Nyxoah SA

XBRU:NYXH

Earnings Call Transcript 2023-Q4

[Operator]

Good day and thank you for standing by. Welcome to Nyxoah Fourth Quarter 2023 Earnings Conference Call.

[Operator Instructions] Please note that today's conference is being recorded.

I would now like to pass the call over to the Investor Relations and Communications Manager, Mikaela Kirkwood.

[Mikaela Kirkwood, executive]

Thank you, Carmen. Good evening and good afternoon, everyone, and welcome to our Earnings Call for the Fourth Quarter and Financial Year of 2023.

I am Mikaela Kirkwood, Investor Relations and Communications Manager at Nyxoah. Participating from the company today will be Olivier Taelman, Chief Executive Officer; and Loic Moreau, Chief Financial Officer.

During the call, we will discuss our operating activities and review our fourth quarter financial results released after U.S. market closed today, after which, we will host a question-and-answer session. The press release can be found on the investor relations section of our website. This call is being recorded and will be archived in the Events section of the investor relations tab of our website.

Before we begin, I would like to remind you that any statements that relate to expectations or predictions of future events, market trends, results or performance are forward-looking statements. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. All forward-looking statements are based upon current available information, and the company assumes no obligation to update these statements. Accordingly, you should not place undue reliance on these statements. For a list and description of these risks and uncertainties associated with our business, please refer to the Risk Factors sections of our Form 20-F filed with the Securities and Exchange Commission on March 22, 2023.

With that, I will now turn the call over to Olivier.

[Olivier Taelman, executive]

Thank you, Mikaela. Good afternoon and good evening, everyone. And thank you for joining us for Fourth Quarter and Financial Year 2023 Earnings Call.

I would like to open with our 2023 accomplishments that have strengthened our confidence for a transformational 2024. Clinically, we completed enrollment in our DREAM U.S. pivotal study in March and initiated enrollment in our ACCCESS complete concentric collapse U.S. pivotal study. From a regulatory perspective, we filed the first 3 modules in the modular PMA submission. The fourth and final module will contain the DREAM safety and efficacy data.

Commercially, we reported 2023 sales of EUR 4.3 million, an increase of 43% from 2022, benefiting from our direct-to-consumer initiatives launched early in the year. We also initiated a partnership with ResMed Germany to further increase overall OSA therapy penetration, ensuring that patients have access to the right treatment. Finally, we continued building our U.S. leadership team, strengthening our U.S. presence.

Looking ahead. 2024 is set to be the most exciting year in company's history. By early April, we expect to report safety and efficacy results from the DREAM study. Our confidence in DREAM outcomes is supported not only by roughly 500 commercial and clinical Genio implants globally but also by DREAM efficacy and safety data released in a late-breaking poster session at SLEEP 2023 in June.

In this poster, we reported efficacy data on the first 34 DREAM patients reaching 12-month follow-up, which demonstrated a 65% AHI responder rate, a 76% ODI responder rate and safety data on all 115 patients enrolled in the study that was in line with expectations. As a reminder: For the trial to be successful, of the 115 patients, at least 62.6% need to be AHI and ODI responders at 12-month follow-up.

We anticipate submitting the fourth and final module in our modular PMA filing, which will include DREAM 12-month safety and efficacy data, during the second quarter this year. We are preparing for a launch by the end of 2024, as based upon modular PMA review cycle plans. We anticipate FDA approval in late '24 or early '25, as we do not control FDA time lines. To ensure we are fully prepared at launch, we are accelerating investments in our U.S. commercial team. We anticipate having the commercial U.S. leadership onboarded by midyear; and bringing on our sales force, patient management teams and reimbursement specialists during the second half of 2024. The current hypoglossal nerve stimulation market in the U.S. is fairly concentrated, allowing for a focused launch strategy on high-volume sites, complemented by robust prior authorization and patient care teams. A streamlined patient referral pathway from sleep specialists to these sites will accelerate market growth.

A key differentiator of bilateral stimulation to unilateral stimulation is the ability to treat complete concentric collapse or CCC patients. The U.S. ACCCESS pivotal study continues to enroll. As a reminder: CCC patients represent approximately 30% of hypoglossal nerve stimulation eligible-to-treat OSA patients who are contraindicated to commercially available HGNS therapy in the U.S. and do not have suitable treatment options other than major pellet surgery.

In the BETTER SLEEP study, we demonstrated bilateral stimulations can treat CCC patients, which led to a complete concentric collapse label expansion in Europe. Recently, Genio's success in treating CCC patients commercially was demonstrated in a real-world case series that showed an average apnea-hypopnea index decrease of 73%. The ACCCESS primary end points are similar to DREAM, with the objective to expand our U.S. labeling to include complete concentric collapse indication and eliminate the need to perform a drug-induced sleep endoscopy to determine whether the patient has CCC or not.

Commercially, the fourth quarter was very strong, with sales of EUR 1.8 million showing 87% sequential and 42% year-over-year growth. This is a result of both strong underlying demand for Genio; and recent commercial investments, including direct-to-consumer online campaigns and a patients hotline. Continued investing in understanding the patient's journey resulted in the launch of a patient helpline and kicking off our ResMed Germany collaboration to ensure every patient gets the most appropriate OSA treatment. This is not only resulting in educating [indiscernible] by calling the helpline but can be considered a key pillar in our fourth quarter success together with -- the strong work of sales and commercial team in Germany is doing.

In 2024, the recent ResMed Germany collaboration will further expand the OSA continuum of care, guiding patients to the appropriate therapy. For CPAP-quitting patients suffering from moderate to severe OSA, Genio is the solution. And for untreated patients, CPAP remains the golden standard.

We continue to position ourselves as an innovation leader in the obstructive sleep apnea space, with always putting patients first and listening to our surgeons. As a result, Genio is a different approach to hypoglossal nerve stimulation [indiscernible] with its [ lead and cuff ] solution. Genio offers patients a leadless, full-body-MRI compatible, non-implanted battery solution powered and controlled by a wearable. Thanks to the fully upgradable wearable component, Genio patients can always have access to the most advanced technology without needing another surgery.

The recently launched Genio 2.1 enables greater stimulation adjustability and gives patients the autonomy to adjust stimulation amplitude within predefined boundaries. This will definitely help patients that are very sensitive to neurostimulation [ overall ], while the [ Genio 3.1 ] implantable stimulator is under regulatory review and will further support our "implant for life" concept. Future generations of the Genio system will have a more ergonomic wearable component, have sensors that will adjust stimulation based on sleeping position and provide patients with real-time feedback through data collection that will improve the patient experience.

We are making strong progress towards our key objectives for 2024, which are to complete patient follow-up in the DREAM U.S. pivotal study and report efficacy and safety data by early April; file the fourth and final module on the modular PMA submission; complete patient enrollment in ACCCESS U.S. pivotal study; continue preparations to enter the U.S. market with regulatory, manufacturing and market access readiness; and drive further revenue growth in Germany while opening new European markets.

With that, I'm pleased to turn the call over to our Chief Finance Officer, Loic Moreau, who will provide a financial update.

[Loic Moreau, executive]

Thank you, Olivier. Good day to everyone and thank you for joining us today.

Revenue for the fourth quarter ended December 31, 2023, was EUR 1.8 million, a 42% increase over the fourth quarter of 2022 and an 87% increase over the third quarter of 2023. I would like to point out that the fourth quarters benefit the most from seasonality, and while we expect a strong year-over-year growth in the first quarter, we anticipate sales to be down sequentially. Total operating loss for the fourth quarter was EUR 10.8 million versus EUR 9.1 million for the fourth quarter of 2022, driven by an acceleration in clinical activities as well as commercial investments in Europe as well as U.S.

As of December 31, 2023, cash and financial assets totaled EUR 58 million compared to EUR 95 million on December 31, 2022. During the fourth quarter, our monthly cash burn was EUR 4.9 million, a slight increase from 3Q, driven by U.S. commercialization preparation activities. Based on our current cash position, we have runway into late 2024.

With that, I will turn the call back over to Olivier.

[Olivier Taelman, executive]

Thank you, Loic.

As I hope you all agree, we are entering the most exciting time in Nyxoah's history. We are a few weeks away from DREAM clinical data readouts, which, if positive, should result in obtaining FDA approval in late 2024 or early '25, depending upon FDA time lines. I look really forward to accelerating investments in the U.S. commercial organization so we will be ready for a late '24 launch and continued sales growth in Europe.

This concludes the formal part of our presentation. Operator, I will turn the call over to you to begin our Q&A session.

[Operator]

[Operator Instructions] That is from Jon Block with Stifel.

[Jonathan Block, analyst]

Great. I'll start. The 4Q '23 top line was certainly solid, I think, ahead of most prior estimates and certainly ahead of ours. Olivier, maybe if you could just talk about, what was that strength attributable to? Was it the DTC? Was it the ResMed partnership? I think there was a competitor that had some lead issues in Germany. So maybe, if you can just talk about the main drivers or even rank order them if you can, that would be helpful as we think about our models.

[Olivier Taelman, executive]

Yes. So thank you, Jon. Thank you for the question. And I can only agree. I think we can say that the fourth quarter was a very strong quarter in Germany. We estimate also that we have -- nearly took 50% of the German market share in the fourth quarter. The drivers, I think, first of all, it's a confirmation that there is a high acceptance [ from our ] German physicians. That is one thing. Second, we have the -- 48 centers that are now fully trained and also implanting. We are offering doctors and patients a choice in the hypoglossal nerve stimulation implant. And stepping away from an invasive pacemaker solution, into a single-incision procedure, is definitely helping. Further, there is the product differentiation putting the patients at the center. And of course, there is the sleep physician focus through DTC. I think those components are really driving our Q4 strong results.

[Jonathan Block, analyst]

Perfect, great. That was very helpful. And maybe just to pivot for the second question: You touched on some of the next steps for U.S. approval and then commercialization. Maybe just to probe a little bit more, can you comment on the status of, call it, the first 3 modules, right, that have already been submitted? And then is there anything new or incremental when we start thinking about the reimbursement path and which road you're going to go down?

[Olivier Taelman, executive]

Yes. So as you mentioned correctly, in total, there are 4 modules. We have submitted the first 3 modules already. The fourth and final module will contain the 12-month DREAM safety and efficacy data and will be filed shortly in the second quarter. So the first 3 are done. The fourth one will go hand-in-hand with DREAM safety data. When we are coming to our further market access strategy -- because I think that was also part of the question. Currently we have a team in place that is working to secure reimbursement from both CMS and the commercial payers. That team will also work with customers through the prior authorization process when we launch in the U.S. We are currently also in close conversations with AAO, who will make a recommendation on CPT codes to AMA. There are a few different strategies. One would be [indiscernible]. Another one would be using the an existing neuromodulation code that covers our technology very well, but I think most important is that the reimbursement in both scenarios will be in line with current HGNS payment rates. So I hope that this is providing you an answer, Jon.

[Jonathan Block, analyst]

Great color. I'll jump back in the queue.

[Operator]

[Operator Instructions] And it's from the line of Ed White with H.C. Wainwright.

[Edward White, analyst]

Perhaps if you could just quantify, if you can, the impact of seasonality in the first quarter of this year that you're expecting.

[Olivier Taelman, executive]

Thank you, Ed, for this question. And I think I -- the best-placed person to answer this is our CFO, so we'll hand it over to you, [indiscernible].

[Loic Moreau, executive]

Thank you, Olivier. And thanks for the question, Ed. So as you are aware, the fourth quarter seasonality is driven by the phasing of hospital budgets and spending in Germany. We -- and as you know, we do not provide revenue guidance, but last year, if you observed, the German HGNS market declined approximately 25% from the fourth quarter '22 to the first quarter '23. And we would anticipate a similar seasonality in the first quarter 2024. Given we still have high customer concentration, the impact of seasonality on our first quarter could be more pronounced. That's what we anticipate.

[Edward White, analyst]

Okay. And also just to clarify: Are essentially all of your sales right now coming from Germany? Is there a number we can use to quantify that?

[Loic Moreau, executive]

90% of our sales in Europe are currently in Germany.

[Edward White, analyst]

Okay, great. And my last question is just on the ResMed. How should we be thinking about the ResMed impact on sales, so far? What are you seeing? Is there any way to determine if it's having an impact already or if it should be a later-in-2024 event? And also, is there the possibility of a ResMed agreement in the U.S. as well?

[Olivier Taelman, executive]

So thank you again for this question. I -- Olivier again. I will answer these -- in fact, these 2 questions. So first of all, in ResMed Germany collaboration, we announced the collaboration end of September of 2023. We do not expect to see an impact for the first 6 months, so we are anticipating beginning to realize benefits in the second quarter this year. So that is, I think, the answer on the first part. The second: Do you anticipate also partnering with ResMed in the U.S.? Our strategy is to go direct in the U.S. If there are opportunities to augment direct approach with partnerships like with ResMed touching on their relationship and [ tapping all of ] their relationships with sleep physicians, we will definitely explore those in going forward.

[Operator]

[Operator Instructions] And it's from the line of Ross Osborn with Cantor Fitzgerald.

[Ross Osborn, analyst]

Congrats on progress. So starting off just on the U.S. market, would you walk us through how you're thinking about initially commercializing Genio in terms of targeting existing Inspire users versus growing the market or, in other words, getting first-time HGNS users to adopt Genio?

[Olivier Taelman, executive]

Thank you, Ross, for the question. I mean we are thinking and we are preparing a lot of different strategies on this point, but I can really be precise in the answer. So the U.S. market today is fairly concentrated. We plan a targeted launch focused on top accounts, which constitute [ over 85% ] of current HGNS sales in the U.S. We will have a dedicated sales force sized appropriately for the targeted launch. There will be targeted DTC focus on product differentiation and patients referral pathway. I think this will be a main differentiator to what is happening today. It will be really a targeted DTC focus. We will be engaging with sleep specialists, enabling a steady stream of patient referrals; scalable patient follow-up strategy; and sales, marketing and prior authorization teams ahead of launch. And more details, I'm really happy to share later this year.

[Ross Osborn, analyst]

Okay, great. And then maybe one more qualifying question on the ResMed partnership. Would you just remind us why they are incentivized to market Genio?

[Olivier Taelman, executive]

Yes. So in fact, I -- first of all, I would like to maybe [indiscernible] partnership because, through this partnership, we really aim, both ResMed and Nyxoah and our patient-centric approach, developing a complete OSA ecosystem where patients can be guided to whichever OSA treatment best suits their needs. We will collaborate on DTC initiatives, sales and marketing efforts to target both sleep physicians and ENT surgeons. And I think the goal of this partnership are to expand OSA therapy penetration and increase our market share. What are the benefits? I think for Nyxoah it's pretty obvious, that having access to patients who are quitting CPAP, that can be offered Genio, which will drive share gains and strengthen our relationship with sleep specialists. For ResMed, benefits from having access to more OSA patients through the ENT surgeons that we are having at Nyxoah; also a helpline and increasing sleep specialists capacity by sending CPAP struggling patients, who are time consuming, to Genio. I think something also not to neglect is the health care system benefits. As untreated OSA patients are at high cost, ensuring these patients are optimally treated either with CPAP or with Genio will definitely have a positive impact on reducing health care spendings. And overall, this partnership will also increase OSA therapy penetration and will benefit patients.

[Operator]

[Operator Instructions] And it's from the line of David Rescott with Baird.

[David Rescott, analyst]

Great. I know you touched a little bit on the reimbursement landscape in the U.S. Again I know you mentioned that, September of last year, at AAO, there was some discussions around new codes. Can you remind us, what specifically are the next steps, as you look out over the next several quarters or so, around what we'll find out and when we're going to kind of find that update out around what a U.S. reimbursement code would look like?

[Olivier Taelman, executive]

Yes, no, no, definitely. So the next step will be very precise, that the AAO will make a recommendation on CPT code to AMA, so from our side, we are working immediately to secure reimbursement from both CMS, once we have FDA approval, so that we can immediately start commercializing -- and in parallel, of course, preparing also commercial payers and educate and train them [indiscernible] products and also convince them to start reimbursing our technology. Now our competitor, as you know, has done a terrific job educating the commercial payers about the benefits of HGNS, resulting in all having HGNS coverage policies. We have already engaged in informal discussion with the payers and [indiscernible] policies. At launch, very precise, we anticipate being reimbursed [ to ] prior authorizations and would expect to be included in coverage policies with commercial payers within 12 months afterwards.

[David Rescott, analyst]

Okay. And then you mentioned some investments in the sales force ahead of the U.S. launch. I heard you also mentioned some investments in manufacturing. I'm curious what specifically is going on from the manufacturing side. And historically, I think, you talked about this [ $4 million ] of quarterly cash burn. Is that kind of the right way to think about that into 2024? Or should there be some type of acceleration assuming that you'll continue to invest in some of the sales force and manufacturing capabilities ahead of the U.S. launch?

[Olivier Taelman, executive]

Yes. So first part is on the manufacturing side. We really invested heavily, so we have now a complete approved site in Belgium manufacturing our products. And next to this, we are working with service providers in the U.S. that will also manufacturing -- or will also manufacture our products, so in both sites, we do believe that we totally completely have derisked the manufacturing volume capacity that we will be able to start building inventory before launch so that, at all time when we launch, we will have significant inventory in our possession, that there will never be a product shortage in the first 12 months of launch. That is one thing. When it comes to the costs relating to this and the overall spend, Loic, I am sure that you would like to comment on this a little bit further.

[Loic Moreau, executive]

So you have seen that we burnt EUR 4.9 million in the last quarter of 2023. When we look forward, we expect the burn rate to remain steady for the first half of the year while we are -- start doing our pre-commercial investment. And then when we -- starting this summer, we expect this burn rate to accelerate as we see more and more investments in U.S. commercialization activities.

[Operator]

[Operator Instructions] And it's from the line of Adam Maeder with Piper Sandler.

[Adam Maeder, analyst]

Congrats on the nice finish to the year and the recent progress. I wanted to start on the DREAM study and just the disclosure strategy around full DREAM results. So I heard the data should be communicated by early April. Olivier, are you able to talk a little bit more about exactly what's going to be shared at that point in time? Is it simply the top line information, or will we get additional details? I'm assuming it's going to be messaged in the form of a press release, but maybe just talk about disclosure strategy. And then I had a follow-up.

[Olivier Taelman, executive]

So thank you, Adam, for the question. So as I mentioned -- and you will -- and we will communicate, latest beginning of April, the data. That will be in a press release, followed also by a call. We will be focused on top line results, AHI reduction, responder rate, ODI reduction. And then we are planning and moving forward to reveal all the data in detail during the ISSS conference in September, where we will have our PI talking [indiscernible] the data and the details. So what you can expect is top line data being released in a press release, followed also by a call where there can be more questions. And we will be focusing on, in fact, responder rate, AHI reduction, ODI reduction. We will also talk high level on the safety data that we are having. And then of course, in parallel, we are preparing everything for publication in the Tier 1 journal.

[Adam Maeder, analyst]

That's perfect. And then for the follow-up, I wanted to ask about the ACCCESS study. I think it was mentioned in the prepared remarks but was hoping just to get a little bit more granular in terms of enrollment progress in that study. How should we think about potential time lines for enrollment completion and ultimately potential FDA commercial approval for CCC patients?

[Olivier Taelman, executive]

Yes, no, no, sure. So we continue to make progress with the study. We will not disclose the number of patients implanted already, but that being said, we still continue to plan to close all implants by the end of '24. Then there is a 12-month patient follow-up, so that brings us to the end of '25. And then the aim is to submit the CCC data as a PMA supplement. That should take maximum 6- to 9-month review period, so we plan to have the label expansion, assuming all data are positive, mid-2026.

[Operator]

[Operator Instructions] And it's from the line of Laura Roba with Degroof Petercam.

[Laura Roba, analyst]

We see that gross margin was lower in Q4. Could you elaborate a bit on that and on what we could expect for 2024?

[Olivier Taelman, executive]

Definitely. And this is definitely a question for our CFO.

[Loic Moreau, executive]

Thank you, Laura. Yes, indeed, we were at 60% in Q4 versus 62% for the rest of the year. Actually this is explained by our scale and specifically the fact that we have a newly opened manufacturing site in Belgium. That is not yet at full capacity, so we see some modest variability quarter-over-quarter. That said, we anticipate the gross margin to increase over the coming quarters as we scale up volumes. Over time, we expect our gross margin to eventually approximate the level of other neurostimulation companies and to be above 80%.

[Operator]

And our last question will be from Suraj Kalia with Oppenheimer.

[Suraj Kalia, analyst]

Olivier, Loic, can you have me all right?

[Olivier Taelman, executive]

Yes, we can.

[Loic Moreau, executive]

Yes.

[Suraj Kalia, analyst]

Pardon the background noise. And congrats with the progress. So maybe a few questions from my side. As we look forward with DREAM, Olivier, what would you say in your position, say, the results are -- [ how would you ] characterize the delta between bilateral versus unilateral? What would make you say these results are better than unilateral? What would make you say these are somewhat less than unilateral?

[Olivier Taelman, executive]

So if I understand the question correct, Suraj -- because there is a little bit background. So you are asking the results -- comparison between bilateral results and unilateral results that we are seeing. Is this correct?

[Suraj Kalia, analyst]

Yes. I guess what I'm trying to understand, Olivier, is you can be rest assured the numbers are going to be sliced and diced in different ways to make different arguments, right? I guess what I'm trying to understand is hypothetically if you have 50% responder rate in the [ complete ] cohort. Inspire had a certain responder rate, yes. We can slice and dice different metrics. What would make you say, "You know what, this is -- the totality of these results show bilateral is better than unilateral?" What would make you somewhat cautious and say, "You know what, we missed [ somewhere ] versus unilateral?"

[Olivier Taelman, executive]

Yes. So I -- first of all, I have to point out that the study was not designed to show superiority. And it was even more a head-to-head trial, but on the other hand, you...

[Suraj Kalia, analyst]

Yes, no, I get it, yes.

[Olivier Taelman, executive]

So [ you look at those ] patient phenotyping. We look at the inclusion criteria. We look at the BMI criteria, so the studies are really similar or comparable. Now what would we expect? So if we can show -- and that's what we already communicated, first of all, of course, reaching the primary end point; second, showing equivalence compared to the unilateral stimulation for non-CCC patients. I think that would be already a first accomplishment. When you look at what the responder rate would mean, in our case, I -- [ we are powered ] and we have to show a responder rate of 62.6%, so I would like to see numbers, of course, above. That is one thing. And then second, there will also be a lot of analysis that will be done on AHI reduction. What is the AHI reduction for patients with higher BMI; for patients with a BMI that is, for example, 25; and going lower? So I think this is really important. Let's also not forget the ODI reduction, because [indiscernible] with oxygen desaturation; [ and the mortality risk ]. So I think this is important. And of course, all reductions have to be clinically relevant. So that's what we are looking at.

So equivalence. That's what we would like to claim. We would further slice and dice the data and looking on AHI reduction. There is also [ the spine position ] that we are seeing. And all the reduction is this because, during a night, patients, they tend not to stay only on one -- in one position but to -- toss and turn a little bit. So also there we will come with a sub-analysis. So that's what you can expect from our data.

[Suraj Kalia, analyst]

Got it. And Olivier, I'll -- quickly with my follow-up question and avoid the background noise. So Olivier, do you expect Genio eventually to be used in patients who are unwilling to try CPAP? And also what has been the experience in Germany? Are they more -- female gender usage is higher than male just given beard issues?

[Olivier Taelman, executive]

Yes, all right. So first of all, we have to follow the current guidelines, and that means that patients need to be refractory or quitting CPAP. So that is one thing. So [ we'll -- we become ] first line. I think, in order to do this, HGNS need to change those guidelines, but for now it's clear that patients have to have CPAP before they become eligible for an HGNS treatment. So when it comes to the gender of patients: So also there we still see that the majority of patients are male and not female, when it comes to the fact what you were [indiscernible] we -- also there we can confirm that patients who are suffering from moderate or severe OSA and offered the Genio solutions are really happy, I -- to shave, if I can say it like this, so that they can really benefit from our technology and from the bilateral stimulation as it is recommended by their surgeons and physicians. So I hope this is answering your question.

[Operator]

Thank you. And with that, ladies and gentlemen, we conclude our Q&A and program for today. Thank you all for participating, and you may now disconnect.