Knight Therapeutics Inc

TSX:GUD

Hello and welcome to the Opsens Inc., Third Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After the prepared remarks, there will be an opportunity to ask questions. [Operator Instructions].

I would now like to turn the conference over to Joe Dorame, Managing Partner. Please go ahead.

Good morning and thank you all for joining us today for the Opsens third quarter fiscal year 2023 conference call for the period ending May 31, 2023. With us on the call representing the company today are Louis Laflamme, President and Chief Executive Officer and John Hannigan, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session.

Before we begin with prepared remarks, today's call will contain forward-looking statements that are based on current assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company undertakes no obligation to update these statements, except as required by law.

Information about these risks and uncertainties are included in the company's filings, as well as periodic filings with the regulators in Canada and the United States, which you can find on SEDAR and Opsens website.

Today's discussion will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not as a substitute for IFRS financial measures.

Finally, today's event is being recorded and will be available for replay, both the webcast and conference call dial-in information, which is provided in today’s press release.

With that said, let me turn the call over to Louis Laflamme, President and Chief Executive Officer for Opsens. Louie, please proceed.

Thank you, Joe, and good morning to all of you. We are excited to once again speak with you today, following another strong quarter of growth across all of our business lines. Let me also take a minute to greet the French-speaking audience.

[Foreign Language]

As I stated in the press release, I am pleased with the progress we made during the third quarter, which reflects a new quarterly revenue record of $13.2 million, up 31% from the year-ago third quarter and up 22% sequentially. Also, with a focus on improving operational efficiency, we delivered record gross margin of 58.8%, up 780 basis points from the year-ago third quarter.

During the third quarter, we saw growth in all three key components of our medical segment, with our SavvyWire for Structural Heart TAVR procedure up 64% sequentially, OptoWire for coronary artery disease up 23% sequentially, and our optical sensors for business partnership, which was up 92% compared to the year-ago third quarter.

Beyond the quarterly financial performance, I am pleased with where we are as a business and the opportunity for the future of OpSens. Our ability to leverage our core expertise as a pioneer of innovative fiber optic sensing technology that can be deployed across a wide range of cardiovascular critical products is in full motion.

On the Structural Heart side of the business, we are highly encouraged about our sensor-guided TAVR, initial commercialization phases, which as I mentioned is up 64% sequentially. SavvyWire is more than a wire [ph]. It is the world's first and only sensor-guided TAVR solution. It uniquely provides a three-in-one solution for stable aortic valve delivery and positioning, continuous, accurate hemodynamic measurements during the procedure, and reliable left ventricular pacing without the need for adjunct devices or venous access. This product will be truly a game-changing product for the TAVR market and for OpSens.

For coronary artery disease, our OptoWire is a pressure-guided wire designed for contemporary clinical practice, allowing medication through complex anatomies, delivery of stents without guidewire exchange, choices among different epidemic and resting indices to assess coronary physiology, and confirmation of treatment with easy and reliable post-PCI measurements.

Within our business partnership division, we are becoming increasingly excited about our performance and perspectives. Our customers are growing and we are growing with them. Sales were up 92% to $4.9 million, a new record for this division. Based on our conversation with our current customers, we think this elevated level of sales can be sustainable going forward.

In addition, we have a large pool of existing customers and a customer pipeline that will generate further growth. Our second-generation fiber-optic sensing technology is in high demand due to its accuracy, small size and reliability.

The continued acceptance of OptoWire and SavvyWire, along with growth in products that leverage our technology, is a testament to the development work our R&D team has accomplished to bring fiber-optic sensing capabilities to the market. And as we look longer term, our R&D team is working on various complementary technologies to the OptoWire and SavvyWire that we believe will support further market penetration for our products.

Further, our commercial sales team has been elevated under the leadership of Brad Davis as we continue to expand adoption of both OptoWire and SavvyWire through a multi-strategy approach of direct field sales representatives, distribution partners, and group purchasing agreements, which all contribute to this record quarter.

Geographically, combined U.S. coronary and TAVR sales nearly doubled at an impressive 82% compared to the year ago quarter, a new U.S. record quarter. Growing the U.S. has been a key focal point for us with OptoWire and of course SavvyWire, and will be a key theme that I think you will see throughout our operations in the years to come.

Importantly, the commercial synergy between OptoWire and SavvyWire has already been seen in Canada and the U.S., and we expect to have a similar positive effect in EMEA and Japan down the road.

Finally, from an operational standpoint, we are benefiting from economies of scale within our manufacturing operation, as well as the transition to more direct sales, which helps to drive gross margin to a new record of nearly 59%. This is an improvement of 780 basis points from the year ago period.

As you can hear, I'm proud of the efforts of the entire OpSens team and want to thank them for their dedication to delivering superior products that enable life-changing procedures all over the world.

Let me expand for a moment on our SavvyWire solution, where we saw strong incremental adoption under our very deliberate commercialization plan. During the quarter, TAVR-related revenue was $760,000, compared to $465,000 in the second quarter, sequential growth of 64%. Brad Davis, our Chief Commercial Officer, is unable to participate on today's call, but wanted me to be sure to convey some key takeaways to the success we are seeing in the field pertaining to SavvyWire.

As Brad and I have communicated in the past, we have enacted a systematic, step-by-step commercialization plan that many other companies in the industry have successfully taken with recently cleared devices. It started with a limited market release in Canada and the U.S., and then moved to more of an extended, but still controlled market release. Full release is on its way, which I will expand on in a moment.

During these two initial phases, we have refined our launch process to include device, display and procedure training, monitor installation in procedure rooms, coordinate with administration to achieve maximum penetration in each account, and software upgrades. A key component in our transition to a full market release has been the launch of a new software upgrade, which will improve ease of use and workflow pertaining to the synchronization of the aortic pressure curve and the ventricular pressure curve, where the push of one button allows everything to be done automatically. This new release improves greatly the functionality of the device.

As Brad stated last quarter, our goal is to get the hospital TAVR teams fully functional and independent to conduct the cases successfully themselves, allowing our field team to then partner with their next target customer to repeat the same in-depth launch process, to ensure clinical and commercial success.

Based on customer feedback, in less than six months on the market, we have incorporated key updates into our software, which increases usability and procedural consistency, making it easier for customers to become independent.

Over the past quarter, since we last spoke with you, we have expanded use of SavvyWire at existing hospitals and added new accounts as well. Overall, SavvyWire has now been launched in 45 hospitals in North America, compared to 30 when we last spoke with you in April, and we estimate use in 1,500 patients, demonstrating continued robust demand from both new and existing accounts.

We have seen strong demand as we have initiated full market release in conjunction with the launch of this new software, and we anticipate launching in over another 20 new accounts this quarter. In Europe, we have submitted for CE Mark and anticipate approval by end of calendar year. We have also received approval in Australia. We look forward to sharing more on our success with full market release during the year-end call.

Beyond our commercial progress, we are making great progress clinically as well. As I mentioned last quarter, we have completed enrollment in SAFE-TAVI, our 120-patient study, being conducted as part of our CE Mark clinical strategy for the commercialization of SavvyWire in Europe. Our expectation is to release our findings at the TCT Conference for International Cardiology in October.

Further, we are excited to have SavvyWire included in the Complete TAVR clinical study to investigate the impact of standardized invasive hemodynamics during TAVR procedures. For those not aware, Complete TAVR is an investigator-initiated study sponsored by Edwards Lifesciences. To have SavvyWire included in this study is significant.

The study will assess discordance between echocardiographic and invasive derived gradients using the SavvyWire immediately post and early following TAVR. There will be 12 to 15 sites in the U.S. and in Canada, with Dr. David Wood of St. Paul's and Vancouver General Hospital University of British Columbia as the principal investigator.

As the results show, and as I hope you can hear from our commentary, we are successfully executing against our very deliberate commercialization strategy. We look forward to a solid fourth quarter for SavvyWire and a very bright fiscal 2024, as we look to achieve our ultimate goal to transform the way TAVR procedures are conducted through use of the industry's first and only three-in-one sensor-guided TAVR solution.

Let's now transition to OptoWire. Performance has been strong in the U.S., with coronary artery disease still up 31% compared to the year-ago period, and up 21% sequentially. Overall, the U.S. now accounts for 24% of overall coronary artery disease sales. Why this is important is that we have significantly higher growth margin when we go direct compared to the utilization of distributors as we have in other parts of the world.

In addition to the increased focus we have placed on the U.S. from a personal standpoint, the ability to leverage offering both SavvyWire and OptoWire has been a key driver here with our innovative functionality that improves workflow.

On that point, during the quarter, we opened nine new accounts, of which 33% of those were initially SavvyWire customers. Simply put, SavvyWire is opening doors for OptoWire as OptoWire is for SavvyWire. Overall, we sold OptoWire into 74 hospitals during the quarter. We plan to maintain this enhanced focus on both opening new accounts and expanding existing accounts in the quarters to come for North America.

For EMEA, a market served through distributors, there has been 2% growth sequentially and 11% on the year-ago period. While Asia-Pacific, a market also served through distributors, has seen a 14% decrease on the year-ago period due to some headwinds in the Japanese market, including currency exchange rate. We continue to work closely with our distributors in the region to ensure OptoWire market share is in line with the value that it delivers as evidenced by the strong growth we are seeing in the U.S. and other parts of the world.

At this point I would like to turn it over to our recently appointed Chief Financial Officer, John Hannigan, to review the financial results in more detail. I will then move to wrap up things and turn it over to your questions. John?

Thank you, Louis. Let me start on the revenue line. Revenue for the third quarter was highlighted by record revenue of $13.2 million, an increase of 31% compared to the third quarter 2022 and up 22% sequentially.

Broken down by product, coronary artery disease, which primarily includes OptoWire, was $6.8 million compared to $6.6 million in Q3 of last year and $5.7 million in this year's second quarter. SavvyWire was $760,000 compared to $465,000 during the most recent second quarter. As a reminder, SavvyWire had nominal revenue in the year ago quarter.

Other business partnerships revenue, primarily consisting of our agreement Louis just mentioned with Abiomed, Johnson & Johnson, was $4.9 million this quarter compared to $2.6 million in last year's Q3 and $3.4 million in Q2 2023. Our industrial business had revenue of $700,000 during Q3 compared to $900,000 in the year-ago quarter.

Gross margins: The gross margin was 58.8%, an increase of 780 basis points compared to third quarter of 2022. The increase was driven by more direct sales compared to distributor sales and favorable product mix. Similar to last quarter, on a mid-term basis, as we see more sales coming from areas where we sell direct, such as the U.S. and Canada, and as we see growth in SavvyWire, we expect to see gross margins continue to rise.

We are also benefiting from critical mass in production, which is driving operational improvements. That said, we are making certain investments in our manufacturing facilities to improve the operation and production efficiencies of our devices going forward, and to meet higher demand from our customers to drive top-line growth.

From an operating expenses standpoint, overall operating expenses were $11.8 million compared with $7.8 million in the third quarter of 2022. Breaking this down, sales and marketing was $5.7 million versus $3.6 million. R&D was $3.5 million versus $2.3 million, and G&A was $2.5 million versus $1.9 million. So the $3.9 million increase was mainly due to an increase in sales and marketing activities, including an increase in our direct U.S. sales force in advance of the launch of SavvyWire. We also experienced some higher expense due to promotional and educational spend at key conferences.

On the R&D front, as Louis mentioned, we will continue to be a company that is innovating as we invest in products that will likely be coming to market in the next 24 months. We are having various disruptive projects right now using our core competencies in hardware and software. Without going into detailed descriptions, I can mention that Opsens software products will capitalize down the road on artificial intelligence and flow dynamic. That said, we do expect R&D expenses in Q4 to be lower than the just completed third quarter.

On the bottom line, net loss for the third quarter of fiscal 2023 was $4.2 million or $0.04 per diluted share, compared to a net loss of $2.9 million or $0.03 per diluted share in the third quarter of fiscal 2022. As expected, the delta here is the growth in revenue and gross profit, was offset by the incremental spend on sales and marketing and R&D expenses I just mentioned.

Balance Sheet: From our balance sheet – our balance sheet remains solid as we ended the quarter with $20.5 million in cash, which compared to $21.9 million at the end of last quarter. Our working capital balance was $31.7 million, providing us financial flexibility and the ability to sufficiently fund our growth initiatives.

With that said, let me turn the call back over to Louis.

Thank you, John. Now to wrap up things, we are pleased with the continued progress being made during the quarter on nearly all fronts of the business. Revenues were a new quarterly record, building off a record quarter during Q2 2023. We had strong operational performance with record OptoWire sales in the U.S., with sales increasing by 31% year-over-year and 46% sequentially.

We continue to advance every operational metric we had in the early commercialization plan for SavvyWire, with 64% sequential growth in the third quarter. We will move to a full commercial launch in the coming weeks and anticipate CE Mark approval later in calendar year 2023, which we as a result expect to see further adoption of the SavvyWire as we look to revolutionize the TAVR industry.

We are seeing another significant step up in our optical medical products division, following a step up in revenue a few quarters ago. And as John mentioned a moment ago, our gross margin increased by 780 basis points to 58.8%, a new record for the company. And finally, our balance sheet remains solid as we continue to make the appropriate investment in sales and marketing, necessary to drive adoption of SavvyWire in the quarters and years to come.

We are excited about OpSens future as there are a number of exciting opportunities in front of us for our proprietary sensing technology, to expand and enhance our markets that will improve patient outcomes and drive top-line growth. As always, I want to thank all our employees for their hard work and dedication.

Operator, let me now turn the call over to any questions.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Rahul Sarugaser with Raymond James. Please go ahead.

Good morning, Louie. Good morning, John. Thanks so much for taking our questions and congratulations on the strong revenue this quarter. So I'd actually like to start there. So great that we're seeing the TAVR products starting to increase in revenue and I think we have a sort of sense of the trajectory there. I think what I was quite surprised by was the relatively large jumps in both the coronary artery disease and the OAM business. And so while that's of course hardening, how should we be thinking about that growth going forward given that you saw a pretty large jump this quarter? Was it an outlier or do you expect to see that continuing to grow northward?

Well, thank you for your question, Rahul. Always good to talk with you. So yes – I mean when we look to the Q3 2023 results, obviously everybody were expecting significant growth in structural heart with SavvyWire, that's what we got. We were positively surprised about the growth that we got in coronary for the third quarter. We still expect to do better in Q4 2023 in that revenue line.

This being said, the growth on a sequential basis should be smaller in Q4. This being said, if you use the comparative approach, obviously the Q3 2022 was a record in the past, while Q4 was quite light. So in that context, you can expect also to see in Q4 a good growth percentage on the coronary line.

For the OEM business, that's an area where – I mean we have been investing time and resources and money for years, to really optimize our manufacturing capacity, our manufacturing efficiency. And in that context, to us, it was not necessarily a surprise to see the growth that we got in Q3. I mean to achieve that result obviously was good for us, but we were seeing this coming, and we feel that again, in Q4 2024, I don't expect on a sequential basis the growth to be as strong as what we got in Q3, but there is still room for us to do better.

Great. Thank you. That's very helpful, Louis. And then perhaps for you John, now turning to sales and marketing expense, of course you know with that revenue growth, we're seeing an increase in the sales and marketing. So could you give us a sense for whether that's sort of now going to level off? Do you expect that to continue increasing as you continue to drive revenue, particularly given the interplay between OptoWire and SavvyWire?

And then also, you've indicated that R&D is going to – likely to come off a little bit. Could you give us a little more clarity there as well please?

No problem, Rahul. Just to the first point in terms of the sales and marketing expenses, we expect that sales and marketing expenses as a percentage of revenue will start to decrease or to tail off I suppose, as our direct sales products, proprietary products, especially in North America. As that growth continues, we would expect that the level of investment in sales and marketing expenses will not increase that significantly and will start to flatten out and tail off.

In terms of the R&D element, Q3 as we had noted was higher than the two previous quarters. That was because we had some specific study activity, clinical activity during that period, and we would expect that to come back to a more normal run rate in Q4.

Perfect. Thanks very much for that, John. And then Louis, if you don't mind indulging in just one last quick question. So it's terrific to see February be included in the Complete TAVR trial being run by Edwards and the focus on hemodynamic measurement being essentially increasing. So could you perhaps give us some sense as to how you see hemodynamics being perceived among the KOLs and the docs that you're talking to, particularly given that some players' devices are fully deployable versus partially deployable, and how hemodynamics – in real-time hemodynamic measurements will allow different players to make sure that their devices are deployed more effectively?

Well, okay. I will start with an existed summary line, where we really believe that having real-time hemodynamic information is the future in terms of TAVR deployment. If I go in more detail, and you referred to the complete TAVR clinical project – I mean this is a high-visibility project studying the impact of the hemodynamic versus the aortic valve performance. And the fact that TAVR was included into a sub-study of this really credible study is really good for us, okay.

The reality okay, I'm not going to convince you that there was major progress in the last few months on this. Those projects always take some time to get running. This being said, we think it will highlight the importance of taking the invasive hemodynamic information. This 200-patient sub-study will be really useful for us, because it will really show that having the right information can be useful. And you refer to different types of valves and we build the SavvyWire for all valves, and there is a value proposition for all valves.

And as you know, there is a certain part of the market where they are developing valves that can be partially deployed; that you can see the hemodynamic results. And if it's not to the doctor's expectation, they can recapture the valve and redeploy it.

So having a device where you can provide in real-time and display such information, it's really useful for doctors and clearly, SavvyWire is unique in that category.

That's great. Thanks for that color Louie and congratulations on the quarter, gentlemen. I'll get back in the queue.

Thank you, Rahul.

The next question comes from Justin Keywood with Stifel. Please go ahead.

Good morning, and nice to see the traction in the overall business in the quarter. I want to come back to what we view as leading indicators for Savvy. There was a mention that there's penetration in now 45 hospitals, up from 30 last quarter. And if I heard correctly, there's an expectation of another 20 new accounts coming online.

My question is how we can look at these hospital accounts or Cath Labs? How that can translate into SavvyWire sales. If there's an expectation of an average revenue per account at maturity, and also the timeline to reach maturity for each of these accounts. Thank you.

Thank you, Justin. For the average, I would prefer to wait. We are still in the early phases of this launch with a new version of the software, as I mentioned before. So on that part, I would prefer to wait a little bit.

Regarding the time to get the accounts independent and the process that we see, we think that right now we have all the elements in place to do the full market launch, to be more efficient. And there I'm referring to having software that is really easy to use, having a training process, either for our employees or for the doctors and the nurses. So we feel that we'll be able to accelerate the speed of the rollout of the SavvyWire.

And you referred to different metrics that we are looking at on a daily basis. As you mentioned, we had 30 accounts at the end of Q2; we had 45 at the end of Q3; and we are looking to add another 20 accounts, which would bring us to 65. And if you look back to what we committed to the financial community, it was to have 60 accounts at the end of the fiscal year.

So we are on a path to meet those expectations in terms of rollout. And ultimately, what's important is that the feedback from the customers is really, really good on the value proposition of the SavvyWire, and we'll need to continue to promote that, to make sure that the market is well aware of this fantastic product.

Thank you for the additional color. As we look into fiscal Q4, last quarter there was some guidance or expectations on what the quarter could shake out on a sequential basis as far as revenue growth. Are you prepared to offer any indication of what we should expect for the upcoming Q4?

What we can guide to the market, and again, last year if you look at Q3, we had $10.1 million in revenue. Q4, 2022, we had $9.1 million. So it was a quarter that was a little bit disappointing to our eyes. So of course, if you calculate a growth rate compared to a disappointing quarter, it would give substantial numbers. What I'd like to look is really at the sequential growth. You can expect to have a sequential growth in Q4 compared to Q3, but the percentage level should be relatively modest.

Very helpful in suggesting potentially another record quarter. Just one more question for John. In your remarks you mentioned the opportunity for continued gross margin expansion. Just wondering what the maturity level of where gross margins could shake out at. Thank you.

Thank you, Justin. Just in terms of where the gross margin could get to, with SavvyWire at a very early stage in terms of its rollout and due to go to full release, SavvyWire for us is a higher margin proposition. So we would anticipate that our gross margin, which was just short of 59% for the quarter, can continue to increase. But we would be hopeful that we can get to north of 60% over the next number of quarters. Not necessarily Q4, but certainly over the next number of quarters.

Thank you very much.

Thank you.

[Operator Instructions]. The next question comes from Doug Miehm with RBC Capital Markets. Please go ahead.

Good morning, Louie and John. A couple of questions. One is a housekeeping one. You indicated that Japan was down a bit obviously in the quarter, but part of that was due to foreign exchange. Can you break that out a little bit for us? How much was foreign exchange versus the base business? And can you tell us what you plan on doing there to fix the situation?

Yes, well I don't have the break-out in front of me, but what I can say is that the fact that the yen got weaker against the U.S. dollar is somehow affecting the general performance or the revenue that we are recording.

I think the second part of your question is really the place where we focus, where we have some control. So for the Japan territory, first we are in a process to select a partner for the SavvyWire that most probably will be a different partner than the partner that we have for the coronary artery disease business.

And again, capitalizing on the synergic effect of SavvyWire and OptoWire will help our general performance in Japan. On top of this, we are working closely with our distributor, our partner, that has been performing some change in their organization to improve the results, and we are supporting them through that phase of change.

But just to add on the synergic effect, what we've seen so far and still early in the launch, but I think it's a confirmation that the strategy that we set in place is working. And in the Q3 results, we could see that we gained three accounts for OptoWire where we never sold before, but they were accounts for SavvyWire. So it means that SavvyWire can help to sell the OptoWire. And on the other side of the equation, in the 15 new accounts for SavvyWire, 10 of them were already OptoWire accounts.

So two-thirds of the accounts that we opened with Savvy already had experience at OpSens. So when we look at those data, we see this really as the idea behind the SavvyWire was of course to develop a great product, but also to have a product that would be synergistic with our existing business, and that's what we see. And we think we'll see that in Europe, in Japan, once SavvyWire will be approved.

Okay, great. Another question has to do with the competitive environment and the recent approval of Teleflex's Wattson Temporary Pacing Guidewire. Can you tell us what feedback you're hearing from docs and whether you think this is a true threat or not as you both go into expanded marketing of your respective products?

Yeah. So based on what we could see on the Wattson wire. So the Wattson wire is a wire that can deliver the valve and that can do the pacing function. In our case, as you know, SavvyWire is unique because it's the only product in the world that can do three functions, which is valve delivery, pacing, and on top, to provide real-time, and more dynamic information.

So we think that the value position of SavvyWire is stronger. We have not seen or we have not been able to assess the quality of the Wattson wire on the other characteristics, but since the doctors have access to a product that can provide more to them, we don't see this as something that will have material impact on the SavvyWire performance.

Great, thank you. And then just to wrap up, when you do look at the hospitals now that have been using the SavvyWire for several months, I think in the last call you indicated that some of them are using it in 50% of TAVR cases. Can you maybe give us a little bit more anecdotal information in terms of usage within these hospitals that have had it at their disposal now for the longest time?

Yes, I think the penetration rate within our account is probably slightly better than what we had in Q2, but still in the same range. So for some doctors, let's say it's either they have not been trained or either they are still running with their existing product, but still the door is open for us to get them to use the SavvyWire. But everything takes time in terms of commercialization, but we think we'll get there.

But still overall, I mean we are glad about the penetration that we get in our existing account. And we think this is enough to provide us the possibility to grow substantially and to grab significant market share in the overall TAVR market.

Excellent! Okay. Thanks, Louie. Thanks, John.

Thank you, Doug.

Thank you, Doug.

The next question comes from Scott McAuley with Paradigm Capital. Please go ahead.

Thank you. Good morning, gentlemen. Thanks for taking the questions. A lot of them have been addressed already, but one I wanted to focus in on a little bit is on the balance sheet. So I think I noticed there is about $1.2 million, an increase in the debt, kind of a new term loan facility. Could you talk a little bit about that and kind of what the expectations are in the next few quarters around kind of the cash burn rate?

So John, maybe you can tackle the first component of the question about the debt and I will tackle the burn rate after.

Good morning, Scott. Just in terms of the debt, that debt is the increase in debt of about $1.1 million, $1.2 million, is actually related to building works or improvements that we will be doing at our premises, which are supported by the landlord. So, just received in advance of the quarter and hence presented as debt. But it is not so much a term loan facility as more a support for facility improvements.

Okay, thank you John. And on the burn rate side, Scott, the way we see our business, our future, is that for the future quarter, the future – the fiscal year 2024, the SG&A component will remain relatively stable with some minimal growth here and there and we will grow revenue and gross margin.

Consequently, you will see in the next fiscal year the burn rate going down and we see probably not in 2024, but in years 2025 and 2026, OpSens moving to a cash flow positive situation from an operational standpoint and ultimately profitability.

So overall, we are confident that the current cash position is appropriate for the growth plan and the forecast that we have.

That's great. With moving towards that, if there is kind of other investments needed with inventory and the increased revenues that you are looking at, like is there opportunity or are you looking at potential for more debt versus any potential need for equity or are you again kind of saying that the current cash position is sufficient and you don't expect to need any other kind of infusion of cash in the near or medium term?

Yes, on the equity side, we don't expect to do anytime soon a dilutive transaction. On the debt side, we could assess different opportunities that are brought to us. It may be a possibility to add some cash in the balance sheet. We'll assess this in the overall plan that we are building for the years 2024 and 2025.

That's great. I appreciate it and thanks for taking the questions.

Thank you, Scott.

Thank you, Scott.

The next question comes from Maxwell Carr with MPartners. You may now go ahead.

Hi Louie! Hi John! Everyone's asked pretty much every question possible. So the only question I have remaining here is actually to do with inventories. We've seen it building. It seems like it's coming to a crescendo. How do you view the inventory situation? Do you see enough SavvyWire produced to support the sales cycle as it goes into full release or are you going to continue adding at a pretty brisk pace versus previous years, previous quarters to that inventory level?

That's a good question and I should have even answered that before. But for Q4 we expect to see the inventory level going down compared to Q3, 2024. We feel that we reach a point where we are comfortable in having the inventory that we need to continue to generate growth, while also properly managing our cash resources or the working capital position that we have.

Perfect. And two more questions here. One, with regards to the Japan story. You've mentioned in previous quarters there's been a little bit of disappointment with the distributor channel you guys are operating with there. Is there any potential for a future direct sales team in Japan or is there too much of a barrier between language and laws and everything, right?

I would say I don't see that on a near-term OpSens moving from a distributor model to a direct model in Japan. In general, I mean we are seeing tremendous opportunities in direct markets. So in North America, where we are investing right now. So in terms of resource allocation, we feel that the current mixed model that we have is the right one, while obviously we need to execute and improve our performance in different areas.

Excellent! Thanks for the clarity on that. And then, I guess with regard to the follow-up to that question, would be the sales team you've put together here in the U.S. Obviously with the results this quarter, they've been doing a good job. Do you see further expansion of that team as a possibility or are you happy with the size of the team? And in terms of rewards or additional compensation, are they going to be having a bump or is it business as usual?

I mean, on a short-term basis you can expect the team to be relatively stable. We do see some specific markets where the patient population, the population of patients is large, where we are not covering right now that we could be really strategic in increasing slightly the number of persons. But still, this growth will be overall much smaller than the general revenue growth that we expect.

Perfect! Well gentlemen, congratulations on a great quarter. I look forward to a full release.

Thank you very much.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Louis Laflamme for any closing remarks.

Well, thank you to everyone for participating on today's call. We are really glad about the progress that we are making. And again, are seeing tremendous opportunities to capitalize on our core competencies in the future. And we look forward to hopefully speaking with all of you shortly.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.