEO & President]

So thank you first of all, Peter, for your compliment on the quarter. So it is true that if you look at the number of ventilated patients, the statistics are still on a relatively high level in the first quarter and while of course I cannot comment on the current trading and the sales we've seen year-to-date, what we see in the clinics when we are out there is still a relatively high level of patients in the intensive care units. Having said that, from a COVID perspective, we do also see an impact from Omicron which tends to have milder disease for most people and also you see that reflected in the ICU. So from a pure underlying patient perspective, Q1 is a bit slower than what we've seen in Q4, but of course I can't give you how that translates into sales in the Q1.

[Peter Östling, Life Science Analyst of Equity Research]

But I think my specific question was if there was any inventory buildup in Q4 as we have seen in some previous quarters?

[Johannes Doll, CEO & President]

Yes. So we don't see -- so if you're referring to 2020, that was really an exceptional year because hospitals did not know what to expect. It was the first winter with COVID and COVID was a new disease. They were much less comfortable with handling these patients so we saw a lot of stock up simply because they didn't know what to expect and there was also in some countries a shortage of propofol or at least rumors of it running out in other places. So that's why we saw this enormous buildup. We've not seen that buildup in Q4. Of course you see some end-of-year rush sometimes in some accounts simply because they have to spend their budgets or they need to squeeze their numbers into this year versus next. But from what we are seeing is that the use in the hospitals is quite close to what's been purchased. So we have much more regular purchasing pattern compared to what we've seen in the year before.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. Great. My second question is on the upcoming U.S. study. The study design was approved by the FDA already in July last year, but up until now you have been rather mum about the actual design of the study. Can you talk a little bit more on what the primary and secondary endpoints will be and how the study will differ versus the European one. Is it still -- for instance is it still a non-inferiority study?

[Peter Sackey, Chief Medical Officer]

So yes, you're correct. I can share some information there. So these 2 trials are both non-inferiority trials, they are identical to [ these trial ], the 2 trials. The primary endpoint is the proportion of time at the targeted sedation time, which is the same in the European study so that's RAS minus 1 and RAS minus 4 and hopefully the comparator in the label dosage is slightly higher than in Europe -- slightly lower in Europe. And secondly, there are 4 key secondary endpoints. So we're looking at [ opiodose ] over time compared with before randomization. We're looking at time to sedation for patients sedated during treatment. We are looking at cognitive recovery 1 hour after sedation. And finally, we're looking at [indiscernible]. So that's 4 key secondary endpoints. So it's not too different from the signals we found in the European study. They are slightly different because according to FDA guidance so it's a frequent testing.And then when it comes to differences compared to the European study, the randomization is 1.5:1. So for every 3 isoflurane patients, there will be 2 patients treated with propofol so slightly weighted to isoflurane and the reason for this is that we need to have the number of patients now who are treated with isoflurane in the database. That number will be sufficient with our own trial. So we no longer need to depend on any investigator initiated trial to get the database patients. So that's one difference. Another difference is that the study is assessor blinded. In the European study, the RAS assessments and the pain assessments were open whereas in the U.S. trial, we will use a [ driver effective ] approach which means that bedside staff will know what patients are receiving, but every 2 hours someone will come in.We don't know what patients receiving and will cover blinded and it will be like a dummy standing system there and [ this does come in in the ] assessment and this is one of the things that they do want to see one reason why the wanted a new trial in the U.S. [ They did not see -- they can see the trial ] performed by private assessors. Then we also have a long-term follow-up, which is a telephone-based cognitive testing and I think with daily life that will be performed centrally via remedies which we didn't have any color from the...

[Peter Östling, Life Science Analyst of Equity Research]

Did you say what's -- can you just remind me about the time where you measure the sedation, was that 24 or 48 hours?

[Peter Sackey, Chief Medical Officer]

So it's up to 48 hours, sorry about that. So the trial, the duration of treatment is 48 plus/minus 6 hours so that's...

[Peter Östling, Life Science Analyst of Equity Research]

Lastly, before I go back to the queue. You had about SEK 32 million in intangibles in Q4. Is that a good quarterly number going forward or will it increase significantly as you start the U.S. trial? I guess what I'm trying to ask is what's your budget for the U.S. trial over '22, '23, '24?

[Johannes Doll, CEO & President]

Yes. So we've not guided on how expensive exactly the trial is. What I will say is the capitalized expenses that you don't see in the P&L this year will be the majority of the cash flow effect. So the study is of course a trial with 500 patients in the U.S. and while I can't give you a specific number, that's a very significant investment. And so you should expect non-P&L expenses or capitalized expenses of a pretty sizable amount in the year.

[Operator]

[Operator Instructions] Our next question comes from Carl Mellerby with SEB.

[Carl Mellerby, Equity Research Analyst]

I just have a question in regards to the financial targets and more specifically the 40% margin target. You said that has now been pushed until you reach a steady state in the U.S. Is it possible for you to give any type of indication of when you expect to have reached that steady state or if not, could you provide some type of guidance on how you see OpEx levels developing throughout primarily '23, '24? That will be very helpful.

[Johannes Doll, CEO & President]

Thank you for that question, Carl. So yes, it's true we've kept the guidance for 40% EBITDA, but we've moved that after our decision to grow the U.S. ourselves to a steady state after launch. So the current timeline, as Peter has alluded to, we are expecting if all goes well an approval in the U.S. late '24 and then we're probably looking at a launch in early '25. And now without giving you a very concrete year, but of course we would expect from a launch that in the third year or so you are starting to generate a profit and then afterwards you should reach a steady state relatively quickly. So that's kind of as much as I can say. Of course I'm hoping or I'm expecting that by the time that we launch in the U.S., we will have 3 years of selling the full therapy in Europe under our belt. That should hopefully generate cash that would together with the funds that we have brought in in the fall finance the launch in the U.S.Now the second part of your question, the OpEx in the coming years. I think for this year of course we don't give out very specific guidance or range of what the OpEx would be. What you can expect is probably Q4 being a relatively good indicator for what it will look like during the year. The one thing that I will remind you of that outbound freight is being booked as part of the OpEx as that will of course scale up in relation to sales. And we will start to see some cost also from our activities in starting to prepare the market in the U.S. this year although the majority of that spend will come in '23 and '24. '24 will be the year where then we will scale up the organization. So in '23 you should expect that we are probably making a few recruitments in the U.S. The way you typically do it is you focus on medical roles first because that pre-label period in the U.S. is quite valuable and you need MSLs and medical staff to be able to engage with key opinion leaders on a scientific level. And then the actual key account manager team and marketing team and all functions, those we would build much closer to launch. So those spend items you would see in 2022 if everything goes according to plan.

[Operator]

Next we have a follow-up question from Peter Ostling with Pareto Securities.

[Peter Östling, Life Science Analyst of Equity Research]

I will start off my second period here with my usual question regarding the ISCA and SESAR trial especially the SESAR trial. The study reached its recruitment for an interim analysis already in October '21 and now 5 months later we are still waiting for those results. Do you know if the Omicron surge have in any way affected the timelines for this interim analysis?

[Peter Sackey, Chief Medical Officer]

I wish I could answer that. I only can say that I know that the recruitment has continued. There are over 450 patients in the trial. We have not received any information neither on the results of the interim analysis nor when it will be ready. I believe this work of preparing the investigator who is responsible for the ISCA trial. I believe they're working hard on getting those results compiled and ready the certification. And once they compile and ready the certification that we get the data, that would be invaluable for us until they are published.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. And then question that I need to ask, I don't know if you will answer it. What price did you get in Germany compared to generic isoflurane for Sedaconda?

[Johannes Doll, CEO & President]

Yes. So I'll say promptly that I will again disappoint you with that question. What I will say is -- so the way it works in Germany is you list the product in [ Novataxa ], which is kind of the system that all pharmacists in Germany have access to and there's an official list price that is listed there, that is a comparably high price. But then the actual net price depends on negotiations with individual hospitals and our ability to pull through these prices with purchasing organizations and individual purchases -- pharmacists basically in the hospital. And the reason I'm shying away from giving out prices is that of course you will see a bit of a variance between accounts. Typically, you would have a bit better prices for a larger hospital chains purchasing organization than for some individual hospitals. So if I were to communicate prices and then hospitals learn about that they are paying more, that of course does not help me. But I will say is we've invested a lot of money to get this off-label therapy to an on-label therapy, to have a branded product that is no longer off-label but on-label. And of course we are charging a significant premium over the available generics and we are also trying to pull through those quite bit higher prices than the generics with our customers.

[Peter Östling, Life Science Analyst of Equity Research]

And the generic price is the one that you had on one of the slides for Germany?

[Johannes Doll, CEO & President]

Yes, but that was propofol prices. What pharmacists will look at if they buy the Sedaconda drug is the generic versions of isoflurane that you can buy from different customers, but those products are not approved for use in the ICU. They are mostly being used in the operating theater. That I mean is a relatively old molecule, which has been around for a while so the generic versions of that are not very expensive.

[Peter Östling, Life Science Analyst of Equity Research]

So just a couple of euros per day.

[Johannes Doll, CEO & President]

A bit more than that and I'll leave it at that.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. So your Chinese partner submitted the file for the device in December. What will happen with -- what's the timeline for also getting the drug on label in China?

[Johannes Doll, CEO & President]

So the -- everything we've done in China so far is related to the drug -- sorry, is related to the device. So we've not started the process for the drug yet. The only place, as you know, where we've filed and got approval for the drug is Europe. And what we're currently doing is reviewing our distributor markets and prioritize them in the sense of which markets does it make sense for us to supply and register work and the factors we are of course looking at is the market potential. We are looking at how much work is it to get it registered. So there's a few places in the world like Saudi Arabia, for example, where it looks like you can get quite far with the European dossier that we've already submitted.

[Peter Östling, Life Science Analyst of Equity Research]

Sorry, Johannes, I have to interrupt you there. I think you misunderstood my question. I thought that the Chinese partner would be responsible for getting both the device and isoflurane Sedaconda approved in China that you hadn't do -- you didn't have to do anything or was it only related to the device?

[Johannes Doll, CEO & President]

Yes, it was only related to the device. Of course we can have a discussion with that partner whether it's worthwhile to also try and register the drug in China. But all the activities we've had so far in submitting the marketing authorization to the Chinese FDA, that is related to the device.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. Then I misunderstood the press release. Could you also talk a little bit about what's happening in Japan? I know that you -- I think you had scheduled a meeting a couple of years ago, but that was postponed when the pandemic broke out. I don't know what the plans are for Japan now that we are hopefully leaving the pandemic behind us.

[Johannes Doll, CEO & President]

Yes. So the situation in Japan is we do have a local partner again that is selling the device. So we're getting some sales from that country not huge, but some sales. The drug is not registered as you rightly say. What it will take for us to get the drug registered is having a discussion with the Japanese authorities. Japan -- and this is the reason why we haven't prioritized this in the short term. Japan tends to be a country that requires a local clinical trial with Japanese patients, which is of course a significant investment. So in light of the other priorities that we have of launching the product in Europe and preparing for the U.S., we feel that the money is better spent right now at least on these priorities as opposed to running a trial in Japan. That's why we've not prioritized pursuing the drug in Japan at this point.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. And finally have you met any obstacles during the latest Omicron surge when it comes to customer access and the ability to train customers to use inhaled sedation?

[Johannes Doll, CEO & President]

Yes, absolutely. I mean I think we've had this discussion before. So COVID is a bit of a double-edged sword for Sedana Medical, right, because you have a few more patients in the ICU that needs ventilation. So in the country like Germany where we have a certain presence, we are rising a bit with the tide. But at the same time, we're trying to launch a product and we want our teams to be out there in the ICU working with our customers and being able to train them and being able to get time with the physicians and so forth. And it's different by country of course, but all in all you can say that access to hospitals is quite restricted. It's been that throughout COVID and we're still not back to a situation where we have free access to intensive care units. It's getting better now in most countries, but we are still not at 100%. We have a bit of an advantage because we are of course bringing a solution to the problem so it's a bit easier for us to get access to ICUs and perform trainings compared to maybe somebody who is selling disinfectors or something like that. But it is not the 100% access yet. So I'm looking forward to the days when COVID is over and we can have full presence in the ICU again.

[Peter Östling, Life Science Analyst of Equity Research]

Yes. Can I just a quick one before I hand over to somebody else? When it comes to the U.S. study, do you expect any start-up problems relating to the ongoing pandemic or will most of the centers be up and running fairly quickly from April and going forward?

[Peter Sackey, Chief Medical Officer]

So obviously, we don't have a force of 30 educators so we will not be able to start all sites in April. But we anticipate that we will have lots of work throughout the spring and through the summer activating sites. There are a few sites that we've approached that that's the thing we need to be a little bit less the high pressure they had in the last 3 months with COVID in order to start the clinical trial. But things are looking good there and of course we can't foresee whether there would be a new wave. But as things are now, we are optimistic when it comes to study activation, site activation.

[Operator]

At this time, there are no further questions. I will now hand back to the speakers for final remark.

[Johannes Doll, CEO & President]

We have questions submitted through the -- okay. I'm just getting. So there was a question from the webcast. What period are the NICE cost savings based on?So the answer to that is they have looked at a 30-day period so they basically looked at the difference in ICU days between our study population and the intravenous population. And then if you follow these patients over a 30-day period, then you also take into account things like nurse time so how much time does the nurse spend changing the propofol bag every couple of hours versus changing our disposables every 24 hours. Then that resulted in that cost saving of GBP 3,800 over a 30-day period. So I hope that answers the question.Then there was a question. Are there any plans for new products to come this year?We've been a bit silent about kind of our R&D activities. We do have an R&D team that is of course working on next-generation products and also new products to support the Sedaconda business. The reason we don't kind of guide on we will launch a new product at this specific point in time is that we need to secure patent protection first and don't want to give that advantage away. But in the very short time, you should not expect any new products to come on the market.And then there was a question around what is the anticipated timeline to upgrade to the NASDAQ main list?So as we noted, we started the process. We think this is an important priority for us as far as finance function this year. We've just started the process and are in the process of laying out that timeline. So we will come back on what exactly the time plan will be, but the process has kicked off. I can't give you an exact timing here, but it's moving forward.And then if there's no more questions, then I would like to thank you very much for spending this time with us today and we're looking forward to report on further progress. Thanks a lot and you have a nice day.