Nyxoah SA (NYXH) 2020 Q4 法說會逐字稿

(Operator Instructions) I will now hand you over to your host, Milena Venkova, Communications Manager, to begin today's conference. Thank you.

Thank you, Val. Good afternoon, everyone, and welcome to our earnings call for the full year ended December 31, 2020. Participating from the company today will be Olivier Taelman, Chief Executive Officer; and Fabian Suarez, Chief Financial Officer.

During the call, we will offer commentary on our operating activities and review our full year financial results released earlier today. After which, we will host the 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 Investor Relations section of our website.

Before we begin, we 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 the risks and uncertainties associated with our business, please refer to the Risk Factors section of our annual report.

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

Good afternoon, and thank you for joining us on our first earnings conference call as a publicly traded company at Euronext Brussels to discuss our full year 2020 operating results and earnings.

2020 was a year marked by key accomplishments for Nyxoah with important milestones reached across clinical, regulatory, commercial and financial activities, showing a focused execution across departments. Early in 2020, we secured EUR 25 million in a private funding, welcoming ResMed as a shareholder, which was then followed by our successful initial public offering in the Euronext Brussels market in September, raising EUR 85 million.

In March, we received positive reimbursement decision in Germany with our Genio system entitled to join the existing NUB for hypoglossal nerve stimulation systems at a similar reimbursement level as other neurostimulation-based OSA or obstructive sleep apnea therapies, paving way for our first revenue generation in the market in July.

We also continued to make progress in the clinical front, securing our IDE approval to begin our U.S. pivotal trial called DREAM, with our first patient implanted by the end of the year. We also completed enrollment in our BETTER SLEEP study in Australia, which has a subgroup of patients in the evaluation of our Genio system in complete concentric collapse cases currently excluded in unilateral hypoglossal nerve stimulation treatment. Of note, despite business disruptions brought on by the COVID-19 pandemic, we are very pleased to note that our manufacturing operations continued with sufficient quantities produced to meet our need. Overall, I'd like to thank our team at Nyxoah for their dedication, focus and contributions. We also welcome new Nyxoah shareholders and thank you for your support.

As we turn the page to 2021, we look forward to ramping up revenue as we continue to build our dedicated sales force in Germany. We also plan to make firm progress on our clinical programs with the goal to complete enrollment in our ongoing DREAM IDE pivotal trial. In the second quarter of 2021, we look forward to the 6-month results from the ongoing BETTER SLEEP study with data sets that could provide the basis for complete concentric collapse therapeutic label expansion. As previously stated, CCC patients are excluded from unilateral hypoglossal nerve stimulation therapies. Patients with CCC represent roughly 30% of the total obstructive sleep apnea market. Finally, to meet the anticipated demand for our Genio system, we look forward to opening our second manufacturing facility in Belgium as we scale up our manufacturing operations.

I will now turn to a more detailed review of our activities, starting with the overall strategy. Our strategy centers on the development of a user-centric Genio system as we aim to well address the unmet need of moderate to severe OSA patients with our proprietary and patented solution. Following successful capital raises, including our September IPO at the Euronext Brussels Exchange, we strengthened our balance sheet, allowing us to continue to strategically deploy our resources to steadily advance our clinical programs, invest in sales and marketing initiatives, scale up operations to meet demand expectations and build upon our IP, product and adjacent technologies with our focused R&D program.

Let me begin with our commercial activities. Our commercial strategy centers on developing and then leveraging key centers of excellence. As we go deep versus going right in driving market adoption of our Genio system. Our activities center on active engagement, education and market development across patients, physicians and hospitals, with focus on high-volume ENT surgeons, sleep doctors and general practitioners who see, diagnose and treat with OSA.

We also tailor our programs to suit local and regional needs, including the pursuit of a fast follower strategy in regions with established reimbursement for hypoglossal nerve therapy while establishing market leadership in regions where we intend to develop coverage.

Our current commercial focus is in Germany, where in March 2020, the German Federal Joint Committee confirmed that the Genio system is entitled to join the existing NUB for hypoglossal nerve stimulation system at a similar reimbursement level to other neurostimulation-based OSA therapies. This paved the way for our first Genio system revenue in 2020. To accomplish this, the commercial team did a great job in preparing hospital administration in setting up the Genio system in their financial system. Indeed, due to the NUB reimbursement specifics, it puts us in a strong position to negotiate hospital budget for 2021.

Now in 2021, we are seeing a shift away from NUB to a DRG system with a dedicated DRG code for hypoglossal nerve stimulation, including the Genio system. This shift is allowing us to fully ramp up our commercial activities in Germany. To that end, activities are underway to build our commercial sales footprint in Germany and fuel revenue generation.

We have also identified a clear reimbursement pathway in countries where there is already reimbursement in place for hypoglossal nerve stimulation as a fast follower, such as the Netherlands and Switzerland, while developing coverage in Spain, Belgium, the Nordic countries, France and in the U.K.

In the U.S., assuming favorable results from our DREAM pivotal trial, we intend to apply for marketing authorization with the FDA. If we are successful in obtaining marketing authorization in the United States, we intend to execute on a fast follower strategy, noting important progress made in securing policies covering to almost 20 million Americans already in 2020. Of note, we are already engaged with the U.S. centers of excellence in our ongoing DREAM pivotal trial, which we believe help us transition to commercialized activities.

We anticipate initial 12-month data for the DREAM trial will be available in the second half of 2022. Assuming a positive outcome from the DREAM trial, we expect to apply for marketing authorization in the United States with the aim of being commercially available in the U.S. in the second half of 2023.

Let me now turn to a discussion of our clinical program. Clinical development, starting with the BETTER SLEEP trial. Our ongoing BETTER SLEEP trial is a multicenter prospective open-label 2 group clinical study to evaluate the safety, efficacy and performance of the Genio system for the treatment of OSA in adult patients with and without CCC of the soft pallet. The study is the first study of its kind to include any complete concentric collapse patients as they are currently excluded from unilateral hypoglossal nerve stimulation and is being conducted in 9 local medical centers in Australia and New Zealand.

I will take a moment here to provide more color on complete concentric collapse. Currently, there is no stimulation-based solution approved for the CCC patients as unilateral stimulation is even contraindicated. According to the latest scientific literature, CCC patients represent more than 30% of the moderate to severe OSA population. We are looking forward to share the results of BETTER SLEEP study, which are expected to be available by the second quarter of this year 2021.

We plan also to leverage on a subgroup CCC patients in a feasibility study to expand the therapeutic label indication of our Genio system. If this initial result of BETTER SLEEP are positive, we intend to submit the complete study results to the notified body in order to expand our CE Mark indication, including CCC patients.

At this time, we have initiated discussions with the European notified bodies and look forward to initiating regulatory pathway discussions with the FDA as we leverage the clinical data to provide treatment opportunities for CCC patients in the U.S. as well.

In November, we completed enrollment in BETTER SLEEP study with 42 patients. The study is expected to be completed by the end of 2023 with 6 months follow-up result data to be announced in the second quarter of this year 2021.

Turning to the EliSA study. EliSA is a post-marketing study in Europe, which we began following our CE Mark for the Genio system in March 2019. The study aims to confirm the long-term safety and clinical efficacy of the Genio system in adult patients suffering from moderate to severe OSA. The study is expected to enroll at least 110 patients who will be followed over a 5- year period, concluding by mid '27. Enrollment is ongoing across approximately 25 investigational samples in Europe.

The study is enrolling patients. However, this study, due to COVID-19-related disruptions, enrolled in 2020 was slower than expected. As of December 31, 2020, 15 patients intended of the total intended 110 patients were enrolled.

Let me now turn to the DREAM pivotal trial in the U.S. In June, we were pleased to announce FDA approval of our DREAM pivotal trial in the U.S. This trial aims to confirm the safety and effectiveness of the Genio system and to support marketing authorization of the Genio system in the U.S. The trial plans to enroll 134 moderate to severe OSA patients who failed first-line CPAP therapy with up to 19 U.S. sites in combination with 7 international sites participating. Our first U.S. patient in this study received an implant as we exited 2020. We look forward to completing enrollment in our DREAM study in 2021.

Let me take a moment to address our U.S. regulatory pathway. We have 2 options, to go the PMA route or the De Novo route. We plan to continue our discussions with FDA to clarify the pathway.

In summary, while our post-market study, EliSA, was met with some slowed enrollment due to COVID, we are pleased with progress made in our pivotal U.S. DREAM trial with enrollment completion target in 2021. We also look forward to announcing 6-month results from our ongoing BETTER SLEEP study by quarter 2 2021, particularly as we evaluate label expansion opportunities in CCC patients that represent 30% of the OSA market, but currently contraindicated for unilateral hypoglossal nerve therapy.

Let me turn to the discussion of our R&D activities. We are pleased to note that our focused R&D programs in 2020 led to important announcements in 2021. Specifically, in January '21, we received the CE Mark for magnetic resonance imaging, MRI, conditional labeling, ensuring that patients implanted with the Genio system can now undergo full-body 1.5 tesla and 3 tesla diagnostic scans within approved parameters.

We note that MRI compatibility aids in OSA patients quality of life with: first, over 40 million MRI scans performed on OSA patients in 2020 alone; second, with 60% of MRI scans performed in the thorax abdominal area; and third, 40% of MRI scans in 3 tesla. To date, we are the only company with an MRI compatibility label for 3 tesla.

Further, in February 2021, we announced our exclusive licensing agreement with the Vanderbilt University in the U.S., allowing us access to technologies and capabilities to develop our future pipeline OSA solutions.

New treatments will focus, amongst others, on stimulating the ansa cervicalis, the efferent fibers of the glossopharyngeal nerve, of nerves that innervate the palatoglossus and/or the palatopharyngeus muscle. As previously noted, we developed our Genio system with the OSA patient in mind. Our R&D initiatives maintain that focus as we look to well address the needs of moderate and severe OSA patients.

With this, let me now turn the call over to Fabian for our financial discussion. Please, Fabian.

Thank you, Olivier, and good afternoon to everyone. Thank you for joining us on the -- our first earnings conference call.

I will provide some highlights from our P&L and our balance sheet. For further details, please refer to our earnings press release issued earlier today or our annual report.

In 2020, we recorded our first revenue from sales of our Genio system in Germany. Revenue of EUR 69,000 was generated under the existing hypoglossal nerve stimulation NUB coding in Germany. Operating cost increased to EUR 11.2 million in 2020 from EUR 7.7 million in 2019 or an increase of 45.4% due to increase of activities in all departments.

General and administrative expenses increased by 78% to EUR 7.5 million in 2020 from EUR 4.2 million in 2019. The increase is due to consulting expenses, staff and legal fees to support our growth. Research and development expenses increased by 29% to EUR 3.1 million in 2020 from EUR 2.4 million in 2019 before capitalization of EUR 2.6 million in 2020 due to the increase of development cost of the Genio system. Clinical expenses increased by 50% to EUR 4.3 million in 2020 from EUR 2.9 million in 2019 before capitalization of EUR 3.3 million in 2020.

The increase in the expenses was mainly due to an increase in staff and consulting to support the completion of the BETTER SLEEP study implantations, continuous recruitment for EliSA study and the launch of the new DREAM IDE trial in the U.S.

In 2020, we strengthened our balance sheet with capital infusion from a private financing round and our initial public offering on Euronext Brussels. Specifically, in February 2020, we raised EUR 25 million in a private financing round, whereby ResMed, a world-leading health company in the OSA field, became a new shareholder of Nyxoah.

In September 2020, we raised EUR 85 million in our IPO on Euronext Brussels. We intend to deploy proceeds from our capital raises to support our clinical programs, sales and marketing, manufacturing, operation and R&D.

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

Thank you, Fabian. We are now concluding the formal part of our presentation. Operator, I will turn the call over to you to begin our Q&A session. Thank you.

(Operator Instructions) And we do have a first question in the queue, and it comes from the line of Michael Polark from Baird.

Happy Friday. Olivier, would be curious for an update on enrollment progress in the DREAM, the U.S. DREAM pivotal study, 19 sites. How many patients have been implanted so far, if you can comment on that? And then I'd be curious of the -- of the 19 sites in the U.S., how many of those have actively -- have been activated and completed an implant?

Thank you, Mike. So first of all, let me start by repeating that we plan to close the enrollment of the DREAM study by the end of this year. As you know, we were slightly impacted by COVID-19, impacting the hospital administration to finalize the clinical activities, so that is one thing.

On the other hand, we also see that due to COVID, that patients are suffering from travel restrictions. So that's why we, at this moment, can say that we have implanted 3 patients so far enrolled, enrolled and implanted.

When it comes to the site that we have activated, we have 14 U.S. sites that have been activated. And we have the international sites as well that are being activated.

So 3 patients so far. It sounds like the activity to hit the target by end of this year, the activity you would expect the next -- through the rest of the spring and into the summer to pick up as vaccination rates increase and patients are more comfortable moving around, is that fair to say?

That is fair to say. And if you do a little bit -- did the math with me. So when we were talking about 25 sites in total, and we have to reach 134 patients, so we still feel comfortable that, by the end of this year, we will close the enrollment.

On the other hand, as you know, linked to our minimum invasive procedure, we plan to do 2 patient implants by day, so every day. So if you do a quick calculation, we are talking about roughly 2 implant days to finish and to close the enrollment across the 25 sites.

Okay. The other one that I had, and then I'll hop off. Would be curious, just for 2021, your budget. What sort of level of operating expenses are budgeted for 2021 as you think about your manufacturing initiatives, your sales force build-out in Germany, the clinical programs? When you roll all that up, what's in your plan for this calendar year?

I think this question is best answered by our CFO, Fabian.

So as Olivier mentioned, we are planning to increase all the activities. The budget will follow this strategy. So mainly, we will increase the budget for the commercial team. And this is what we have started to do since the beginning of this year.

Clinical expenses will also increase significantly because of the IDE pivotal trial that we have discussed just now. And obviously, R&D remains a very important activity of the company. Olivier discussed about the pipeline that we want to develop. This is one element, but we continue investing in our Genio system and preparing the next generation of the system.

The next question comes from the line of Damien Choplain from Kepler Cheuvreux.

I have a first one regarding the reimbursement. Is it fair to assume that you will receive DRG code in Germany in Q2? And in what extent do you think it could boost the sales in that geography?

And with regards to France, are you still in the process to get Forfait Innovation in 2021?

Thank you for the question, and let me start by answering the one in Germany. So we already are a little bit ahead of time because we have obtained already the full DRG coding already at this moment. So the impact that we foresee is the fact that it will make it a lot easier and more straightforward to open new sites and to also have implants done. Now what the exact translations will be, that is something that we are working hard on in the future. But it definitely will be easier to implant patients compared to the NUB coding that was in place in 2020.

Now when it comes to France, so in France, yes, you are totally correct. So we -- obviously, we are going after the Forfait Innovation pathway. At this moment, we are still in further discussions in order to see under what condition this can be obtained. As you know, France is a difficult market in the sense from a reimbursement perspective to enter. And so far, there is no hypoglossal nerve stimulation technology that is reimbursed. So we are still in discussion and still are planning further interactions with the French Ministry of Health and the French Haute Autorité de santé, to be very precise, or the HAS.

And maybe last one on the U.S. regulatory pathway. When will you have a feedback from the FDA regarding the U.S., the routes you are eligible to, and in between the PMA or De Novo?

Yes. So first of all, you know that to qualify for the De Novo, in fact, it has an impact on the proven safety and efficacy data. That will make the difference between a level 3 or category 3 versus a category 2 where De Novo is under. At this moment, I cannot make any statement with which regulatory path that Nyxoah will obtain. We feel that we have valid arguments to say it could be De Novo. But once again, I cannot make any statement on this at this moment.

Now, the difference is, first of all, on time line. And the second difference will also be on future product innovation or future next-generation product that we want to include. So if you are under a De Novo, everything goes faster compared to a PMA. And if you see the commercialization of the market access approval, De Novo compared with PMA, we are talking about roughly a difference of 3 months.

But once again, we think we have strong arguments, but it will be the FDA and the discussions with FDA that will further clarify. So I do not want to make any statement which pathway we will be eligible to.

There are currently no further questions in the queue coming from the audio line. (Operator Instructions)

And there are no questions coming through. So I'll hand the call back to our speakers to conclude the conference today. Thank you.

Thank you. So I would like to close our call this afternoon reaffirming our patient and physician-centric focus to meet the needs of moderate to severe OSA market. We are first-to-market with a leadless, battery-free and minimally invasive bilateral hypoglossal nerve stimulator that has recently received CE Mark for MRI compatibility.

We are excited about our revenue growth opportunities with Germany as our first commercial market as well as continued clinical progress opening new markets, such as CCC patients, and geographically to further expand in the future in the U.S. We reached important milestones in 2020, and we are looking forward to continued progress in '21.

Thank you all for joining us this afternoon and looking forward to hearing back from you in the near future. Good afternoon.

Thank you for joining today's call. You may now disconnect.