Q3 2022 Nyxoah SA Earnings Call
The first three module or module of the PMA prior.
Prior to having clinical data next fall.
We reiterate of timeline or for regulatory approval in the second quarter of 2024.
We have begun activating sites in the U S. Excess pivotal study focused on complete concentric collapse basin and continue to expect the initial implants before year end.
As a reminder, triple.
Triple C patients represent approximately 30% of April's Russell another stimulation eligible to treat OSA patients who are contra indicated to commercially available <unk>.
<unk> therapy in the U S.
And who currently have no suitable treatment option, although the major pellet surgery.
Commercially in Germany demand for <unk> remains high we.
We activated six new commercial sites in Germany during the third quarter, bringing our total to 32 active sites, we expect a very strong fourth quarter with up to 40 active sites by year end.
That's up.
We will.
Supply constrained due to a temporary issue at one of our component providers, which I will detail shortly that resulted in us postponing availability of inventory in Germany.
The U S Dream trial was never impacted by decisions obviously constrained.
As a result, we reported sales of 182000 vehicles well below underlying demand.
This is not reflective of the progress our commercial team has made as we received additional purchase orders.
Roughly 700000 vehicles that remained open at quarter end.
Importantly, the supply issue has been remediated and the vast majority of the orders that were open have since been sold.
Notably despite the supply constraint with combined third quarter open orders and reported sales we estimate that our share remains consistent with the second quarter.
What makes me even happier is to see the demand in Q4 remains high.
This strengthens our confidence to be the market leader exiting 2022 in Germany.
No let me start.
With a review of our first priority and update of our two pivotal studies in the U S Dream and access.
In the Dream study to date, we have completed 110 of the 115 implants with the remaining five implants scheduled for the next two weeks we remain on track, having 12 month clinical data from the study in the fall of 2023 with regulatory approval expected in the second quarter of <unk>.
2024.
As discussed previously we are pursuing a model of the PMA process. We are preparing the first module and anticipate submitting it in early 2023.
In the meantime, we have already begun investing in the U S market access organization to ensure reimbursement upon approval.
Asphalt Av access study for complete concentric collapse patients, we all know activating clinical sites.
As a reminder, we plan to unplanned up to 106 patients across up to 40 clinical sites in the U S.
This CCC patients who represent 30% of the eligible to treat hypoglossal nerve stimulation OSA population.
Currently Contra indicated for the Palazzo novel stimulation in the U S.
And therefore that only treatment option. After failing <unk> is currently major pellet strategy.
With a CCC label.
Only will these CCC patients be eligible for people who are also <unk> stimulation therapy.
But all <unk> patients will no longer have to undergo a drug induced sleep endoscopy all guys.
Since detailed mining CCC will no longer be a pre requisite to getting an implant.
In Europe we.
Where we already operate a CCC indication physicians and patients are already benefiting from no need.
The dise procedures.
This is a true demonstration of a patient's first approach to OSA therapy.
Not only are we providing a much less invasive treatment option for CCC patients, but we are also streamlining the buck too. It was also not a stimulation therapy for all <unk> patients by eliminating the need for the dice.
Of any procedures to diagnose CCC.
We still anticipate initial implants before year end and we expect to complete all 106 implants in access within a year for the following reasons.
First we already have a database of patients who screened out of dream because dice showed they have CCC.
Second we will have more opportunities to enroll patients since we will activate up to 40 sites such as 20 sites for dream.
First there are no hypoglossal nerve stimulation alternatives for Triple C. Patients. So there will be no competition for these cases.
For home sleep test will be used to qualified basins and we have learned a great deal from dream and hold to more efficiently move patients through the funnel from enrollment all the way to implant.
We continue to expect our regulatory approval in the first half of 2025.
So roughly one year after the loan CCC approval.
That we expect coming from Dream.
Importantly, we are generating growing interest and enthusiasm within the clinical community as we move closer to U S commercialization.
This was evidenced by more than 90, E&P surgeons and sleep physicians, who attended symposium at the a O.
<unk> Congress in Philadelphia in September .
Mixed silver patient centric approach, which includes full body MRI compatibility.
A littler system.
Bilateral stimulation both by our non implantable bulbs generators.
Our scalable platform is resonating very well with the U S clinical community.
I would like to thank the entire <unk> team for their great work and focus on execution as we continue to advance the next war stories.
Moving on to the second priority.
Our European commercial launch focused primarily in Germany.
Germany is the largest and most competitive but also more stimulation market outside of the United States.
<unk> has a dedicated German sales and marketing team of 15 people and similar to deal with Jeep and the reimbursement level at the same price point as all the hypoglossal nerve stimulation technologies.
We have defined of commercial success by becoming market leader by the end of 2022.
As I mentioned earlier.
During the third quarter, we experienced a temporary supply disruption in Europe as one of our component suppliers have the malfunctioning machine.
This has been solved.
To further optimize our supply chain. This quarter, we are bolstering of Israel manufacturing capacity with a second site in Belgium and have sufficient capacity to meet the demand.
Additionally, we are in the process of adding a third production line in the U S with a well known contract manufacturer.
That said during the third quarter, we postponed availability of commercial inventory in Germany, and therefore, he booked sales with one almost 82000 geos.
Underlying demand.
That remains very strong with about seven homeless dozen of confirmed purchase orders being deferred to the fourth quarter.
While I do not plan on providing any fourth quarter guidance. Since we never provided any guidance I think it is important to show that our third quarter supply issue has not dampened demand for genial.
We continue to hear from physicians that because of a label expansion to include patients with complete concentric collapse.
They are increasingly opting for general as they do not have to perform a drug induced sleep endoscopy or dise procedures.
This drastically shortens the time between diagnosis and implant and remove the burden for both patients and physicians.
Positively impacting access to <unk> for patients who are in desperate need of a suitable solution for their OSA.
We also launched the program called Geforce in Germany.
Careful who will use the acute bubble home sleep test to accelerate the pathway to the <unk> solution.
<unk> will be used to confirm a prior PSG for existing <unk> patients.
Thus, enabling them to receive and Ags implant without waiting up to six months for the confirmatory PSG.
To this end we are hosting an event around the German National Sleep Society annual Congress in Wiesbaden, Tomorrow, and titled Obstructive sleep apnea from by Moses to treatment. This event will be webcast and information on how to access it is present on our website.
Looking at markets outside of Germany. This quarter, we commercially implanted patients in Switzerland, where we have a full of reimbursement, including Deogee in place.
We continue to establish a position as an innovation leader in the OSA space.
Always putting patients and clinicians first.
R&D strategy.
As we have discussed previously we received regulatory approvals for Virginia $2. One next generation system.
Which improves patient comfort and compliance without the need for surgical procedures to replace the implantable component.
General remains the only scalable hypoglossal nerve stimulation of implant which of those patients.
To always have the most advanced features with their existing implant and therefore not have to undergo a modest subsidy.
We are also developing future generation of both the implantable stimulator and the activation chip to improve the patient experience.
For the implantable stimulator, we are working on an implant for glass.
As far as the activation ship its.
Design will become more economic and integrated patient and physician feedback.
We will provide further updates on these developments as they progress.
Okay.
No updating you on November built mixed saw answer regardless collaboration project.
Processing towards a prototype device and expect to Commons a feasibility study in 2023.
These efforts embody our mission to build the product pipeline.
That will enable us to expand the market by offering solutions to government non responding April also noticed stimulation patients and non eligible moderate to severe OSA patients.
We look forward to providing periodic updates.
With that I'm pleased to turn the call over to our CFO Luis <unk>, who will provide a financial update.
Thank you Jay.
Good day, and good evening to everyone and thank you for joining us today.
Revenue for the third quarter ended September 32022 was 182000.
As all of you already mentioned third quarter revenue was impacted by a temporary supply disruption that limited our ability to meet demand in the quarter.
The issue has been Remediated and we have filled the vast majority of the open others with no cancellations.
Total cost of goods sold for the third quarter of 2022 was 63000.
Implying a gross margin of 65, 3%.
As a reminder, we continue to expect gross margin to expand over time in line with other neurostimulation companies as we achieve greater commercial scale.
Total third quarter operating expenses were in line with our plan as we continue to focus on research and development programs.
R&D increased $4 2 million in the third quarter of 2022 from three 5 million Euro in the third quarter 2021, mostly due to the development of future generations of Jennie O.
Selling general and administrative expenses rose to $4 8 million for the third quarter of 2022.
$4 5 million in the year ago quarter.
Due primarily to increased commercial efforts in Germany, and other European markets.
We also added head counts to a copper based infrastructure and expect to continue investing in human capital as we further scale up our organization, particularly our U S commercial team.
Total operating loss for the third quarter of 2022 was $8 8 million.
This $8 1 million in the third quarter of 2021, driven by the delay in the first quarter revenue the acceleration in our R&D spending.
And our commercial and clinical activities.
As of September 32022, cash and financial assets totaled one totaled $115 4 million compared to $135 5 million on December 31 2021.
Monthly total cash burn was around $3 million during the third quarter, which benefited from foreign exchange headwinds.
We continue to expect monthly cash burn to increase slightly going forward as we comment comments, the excess <unk> or in the U S and invest in our our direct to patient marketing efforts in Germany.
With that I will turn the call back to a full year.
Thank you Louis.
I am extremely proud of how the team responded to the challenges we faced during the third quarter.
And host totally we are executing coming out of it.
As a result, we are not changing any of our expectations on our key strategic objectives.
Being having dreamed 12 month clinical data available in the fall of 2023.
The resulting in regulatory approval.
Before.
24 <unk>.
In basketball.
<unk> patients this quarter and achieving German leadership by the end of the year.
This concludes the formal portion of our presentation.
Operator, I will turn the call over to begin our Q&A session.
As a reminder to ask a question. Please press star one one on your telephone please.
Standby, while we compile the Q&A roster.
Yeah.
Our first question. Our first question comes from Adam meter with Piper Sandler Your line is now open.
Hello, Adam.
Holly This is Brian on for Adam. Thank you for taking the question.
I want to start off on the supply chain disruption that occurred during the quarter.
So when exactly did that occur and it does sound like you guys have taken the step to kind of mitigate or prevent that from occurring.
When can we what should we be expecting in terms of you know that.
The second source supplier that you found them.
Sounds like additional manufacturing capacity.
I guess, what should we be expecting from you know.
A capacity perspective going forward and then.
It's a follow on there even if we back Andy unfulfilled orders.
They'll put Q3 revenue shy of the street by.
About 500000 Euro are so so.
Can you elaborate on the commercial trends in the quarter, maybe just talk about some of the headwinds that youre seeing in the field or in the commercial organization.
Progression months to months that'd be great as well.
Hello. Thank you for all these questions. So let me start by.
Answering of course, it's very inconvenient when when when you're facing something that we went through to Australia to answer. Your question. We saw this it was picked up end of August that there was an issue with with vulnerable sub suppliers.
I think with a fast growing company those kind of bumps in the road can happen and I think more importantly is also holding team shows resilience of the resilient and solving this so therefore I can confirm the movement. We saw this I think the positive thing is that our quality system quality system immediately picked.
Up next we solve the issue.
We stopped building and making sure that you're unable to assist.
Significant supply that is one thing on top of this and this is not new but I would like to emphasize on this next tool is very manufacturing plant. We also know of the Belgium manufacturing site that bus successfully that ordered so that will definitely increase and make sure that we have sufficient manufacturing capacity to meet all clear.
Nicole and commercial demands and to build stock and going forward.
And I hope that this is a business.
In fact answering the first part of the question.
Most next book that I'm hearing is were you, saying, while the boat your German revenue expectation for the third quarter.
So yes in total we see that we have nine on the scale of demand.
And that is showing that our market share was consistent with the market share we reported in the second quarter.
Despite the procedure deferrals to the fourth quarter. So that's one thing when it comes to the street expectation. So we never gave any guidance and we are still not doing this.
Can say is that we still feel very confident that we will have a strong Q4 quarter debt.
On top of this we were able also to have the backlog of the fields that we saw during quarter three and therefore that we can exit 2022 more or less in line with the expectations of the analyst consensus.
Without giving guidance I think amounting quite a lot. So we expect 2022 to be in line with the analyst consensus of strong Q4s, we fixed the issue and we are also back filling the shortages that we had on the <unk> that we have the two standing opened in quarter three.
Okay, Okay perfect.
Just to maybe put a finer point on your comment there.
Thank I think consensus revenue about 2 million Euro in Q4 prior to this call. So.
It sounds like that should still hold and does also take into account. That's one time kind of bolus of unfulfilled orders that we should be expecting to see in Q4. It is not the right way to think about it.
Yes.
So we want to keep up with Q4 being very strong we want to pick up the loss that we had in quarter three.
Since youre talking specific numbers.
Street consensus for 2022, it's $5 million and there we are still feeling very confident that this is within reach.
Okay. Okay perfect. Thank you so much.
And then I guess.
Another question that I had was we understand there was a change to the guidelines in Germany regarding the role of oral appliances, and where that fits into the care continuum.
Okay.
<unk> deep happened hypoglossal nerve stimulation.
Is that correct and can you level set us there with more details like have you seen an impact to your business and you know.
How have you navigate this dynamic going forward.
In all honesty, we have not seen any impact of this to our business.
So that is what I can comment I know, it's a very short comment, but we did not see any impact at all to our business from this.
Okay, Okay perfect.
Perfect I.
I guess, if I could squeeze in one last one in here just on <unk>.
You know as I think about the timelines if you expect to finish and planting all the patient and I think you said the coming weeks at 12 months follow up would put you in the late November kind of December timeframe. So that does sound more like a late 2024 event.
In terms of when you have finished all of kind of the clinical data work.
So you know Q2 2020 for regulatory approval that that does seem a bit high so maybe just walk us through that timing and your confidence to reaffirm the timeline here.
So.
First of all we expect.
<unk> 12 month data and full 2020 tweet so end of November .
As you know this is an open label study. So we were able to track to monitor and to analyze data in real time.
So therefore, we will have the full data set very soon after the final patients implanted reaches 12 months. That's one thing on top of this we talked about a model of PMA, where the first three modules already be submitted.
Should be also approved so that by the time, we each November end of November we only need to add the efficacy module to this and then we think that it's really realistic to have.
Six to seven months after that getting regulatory approval by FDA and that brings us to the timeline, we're always saying by the end of quarter. Two in 2024, we expecting regulatory approval.
Okay perfect. Thank you so much for taking the question.
Youre welcome. Thank you.
Please standby for our next question.
Our next.
Question comes from Jon Block with Stifel. Your line is now open.
Hi, Joe.
Hi, Good afternoon. Good evening, maybe just on the first one Olivier.
Inventory issues did not impact dream, which I think you were pretty clear it did not.
Can you just talk a little bit about what slowed the enrollment pace or maybe I should say the implantation patient <unk> you know I think on the prior to Q call in August .
You might be a couple of months away I think it was maybe four to six or even eight weeks and it looks like it might fall closer to four.
Four months give or take so is there anything to call out in terms of what's slow down at the centers again, it doesn't seem to be.
A supply issue, but market or competitor wise that has caused it really the slight push if you would out by a couple of months to the right.
Module and thank you for this question and first of all let me start by confirming that there was never any inventory issue in the U S. For the treatment study. So that you picked up fairly well answering your question over the last few months, we implemented solutions to existing bottlenecks I'm sure you'll recall during our last earning calls.
We identified two major bottlenecks, one was scheduling BSG slots and.
And the other one was finding a walk down of dealing with <unk> capacity.
No.
Bsg's and finding the PSG swaps, we addressed the bottleneck by working with private sleeps on this and that seems to work out very well.
When it comes to finding a walk down yes, I have to admit there is competition there is a competition between us and inspires us.
As you just heard us. They also have a very positive quarter in quarter. Three we have a lot of overlap with our clinical sites and we were impacted from an overall capacity perspective, no doubt also putting didn't provide perspective, we reached 110 implants all of the $1 15 yield of five 4%.
Missing patients. They all have identified we know where they are and we also know what the all dates will be and will look like so we think I think we did fairly well already one come out of the 115 five identified and in the coming weeks. They will also be a blended and then the clock starts ticking for 12 month data.
Okay, perfect very helpful and maybe just to pivot for the second question.
When we think about the eventual U S commercialization efforts.
Any change in strategy for you guys, if you're number two to market or a number.
Here in the U S.
What changes if anything and maybe Olivia what can you do it.
Along the way to strengthen your hand publication of papers better sleep.
Et cetera, so that when you are there and if you're close to another player you're sort of all.
All set to go from a commercialization from our papers effort to really hit the ground running thank you.
So first of all based on the improvement we are feeling pretty confident that we will beat the number too often fire on the markets. Let me point this one out.
Next <unk>.
We will be preparing already on <unk>, we are preparing future U S strategy as.
As I mentioned, we already highest.
Market access directly.
She is already very intensely working together with <unk>.
Switching to Medicaid so she's really peak, they're preparing and laying out already also the discussions on what kind of CPT code. Each we will be using so all this work is going on and part of this has already been done at the point, where we are to date that is one thing.
Over the coming months, we will start further investing in hiring commercial leadership. So that we can start by having those people on booked already spoke looking and building and further preparing or commercial structure will look like and even folks reaching out.
Which salespeople, we would like to highest what would be the type of profile. If you would like to hire and also where which we identify and scan risks can be found this talent. So thats. The second thing that you can expect in 2023.
And for the rest the only thing that I can Goldman this that it's sometimes nice to be seconds, because somebody already paved the way and how to enter the market in order to introduce it but we're also not a stimulation with base and we definitely think we can benefit from this as well. So today, our focus stays on getting the last five implant them, having the clock starts ticking.
<unk> getting regulatory approval somewhere in quarter, two 2024, and then before making sure that we do all the proactive activity needed to build the team already started by market access people and also by investing in hiring our sales leadership.
Great very helpful color. So thank you guys. Please standby for our next question.
Okay.
Our next question comes from Ross <unk> with Cantor Fitzgerald. Your line is now open.
Hey, guys congrats on the progress made.
Maybe looking at Switzerland, given and accounted for.
I think the amount of revenue during the quarter are you able to disclose how many active sites out there now.
So active sites in Germany, you mean.
And so that's all I'm just curious why youre.
Okay. That's fair Okay. So what was not very clear so my apologies. So in Germany, we are 32 active sites.
And in Switzerland, we have in quarter three we have one active sites that did implants, and we are expecting going forward to add three more so with <unk> two in Germany, one in Switzerland for Q4, we're going up from one two Falcon, Switzerland and from 32 up to 40 <unk> in Germany.
Perfect. Thank you and then outside of Switzerland.
Our conversations going in Belgium, Italy, and Spain.
Yes, so outside of Switzerland, we have Spain, with we have reimbursement and we also have Finland, where we have seen Boston.
When it comes to France for example, because you know that we saw some activity.
Can only say that I can only applaud inspire for the programs, we're introducing a proposal noticed in such a difficult market like from.
But I also know that this definitely will help us in building our case in France as well.
So that's where we stand for the moment in Belgium. We also have submitted the reimbursement filed but we do not expect in.
In the coming 18 to 24 months that would be present, there and in the Netherlands also there we have seen Boston activities ongoing but also there from a timing perspective, we don't expect anything in the coming 18 months.
Yeah.
Great. Thank you for taking my questions.
Please standby for our next question.
Our next question comes from Suraj Kalia with Oppenheimer. Your line is now open.
Good afternoon. This is Mike on for Suraj, Thanks for taking our questions I'm.
Curious picking up on the central theme, what gave you the confidence to up your German yearend centers guide from over 35% over 40 or was it more de novo or existing centers driving the growth any competitive dynamics at play there or just a preference Virginia and bilateral stem.
So we saw a lot of momentum in Germany over the last six to 12 months.
So while being in increasing our commercial presence and increasing our presence at conferences, we sold a lot of sites folding approaching us even sites that we honestly at the beginning of the multiple videos that at such a high interest in following the typical automotive stimulation and more specifics floating with mix along with continued.
Technology. So that is the explanation why we are increasing the number of sites.
No total German German market also there because the old open attrition is still low so the more sites you have <unk> that can deliver on both of them I think the more beneficial is also will be and treating more patients and to continue showing strong market growth.
Excellent that makes sense and then I know you mentioned the German share was flat sequentially with the 28% I believe in <unk> do you have any targets for where it might be at the end of 2022 here.
No.
I really like this question because.
This is really a question where I am extremely proud on my German team.
We defined the commercial success from the get go by saying we want to exit.
1022 as market leader in Germany.
Today, we are roughly at 30% of market share to your point.
To answer your question for Q4, and this is the challenge my German team and myself. We are taking we are still saying that we will exit Q4 as market leader in Germany, and this has not changed and I hope that viewing on Mexico Evelyn Cole I can confirm this and you can be very certain that when we did this that it will be very strong gentlemen celebration.
Taking place because if we could do this it would be an extremely strong performance and we see every every everything lined up.
To really accomplish this.
Okay and then.
I'm, just thinking about what could possibly go wrong any staffing shortages in the field today that are impacting PSG labs, and if so is that impacting procedure volume.
How is it.
So if almost staffing perspective also there you see a lot of momentum. So we have to date 15, German dedicated and exalt people both in sales and marketing.
Likely have some visible hitching all to US. We are also seeing that people start to teaching owed to us.
And saying, Okay guys of your investing <unk> hiring at this moment. So they are also we find this really excitement next to this I mentioned the <unk> program that we're rolling out in a nutshell is this I think with the <unk> program, we have a home sleep test, that's really using an offering to sleep physicians.
In order to validate in fact existing Psg's and that will of course give also patients short pathway directed to a digital solution than when they have to wait until <unk> gone on BSG. So we are really investing we also invest in the outline that we ethanol in place we are seeing.
The next two or next to E&P surgeons that we are also working with them together also in strengthening net disposal network. So all these investments we are making on them that is really giving us confidence.
<unk> will continue growing and that <unk> will also continue growing very strong and of course, resulting in and then most of this position.
Yes.
Okay, and then if I could just squeeze in one last numbers question for Luc I realize you don't give guidance.
Guidance in general, but do you see <unk> gross margin kind of similar to the $65 three recycled <unk> microbial.
<unk> cost or other pressures from the <unk> supply disruption we saw.
Thank you for thank you for the question. So as you pointed out in terms of.
Of gross margin.
We have 65% in Q3.
We expect this gross margin to remain fairly stable.
In the last quarter.
With additional volumes, we are building at the moment. So we don't expect adverse gross margin impact from the.
From the supply disruption we had in.
In Q3, we have resumed.
Quite quickly quite quickly and we are now catching up in terms of.
Production in batches.
That's great to hear thanks, so much for taking our questions.
Yeah.
Yeah.
At this time I am showing no further questions I would now like to turn the conference back to alleviate almond for closing remarks.
Thank you.
So once again, thank you all for joining and listening in and thank you all for your questions.
The conclusion that I would like to that I would like to make is that we see great traction in the dream study.
Still confident insuring or.
Clinical data by.
For 2023, and also not changing annual book timelines and getting regulatory approval in the U S.
To Australia and convenient the manufacturing issue, we went too, but we solstice, we fixed it we saw no impact we saw no decrease in demand at all we expect also a very strong Q4 in our commercial launch in Germany. So also there. So once again I can only thing the team will continue executing strong and we're looking forward to <unk>.
On our Q4 quarter during our next earnings call. Thank you all.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
[music].
[music].
[music].