Sedana Medical AB (publ)

STO:SEDANA

Earnings Call Transcript 2022-Q4

[Operator]

Welcome to the Sedana Q4 Report 2022. [Operator Instructions] Now I will hand the conference over to CEO and President, Johannes Doll. Please go ahead.

[Johannes Doll, executive]

Good afternoon. Welcome, everybody, to Sedana Medical's Q4 and Full Year Report 2022. With me, I have Peter Sackey, our Chief Medical Officer; and Johan Spetz, our CFO. And what we will do, I will start by taking you through our performance in Q4, and we will have a look at the progress we have made with regards to our 2 main strategic priorities, rolling out in April at on in Europe and preparing for the U.S. market, including our clinical program that Peter will speak about, and Johan will show you our numbers in a bit more depth before I will wrap it up, and we, of course, discuss your questions. As always, there are some predictions we are making about the future. So when you have a minute, please give our disclaimer on Page 2 a quick read. Let's start on Page 3, please, with the quarterly highlights. It is no secret at all that we are looking back on a year that has posed a number of challenges when it comes to the intensive care landscape coming out of global COVID-19 pandemic with much less ventilated patients in ICUs, staff shortages in hospitals around the globe and some remaining access restrictions in hospitals around the world. As in previous quarters, the impact of the sharp decline of patients compared to the extraordinary years 2020 and '21 is also visible in our numbers in Q4. We have landed on SEK 36 million, a decline of 23% in Swedish krona. Of course, that kind of decline is not what you want to see it from a growth company, but it's worth highlighting that Q4 was actually our strongest quarter in 2022, and we feel that it's a very solid performance given the context. And this is the result that makes me look very optimistically into 2023 when we will start comparing to less insulated sales levels. Gross margin has further improved to 72%, and we still have a robust balance sheet with more than SEK 600 million in the bank, so we can execute on our plan without having to ask for new money, which in the current market environment is, of course, worth a lot. From an operational perspective, we have made some good progress in both Europe and the U.S., Sedaconda isoflurane, our pharmaceutical is now approved in 17 out of 18 countries, and we also see some progress on the pricing and reimbursement side that I will come back to. Fantastic news in the U.S. where FDA has granted us Fast Track Designation, which we're obviously very excited about as it shows that FDA agrees with us that we are bringing an important therapy that should be accessible to patients sooner than later. In other news, we have completed the recruiting of our pediatric trial in Europe, which is an important milestone, and we've also had the honor of ringing the opening bell at Nasdaq Stockholm. So we're now officially a main market company. Let's look at Page 4, please, which helps put the 2022 sales performance into context. You see the sales development over the last couple of years. You see a steady growth on a lower level before COVID-19 and sales doubled in 2020 and increased even further in 2021. Why was that? Of course, because ICUs were flooded with COVID-19 patients that needed to be ventilated and then you see the resets in 2022 with sales that were, as I said, 23% lower than 2021, but still 71% higher than the last normal year, if you like, before COVID 2019. It always helps to keep this through-cycle view in mind to understand our performance. On Page 5, you see our 2022 sales split by quarter. You see that the winter quarters tend to be higher than the warmer summer quarters. So that's normal and just a reflection of more patients with respiratory infections being in the sense of care in the winter. Q1 2022 was still a little bit helped by COVID. We will see that in a second as the tail of the last real COVID wave went into Q1 as well, but to a much lesser extent than the 2 previous years. Nevertheless, Q4 was our strongest quarter in the year, which I'm very happy about. On Page 6, you can see our regional breakdown in all of our regions. We are comparing a very, very strong COVID quarter Q4 2021 with a quarter that in comparison, had much less patients for Germany that meant a year-over-year decline of 30% in local currencies. Direct markets have reached the same level again despite the difficult comparator, which shows the good momentum we have, for example, in Spain. And in the distributor markets, we still see what we've seen for a while that we have high stock levels, both at the distributor level and in the hospitals, especially in some countries in South America, Mexico, for example, that was one of our strongest contributors to our 2021 performance and has caused that decline now. On Page 7, there are 2 big priorities for the company. One is to capitalize on our approval in Europe and double down on our commercial execution. So we work towards making inhalation the standard of care. And at the same time, the second priority already preparing for, hopefully, our largest market of the future, the United States, where we are planning to launch in 2025, if all goes as planned. Let's start on the European side, on Page 8. We see in grass what I have already touched upon. Throughout the year, we saw much less ventilated patients in the ICU. These are numbers for Germany, as Germany is our largest market, but we saw similar developments across the board. If you have followed us for a while, you know that exact data on our addressable market, so ventilated and intubated patients in intensive care are not publicly available. What we do have, though, is the number of patients in Hi-Care and ECMO ICU beds. That's what you see on the left. These numbers are not perfect because all it shows is how many patients we had in ICU beds that would typically have a ventilator available. But of course, it doesn't tell us whether these patients were actually intubated and ventilated or not. And on the right side, you see the number of ventilated COVID-19 patients. So these are ventilated patients, but it does not show the full foot either as we cannot see ventilated patients with diagnosis other than COVID-19. What you do see, however, is that the number of COVID-19 patients has declined a lot. You can see that the last real wave of COVID was hitting the ICUs in Q4 2021, which is now the quarter we are comparing to in this report. And then you see that the tail of that wave ranges into Q1 2022, but then we had quite low COVID-19 levels in ICUs throughout the rest of the year. Okay. From what we know from previous quarters, the left side underestimates the decline in ventilated patients and the right side overestimate that decline. So the truth is between the 18% and the 61% decline that you see here. based on our own studies we've run in previous quarters, probably somewhere in the range of 40% plus in terms of decline. On the next page, on Page 9, we see the same data for Q4 in isolation. And what you will see immediately is that the difference in COVID-19 patients is even more dramatic than the average for the year, minus 75% on an average day, which again shows the wave that we saw in '21, but not in '22. On Page 10, you may have seen these statistics before. Again, in Germany example, German actually use our reporting on a daily basis, whether they operate under regular conditions or whether they have constraints, which in almost all cases, means personnel shortages in Q4. 70% of all ICUs reported restricted or partly restricted operations showing how much of an issue this still is and the hospitals. Again, this is a German example, but we see the same problem across our markets in the U.K., for example, 40,000 nurses have let the NHS in 2022. And that is from a situation that was already stretched to start with. So some estimates show a nurse gap of more than 100,000 nurses in the U.K. On Page 11, we have summarized what these trends mean for us, less patients. The effect is quite obvious, even though our penetration is going in the right direction, less patients means less devices sold means less sales. And the staff shortages also contributed to the lower number of patients as ICUs are running at lower capacity, surgeries have to be postponed, et cetera. But the cash shortages also mean that we have to fight a little harder to get customers to focus on a new therapy because the human instincts when things are stretched is to stick with what you're used to and not necessarily switch to a new way of doing things. And many hospitals this issue is not just about the number of nurses, but also about the quality since ICUs are desperately trying to fill the vacancies there quite a few nurses from normal wards working in intensive care now, who maybe don't have the proper education. A lot of nurses come from abroad with maybe different education and background and also quite a few temworkers that are switching in between hospitals quite frequently. And what that means for us is that we need to ensure even more training. So the ICU teams feel fully comfortable using our therapy and also realize that it actually does make a nurse's like easier in a lot of cases to use our therapy.Not an easy environment to operate in, but I have to say so far, I feel that our teams are managing that situation very well. Just as an example, more training can also be a very good thing because it's much more time you get to spend with the full ICU team compared to a normal sales visits where you spend a few minutes with maybe only a few people. If we then move to Page 12, so how will this market environment develop we stay consistent with what we have said before. We listen to our customers and continue to expect a gradual dynamic normalization in the number of patients in the ICU over the course of this year, while specifically, the staff shortages are more tricky to result and will be with us for a little bit more time. Q1, as I said last year, we still saw the tail of this last COVID wave. So just to illustrate yesterday, that's public data. In Germany, we had 242 COVID patients that needed to be ventilated in all of Germany a year ago that was still almost 1,200 or a factor of 4 or almost 5%. But in general, looking at the year ahead, we will be up against much fairer comparators when it comes to our sales. On Page 13, some good news on the regulatory side. We now have received 17 national approvals out of the 18 countries where we have applied. Poland and Italy were the 2 latest additions to this list. The one that we have not been waiting for 2 years is the U.K. that is still outstanding. Here, we see further delays. MHRA has now promised us an update in March. So let's hope that this time, this is true the delay is not because of us, but because of MHRA continued excess workloads, but that at the end of the day, doesn't really help us. So we are eagerly awaiting the approvals because we are hoping to be able to capitalize even more on the great nice guidance that we received more than a year ago in the U.K., which recommends our products and shows a health economic savings for the hospital versus the previous standard of care. On Page 14, as most of you know, regulatory approval is one step, but then there's also some pricing and reimbursement processes to go through that are quite different by country and quite different by Lentas in the different places. Here, we've reached an important milestone in journey where we have now finalized the so-called AMNOG process, meaning that we are done negotiating with the German payer associations, so-called Krankenkasse and after 1 year of free pricing, we will now have a list price that is giving us the certainty that we can continue to operate in the same way in Germany. I won't disclose that list price because it's confidential, but I can say that I'm quite pleased with it as it allows us to keep the same net price level. So what our customers are paying today also going forward. In Spain, things are taking a bit longer. We had hoped for pricing and reimbursement approval in December, but did not get it. We are now in access negotiations with the Ministry of Health. We're getting great support from some of the leading Spanish key opinion leaders that really push for inhalation. And we are also quite pleased to see that there are some new treatment recommendations by the incentive Care Association for sedation of ventilated patients that now have inhaled sedation as a first line recommendation for moderate and 4 to be a sedation on the same level as propofol. So that's very, very good news. And we are hoping that all of this together will help to take the pricing and reimbursement box reasonably soon. I should also mention that we are seeing very, very good momentum in the sales growth in Spain even without that reimbursement approval. But of course, we'd like to get that step as well. And in Italy, we actually had a quite unusual situation because we actually finalized the reimbursement discussions before we got the regulatory approvals. So now we have both already as our distributor that we've worked with for a number of years in Italy quite successfully, will be able to launch as soon as we have the drug supply in place. With this, I will hand over to Peter, our Chief Medical Officer, who can take us through some of the great news from across the pond in the United States.

[Peter Sackey, executive]

Thank you. Yes. So at the turn of the year, we received feedback from the FDA and were granted the fast track designation. And that means that the FDA will give special attention to our clinical development program and confirms their view that inhalation may potentially meet an unmet lei contestation and critically ill ICU patients. And the implications of this are that the FDA will make terms more available for prevent communication throughout the development process and potentially, there may be room for accelerated approval prior to review and/or a rolling review, and this is yet to be read with the FDA. If we move to the next slide, Slide 16, the 2 clinical trials that are form the base for our -- the FDA NDA application are 2 Phase III studies as a abided studies to come from the fixed safety and insulation delivered by Sean ACD and comparables propofol. And these 2 studies include 235 patients each in approximately 25 sites. And the primary endpoint is similar to our European study in a portion of time in sedation target range for Raiman to 4. Key second endpoint include opioid use, wake-up time according to recovery after end of treatment and Phase Ia. And these studies we go to Slide 17. These studies were initiatives of first patients in April and in June, respectively, and anticipated to be ended by the end of this year. And we currently have almost 20 study sites up and running at a Go pending. And given that we can keep this time line, we'll be able to submit our NDA application early next year with an approval at the end of the year and the U.S. launch in 2025. If we move to Slide 18. Looking at the major investigator-initiated trials, where we have some degree of involvement, we have the Interset study in France. That's a study can tie top for up to 2 weeks, comparing acute cognitive dysfunction and long-term cognitive function in 250 patients in total. To date, 16 patients have been enrolled in this trial. And then we have the CSR study, simplinDS. This is a study of 700 patients randomized to a Sieframe or propofol 1:1 in these patients with ARDS. Also in France, this study is moving closer to full enrollment. And currently, we have 65 patients enrolled and they anticipate to have enrolled all patients by the end of this year. And the timing, we have the ISPA study and Hansaton COVID ARDS study that was a retrospective study plus almost 200 patients with COVID ARDS. And this study was completed and was recently published in general TrencorMedicine and the findings in the study were that use inhaled for 24 hours or longer in the patients with no associated any difference in typical outcomes compared to IV sedation. There also did include enhanced was feasible and safe while reducing requirements for other sedative agents. Let's move to Slide 19. As Jonas mentioned, we completed our study, IsoCOMFORT study also at the end of -- on the beginning of this year actually was. And this is a study that we've been required to perform to secure data and market protection for addiction. And that's one of the reasons why the study is being done, particularly and maybe more importantly, I would say in the short term is that we would -- if the study is successful, be able to get to market authorization for pediatric use. And we expect to be able to present the high net results from the IsoCOMFORT study in Q2 of this year and assuming positive results that we anticipate to get an approval in Europe in Q1 2024. The data exclusivity, I mentioned is until 2031. And that's independent of whether or not we meet our primary endpoint in the trial that the coexist for that in that we bioflur commitment to perform pre-clinical trial in children. So moving to Slide 20. We have increased our activity out there, not only among customers, but also on various congresses across the globe. So we've been present in 4 continents with both symposia, webinars, our own organized meetings and face-timing bots and numerous congresses with high attendance generally, I would say, higher than pre-COVID. And then we move over to Slide 21, and I'll pass it to Johan Spetz, our CFO.

[Johan Spetz, executive]

Thank you, Peter. So if we turn to our financial results in Q4 2022 in a bit more detail. As Johannes has already mentioned, we reported net sales for the quarter of SEK 36 million. That's down from NOK 46 million in Q4 of 2021. So constituting a decline of 23% or 28% in fixed currencies. And Johannes has already discussed the main drivers behind this. It's mainly a decline in Germany and due to fewer ventilated ICU patients, where we saw Q4 of 2021 being one of the last quarters where we had significant numbers of ventilated COVID-19 patients in ICUs in Germany and in most of our major markets. More flattish sales development in other direct markets despite similar market headwinds. Again, as Johannes has mentioned, Spain is one country where we see good growth momentum, compensating for some of those market headwinds. Then if we turn to gross profit, we report for the fourth quarter '22 a gross profit of SEK 26 million, which equates to a gross margin of 72%. So that's up from 71% in the same quarter in 2021. And the improved gross margin is mainly an effect of price adjustments that we've done during the year and also lower freight costs. EBITDA for the quarter, we reported minus SEK 18 million. That can be compared to minus SEK 13 million in Q4 2021. And if we look at OpEx, so total OpEx, combining selling, admin, R&D and other that came in at SEK 49 million in Q4 2022, which is lower than the same period of 2021. And we can also point out that in Q4 of 2022, we had some costs related to our NASDAQ uplisting project, which is then of nonrecurring nature, which accounted for SEK 4 million out of those SEK 49 million in total for the quarter. So we are seeing that the cost efficiency measures that we have put in place and are continuing to put in place also going forward are starting to have an effect. So some of the things that we've done already is that we've worked on streamlining some administrative functions such as HR, Investor Relations, accounting controlling. We've also tried to reduce external spending on consultants, other external vendors and also confidence sponsorships. So we are taking measures to reduce our underlying cost base, in particular, at the headquarter. Of course, we want to continue to invest in growth and spend money on growing. But we are seeing that we have additional streamlining initiatives that we can pursue during 2023. If we look at the number of staff at Sedona Medical today, we are 95 people, and that is down from 107 at the same -- well, at the end of 2021. So that's including both employees and consultants. So then if we move to the next slide to look at our cash flow and cash balance. The cash flow from operations in the fourth quarter was minus SEK 23 million, of which cash flow from working capital accounted for minus SEK 14 million, and that's mainly related to negative cash flow from short-term liabilities or accrued expenses to be precise. So a reversal effect from what we saw in Q3 of 2022. Cash flow from investments during the quarter, minus SEK 27 million, and that is related to our clinical studies and registration work in the United States as well as the pediatric study in Europe. So for total cash flow for the period of minus SEK 51 million, taking us to a cash balance at year-end of EUR 8 million, and that's compared to SEK 676 million at the beginning of the quarter. So that change in the cash balance, of course, also includes an FX effect. So we still have an ample cash position at Sedana Medical. We are, of course, managing this liquidity in various ways, both when it comes to the currency exposure. So we have converted roughly half of our cash into U.S. dollars. Of course, going forward, a lot of our expenses will be in U.S. dollars. And we've also placed approximately half of our cash, total cash position in longer-term deposits for better interest rates, both SEC and USD cash holdings that were placed in those type of longer-term deposits. And as Johannes has mentioned already, we expect with this cash position that we have to be fully financed until breakeven and to be able to execute on our strategic plans that we have. And as a reminder, we have no long-term debt in the company. And as a final note on this slide, we -- in January, we successfully moved to the NASDAQ main list here in Stockholm, and I just want to take this opportunity as well to thank the whole team that was involved in achieving this milestone for Sedana Medical. And then if we turn to the next slide, Slide 23. This is our current largest shareholder or larger shareholders as of December 31, 2022. Not that much in terms of movements during the fourth quarter. But of course, we want to thank our shareholders for the trust and continued support as we move into 2023. So with that, I will hand the call back to Johannes.

[Johannes Doll, executive]

Yes. Thank you very much, Peter and Johan. So let's move to our last slide, Page 24. Please, I hope we could bring across that we've made some progress in the quarter and have made a solid step forward in our journey. Before we close, let's take a quick step back from all the information that we have thrown at you and remind ourselves what Sedana Medical is about from an investment perspective. We continue to see good gross margins of 70% enough. So by definition, we can become quite profitable as a business when we reach scale. And we already have proof of concept for that in our main market in Germany, where the majority of intensive care units are already our customers today, and where the local team is generating attractive EBITDA margins on a local level. So it can be done. The question is really, can we reach enough scale? And here, we have convincing clinical data on our side, showing that patients really benefit from inhaled sedation which is important as only good medicine will turn into a good business eventually. That is what it should be, at least. And equally important in today's health care systems, we can also show that hospitals save money within inhaled sedation versus the previous standard of care. And we have lots of places to grow and to create new Germany, if you like, again, regulatory approval in 17 countries in Europe, hopefully soon '18 when the U.S. and the U.K. comes around and the largest commercial opportunity in the U.S. is still untapped with FDA giving us an extra motivation of boost, as we have heard with the fast-track designation. And let's not forget, very important these days a strong balance sheet and the commitment to keep working on the OpEx side to get closer and closer to profitability outside the U.S. That concludes our presentation. Thank you very much for listening, and we will be very happy to take your questions.

[Operator]

[Operator Instructions] The next question comes from Mattias Vadsten from SEB.

[Mattias Vadsten, analyst]

A few questions from me today. I mean it's reassuring to see the growth rate is putting it into perspective to the quarters in 2019 coming up here in Q4 versus prior in the year. We also show quite impressive development quarter-over-quarter, in my opinion. Also here, while comparing the sort of sequential development into Q4, we've seen in the past in the company. So could you describe what improved into Q4 other than sort of seasonal patterns? It looks like the majority of improvements come from Germany. So maybe start there.

[Johannes Doll, executive]

Yes. Thank you, Mattias. So well, let me first say, of course, throughout 2022, a lot of things have happened that were a little on the execution side that were a little bit hidden under the relatively negative sales development, which in turn was driven by the external market factors. So for the last almost 18 months, we have put a lot more focus on commercial execution. We have run field force effectiveness programs. We've looked into how can we spend even more time with our customers, how can we use that time in the most efficient way? How can we make sure we spend our time where the potential sits in large potential accounts and so forth and try to be as impactful as we can be with our troops out there, our key account managers out there to convince as many clinics as possible to use inhaled sedation more than intravenous sedation. And the most important indicator here is basically the penetration of the whole market that has been going up throughout the year. So we are seeing impact of our work here. Yes. In Germany, we see good developments, but also in some of our other direct markets, same is one that I've highlighted a few times in the presentation, but also in Spain and U.K., things are going in the right direction. So what we're seeing and what we hopefully we'll be seeing more of when the market headwinds have become a bit lighter. And eventually, we enter a new normal is the impact of the very execution-focused work that we have done and the increasing customer focus and commercial orientation of the whole company.

[Mattias Vadsten, analyst]

Very good flavor. Would you say that the new customer inflow that you have reported previously, has that come up or to the same level still or...

[Johannes Doll, executive]

We've seen a reasonably stable level throughout the year. So we've communicated a number previously of the green new accounts per week in Sedana. Of course, it's a little different by country. So in Germany, the majority of ICUs use our products already. We are still opening new accounts. But of course, proportionately, more growth has to come from making sure the penetration in existing accounts goes up. So they use inhaled sedation ideally as the standard of care or at least in as many patients as possible. In other markets where we're still getting started on a lower level, so sales, of course, the importance of opening new accounts and opening the right new accounts in accounts where we see good potential is, of course, proportionately more important still. And that's why this number of new accounts a week is one that we're quite happy with. And it's also worth mentioning that there's a lot of work that goes into opening an account. So we don't sell a therapy where we hand over a user manual and then the customers will just start using. There's a lot of training involved training with the full ICU staff, you need to get the doctors involved. You need to make sure the processes work in the ICU, all nurses need to be trained and I suppose. So it's a lot of work going into this. But we see a huge difference in the later pickup depending on how much work we have put up front. So if you don't put that time upfront, you will maybe see a little bit of sporadic use, but the accounts where we are really successful. Those are the ones we are from the start, we've really invested in working hand-in-hand very closely with the with the SEC.

[Mattias Vadsten, analyst]

Sounds good. The next one would be on the 2025 target, if I may. I mean, let's say you grow 25% per year in Germany and make some SEK 50 million in distributor markets by 2025. It seems you need to more than double sales in other direct markets each year. How to think about this year? I mean in terms of Q-on-Q improvement in other direct markets, you're now -- the therapy is approved in more important countries, of course, with hopefully U.K. coming on soon as well, we know this, but can you just help us I understand sort of the path here, if you will be back-end loaded? Or how should we think about that?

[Johannes Doll, executive]

Yes. So I mean, of course, you're exactly right in saying it's a steep mountain we have to climb, especially in that amount that looks even steeper now that we've gone a little bit into our valley in 2022 coming out of COVID. Of course, what that year has hidden a little bit is the underlying momentum, which is looking positive. And hopefully, that will become more visible as we move forward. But we also have to accelerate further. That's very, very clear. And what we will need to see in more markets is inflection points in the sales curve. So in Germany, if you look back at history, at some point, helped by the treatment guidelines and helped by enough customers using the therapy all of a sudden, the growth accelerates when it becomes a topic at conferences, when physicians speak peer to peer, when all nurses kind of get used to it, then all of a sudden, you see a faster growth. And we are, I think, pretty much there in Spain. So we see very, very good growth in Spain. We are hopefully close to seeing an inflection point like this also in France and the U.K., as I've mentioned, once we get the MHRA approval. I'm hoping for some acceleration as well because we had this very, very positive, nice guidance a little more than a year ago, and we're still in the slightly observed situation where NICE is recommending a treatment that is not MHRA approved, which is quite rare, I guess, to happen. And once the full therapy is approved, we can actively promote it and hospitals can feel more secure about using something that is on-label approved and so forth, then that should accelerate the pickup as well. So in terms of what the shape of the curve looks like, you're probably right that it's a little bit back-end heavy because some of these inflection points will come over time.

[Mattias Vadsten, analyst]

Good. The last one, with the FDA Fast Track designation in the U.S., as you mentioned, the expected time line until approval and so on is left unchanged. We know that. So my question is really, are there any other sort of readouts or potential news flow, like early days that we can expect over the year? Or yes, in the U.S., do we have to wait until the end of the year for the next sort of news relating to the U.S? That's very difficult question, but anyway.

[Johan Spetz, executive]

It sounds like it's difficult for you to be patient on this one. Yes. So the -- generally, so when it comes to the fast track generally, my recommendation is always to have an extremely humble approach towards FDA because, of course, we can be self-confident and we have a great therapy that that's bringing a lot of value to patients. At the end of the day, to the FDA that decides and the possibilities for a company to influence the decision-making is limited. I would say, of course, you have to bring forward the best arguments. But at the end of the FDA that decides. And that's why we've been a bit cautious in now creating too many hopes of what the fast track designation would mean because the FDA is very careful in not making any commitments. So there are a number of things that Peter has talked about like the rolling review, potential closer interaction, potential accelerated review, priority review and so forth, that could mean an acceleration, but none of this is guaranteed. So that's why we have not changed the guidance on the time line because they -- it's not certain that it will result in an acceleration. And in terms of milestones, we will continue to report on progress whether we are on track or not on track with the recruiting because that's, of course, a big driver of the time line as well if we manage to recruit our patients on time. But the next big milestone is indeed going to be the completion of patient recruitment. And then after that, we will, of course, submit to the FDA, which will be communicated around. And also that's probably going to be a communication around top line data as we have had it for the European trials as well. But in the meantime, you'll have to be a little bit patient on more news on the U.S.

[Operator]

The next question comes from Peter Ostling from Pareto Securities AB.

[Peter Östling, analyst]

First, congrats for a very solid ending to 2022. It's always very interesting to see the market reactions when the news agencies put out the initial headline sales down 30% increased loss. And I congrats the investors that bought when the share was down 5%. They have now done made about 15% return so far today. So with that statement, I will -- I have quite a number of questions, and I will -- I think I will start at the end of your presentation with some financial questions. Can you say anything about -- if you see the -- if you adjust for the SEK 4 million that was considered one-off and take the total OpEx for Q4, is that a good proxy to use when forecasting OpEx in 2023? Or should we expect that you start to maybe build some more traction in the U.S. that will increase OpEx a bit in 2023? That's my first question.

[Johan Spetz, executive]

Yes, I can take that one. Yes, I think for the countries that we have in the company today, that is a reasonable level of OpEx. But as you point out, we have the U.S. coming up, and we will, of course, build our own, as we've communicated in the past, we will build our own organization in the U.S. So that will start to happen slowly and gradually during 2023. So you will see some of that coming in. But then on the other hand, we have some other cost efficiency initiatives that we intend to pursue during the year. So that will have an offsetting effect there. But as you know, we're not guiding firmly on any OpEx numbers for the full year. But hopefully, that gives you some indication.

[Peter Östling, analyst]

Can you say anything about cost increases in general, wages, et cetera, during 2023? And if your efficiency measures will mitigate some of that?

[Johan Spetz, executive]

That is definitely our ambition. Of course, we are seeing the inflationary trends that all companies see these days. So far, as you can see both in our gross margin and also our OpEx. We've been able to mitigate that in a number of different ways. And of course, our ambition to continue to do that. So hopefully, we'll be able to keep those pressures under control during '23.

[Peter Östling, analyst]

Great. And just allude a little bit on gross margins. Do you expect them to stabilize around 71%, 72% for '23? Or will they fluctuate with -- maybe with volumes during the year?

[Johan Spetz, executive]

Yes, there, we have our standard guidance of 17% gross margin. Of course, we are on a good trend now. But as you pointed out, there are inflationary pressures around us out in the world. So that's probably reasonable to stick to that guidance. Hopefully, we will aim to beat it and continue on the current trend. But that's remains to be seen how it plays out here, macroeconomically.

[Peter Östling, analyst]

Okay. And then moving over to maybe Peter Sackey. In the U.S. trials, can you say anything on how many patients that you have recruited or maybe if you can say anything about how many clinics are now past the running patient level and actually recruiting real patients. If that's all of those 20 clinics that are up and running that are they recruiting real patients? Or are some of those still having running patients?

[Peter Sackey, executive]

Yes. So I didn't say the handheld that all on the running, but the majority are currently enrolling randomized agents when it comes to the patient numbers nobody will to communicate on that. We are seeing good momentum, I would say.

[Peter Östling, analyst]

Okay. Great. And could you just remind me about the 130 run-in patients, will they be included in the statistical analysis or not?

[Peter Sackey, executive]

So the run-in patients will not be included in comparison. They are merely for training but they are also contributing to our safety database because they're being exposed to ileal of the more item, and we are collecting all relevant safety study data on the safety.

[Peter Östling, analyst]

Okay. Can you say anything about if you have seen any kind of hiccups in -- when using this new therapy for the U.S. market or if those potential hiccups has been taken care of with the run-in patients and when you start to recruit real patients, it gets more smoothly with the health care staff.

[Peter Sackey, executive]

Yes. So U.S., of course, is a new IT environment for us for the company. I would say we've been very successful in the running pay in all athenista a very good experience, both for us as a company and also for our study site, the PI facility to not only have we been able to learn how to master parity, but also had the opportunity to see some of the benefits in an open-label fashion. So that's created a lot of the enthusiasm and incentivized, I would say, the study.

[Peter Östling, analyst]

Okay. Then I noticed that you mentioned on one slide that the CSR study has now recruited 616 patients. I was just wondering what happened to the interim analysis of the 350 that was announced about 2 years ago, I think?

[Peter Sackey, executive]

Yes. this was a process that has taken significantly longer time than anticipated and it was actually meant to be a readout for utility. And they are now very close to completing the study and still not got the final data for that.

[Peter Östling, analyst]

Okay. So that analysis could come any day now?

[Peter Sackey, executive]

Well, Mike, I don't have any input on when it would come. But I have the -- because this is not our study, as you know, but we have -- we communicated with the lead investigator in the study I have some very big, but they have a clear impression that they're not really hoping -- they're not waiting for the interim analysis aspect. They're just recruiting until the study will be over if they were defined this was there was any safety issue and the they have the Monition board, and there's been no issues there. So it's very unlikely in my view that the study will be halted based on those results.

[Peter Östling, analyst]

What? I didn't get the last -- do you expect the study to be halted after the interim analysis.

[Peter Sackey, executive]

No, no, I don't expect I don't have... I don't think the data itself expected to be.

[Peter Östling, analyst]

Okay. And then over to some reimbursement issues. Spain, firstly, can you say anything or allude anything about what the main issues were behind the reason to postpone a decision in December? Do they need more information or -- what was their response?

[Johan Spetz, executive]

Yes. So the pricing reimbursement process in Spain is a little bit unique. There's a number of steps to go through. And as, of course, you know, it's one of the ones in Europe that take longer. So I just saw a statistic that's between submitting the pricing and reimbursement dossier and approval of the pricing and reimbursement that is in Spain, we averaged 400 days. So compared to that, I mean, we're still doing pretty well with last summer. Now as we have also communicated, we were hoping to get a positive approval already before Christmas. We were probably a bit too optimistic there. We didn't get that approval to purse didn't get a formal rejection either. So it's not that. We are now in -- and that's a step forward in the process, we're now -- we have a contact person in the Ministry of Health that we can talk with and negotiate with. And part of that negotiation is around the price, of course, because the affected for the system to make sure that the new therapies that come to market are not too expensive and don't blow up the budget. But there's also a discussion around how urgently is inhaled sedation needed. And this is one that I think we can bring very, very good arguments because from both of the big associations and in Spain and the physiology and incentives intensivist being the more important one. We have very, very good key opinion leaders that are writing letters supporting the introduction of inhaled sedation and providing good argument as to the clinical need for these 2 things, clinical needs and the money and the process going forward is as we are fine-tuning our dossier -- value dossier that we've submitted, making a few adjustments. So that's adding the opinion Beverletters to that. And then at the end of the day, all the regions in Spain will vote whether or not they want that product we inverse in their respective region, and it needs to be a unanimous vote. So you need other regions to vote in favor. And as you can already hear from Peter, it's a slightly longer process, but we are hoping that these regions will vote somewhere in the second quarter. And then hopefully, we'll have that pricing and reimbursement approval. Of course, there's always some uncertainty as for all the purposes. But I think the arguments that we can bring forward, well, not that I'm usual, but I find them very convincing. And then as we said before, it's not been a true barrier to the success in the market in Spain. So we do see very, very good adoption. It's the fastest-growing market right now. And of course, it would be nice to see that further accelerate if we get the filing and reimbursement approved.

[Peter Östling, analyst]

Yes. So how -- I mean the fact that Spain is one of the fastest-growing markets, how is that input affecting the authorities?

[Johan Spetz, executive]

It's -- well, it's helping in the sense that the clinical need becomes a bit more obvious. Now of course, it's a number of regions in Spain, not all the regions see the same kind of pickup of course, we have a pretty focused approach and focusing on the larger cities. So there are regions where inhaled sedation does not play a big growth. But it's -- overall, it's a positive there seems to be a market demand because, of course, also the health system. Well, one aim is to save money, but the other aim is, of course, also to provide good care, and you can't really withhold therapies where there's a clear need because it's better for patients. You cannot withhold that from patients.

[Peter Östling, analyst]

Okay. Without talking about absolute values, can you say anything about the relative -- or reverse the levels between, for instance, Germany and Italy and the price that you're asking for in Spain?

[Johan Spetz, executive]

No, I can't really talk about it revamp. But of course, we -- I mean every process is unique. The circumstances are unique, also how competitors are priced, how propofol price, how midazolam is priced, how off-label isoflurine or sepofavorflurana are priced. So there's a number of factors playing into that. But since European countries have become more effective at looking at each other in terms of reimbursement prices, then of course, they will not make any statements around the relative or absolute values in specific countries.

[Peter Östling, analyst]

Okay. Just a last question before I go back into the queue. I noticed that the number of ICU patients in Germany declined by 18%, but your sales in Germany declined by 30%. And still you say that you have good momentum behind the scenes, so to speak, how should we interpret the different values here?

[Johan Spetz, executive]

Yes. That's a good question. I was trying to explain that on that one piece.

[Peter Östling, analyst]

Yes, you said that the one underestimated and the other overestimated.

[Johan Spetz, executive]

Exactly. So the number of ICU patients, that number has explained 18%, exactly right. Those patients are patients in the ICU irrespective of whether they are intubated and ventilated or not. So when we did our studies previously, usually more than half of these patients are not ventilated. And so the -- between these 2 values, so minus 18% for the ICU patients overall and minus 61% for ventilated COVID patients, which, again, is not all patients because there's only COVID patients in there. The real decline of incubated and ventilated patients is usually somewhere in the middle. So you remember, we made the study where we actually looked at that and made a survey among intensive care units in Germany, where we found a reduction between 40% and 15%. So right in between these 2 values. And that's where without having the hard data, that's where we estimate that the decline really -- the decline in ICU patients is underestimating the decline in integrated patients. The reason behind that is that there's a number of reasons. But if you have low -- and of course, it shouldn't be that way, but it's still a fact in clinical practice, if you have low capacity utilization in an ICU. So you have a lot of empty beds, then you tend to get patients into the ICU that are less severe, and those are less likely to be modulated. And that's why these numbers don't fully correlate with our sales development.

[Operator]

The next question comes from Joseph Hedden from Rx Securities.

[Joseph Hedden, analyst]

I just wanted to ask one on the 2025 revenue guidance and some of the assumptions baked into that. It seems to me that a couple of the bigger challenges that are persisting are access to hospitals to really push the product as a hangover from COVID and staff shortages and unfortunately, both issues which are beyond control. So I was -- beyond your control. So I was just interested to know what kind of assumptions on relief of those 2 problems is baked into your 2025 revenue guidance? Or is that guidance made on the kind of maintenance of the status quo is at the moment?

[Johannes Doll, executive]

Yes. So there is -- of course, it's but our addressable market is ventilated and sedate patients in the ICU. And there's a number of factors that are affecting that number. So there's a seasonality. There's whether or not flu seasons are mild or severe, there's the whole COVID issue and the implications from that, the snap shortages, there's access to hospitals, et cetera. A lot of these things, as you rightly say, is beyond our control. But it's also in the long term, not going to be so important whether an individual flu season will be more severe or more mild or whether in a particular quarter, the access to a hospital was more or less difficult. It's true that over the last probably 18 months and especially also during -- during COVID and then the following year, there's a number of very special effects in the market that have made our lives easier, and we would need some of them to relieve a bit in order to see the full growth potential that we see that we have. But from an executional perspective, we are, of course, very much focused on what we have under control, and that is making sure that every patient that is ventilated in the ICU has as high as possible chance of receiving inhaled sedations and as long as that's indicator, so the penetration of all patients goes in the wrong direction, then we can live with kind of the fluctuation in the size of the market segment because over time, that will equal out. But of course, for the EUR 500 million target, it will help if they come a bit more to normal, both in the number of patients and also in terms of staff shortages that they had in the hospital.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Johannes Doll, executive]

Yes. Thank you very much. Thanks a lot for listening. Thanks a lot for the discussion and the good questions, and I'm wishing you a nice afternoon.

[Operator]

This concludes the call. You may now disconnect.