Nyxoah SA Q4 FY2022 Earnings Call

Good afternoon, and good evening, everyone. And welcome to our earnings call for the fourth quarter of 2022. I am Michaela Kirkwood, Strategy and Investor Relations Manager at Nyxoah. Participating from the company today will be Olivier Taelman, Chief Executive Officer; and Loïc 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 Investor section of our 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 the risks and uncertainties associated with our business, please refer to the Risk Factors section 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.

Thank you, Michaela. Good afternoon, and good evening, everyone. Thank you for joining us for our fourth quarter 2022 earnings call. I am extremely excited to announce we have implanted all 115 patients in our U.S. pivotal study DREAM and filed the first module in our model of PMA submission. With the clock now ticking to our 12-month data, our focus shifts to strong patient follow-up. What pleases me even more is to see the first 34 DREAM patients completing 12-month follow-up, showing a 65% AHI responder rate and a 76% ODI responder rate and safety in line with our expectations. This is supporting what we have already demonstrated in studies and European commercial patients. We have submitted this data as a late-breaking abstract to the SLEEP 2023 Conference in June. While these data are preliminary and not conclusive for final DREAM success, they are highly encouraging. Commercially, our European sales and marketing organization continued its strong execution with sales of €1.3 million in the quarter. In Germany, we are exiting the year with roughly 34% market share and with 38 active accounts, up from 12 at the end of 2021. Finally, we continue to expand our commercial presence in Europe as we expect to report our initial sales in Austria during the first quarter. As a reminder, 2022 was the first full year of reimbursement in Germany and I am extremely proud to see our leading German clinicians have embraced the Genio Technology. Driven by a single incision, a legal system offering bilateral stimulation, powered by an external battery and a full body MRI compatibility. While it’s strongly resonating with patients, the ability for Genio to always be upgraded to the latest technology without the need for another surgical intervention is crucial. We received clearance for our Belgium manufacturing facility, adding a second manufacturing site and thereby, strengthening our supply chain. This is an important milestone in securing capacity to meet growing demand in Europe ahead of our U.S. launch. As for the ACCCESS study for complete concentric collapse patients, we have implanted the first patients. CCC patients, who are refractory to CPAP, currently have no hypoglossal nerve stimulation treatment options in the U.S. These patients represent roughly 30% of the moderate to severe OSA population. With the CCC label in the U.S., we would remove the important hurdle of a drug-induced sleep endoscopy, allowing patients simple and fast access to our hypoglossal nerve stimulation therapy. From an R&D perspective, we continue to innovate. Last year, we received regulatory approval for Genio 2.1 and are making progress on the ansa cervicalis project in collaboration with Vanderbilt University. We anticipate illustrating a feasibility study in 2023. Now I would like to share our three key objectives for 2023; first is to focus on patient follow-up in the DREAM study, resulting in reaching the primary end points; next is beginning preparations to enter the U.S. market with regulatory, manufacturing and market access readiness; and last is driving further revenue growth in Germany and opening new European markets. Before I turn the call over to our CFO, Loïc Moreau, I would like to invite all those on the call to join us for our first Investor and Analyst Meeting tomorrow, March 23rd in New York, beginning at 4 p.m. Eastern Time. The registration details can be found on our Investor Relations website.

Thank you, Olivier. Thank you for joining us today. Revenue for the fourth quarter ended December 31, 2022, was €1.3 million, more than tripling from the fourth quarter of 2021. The average selling price in the fourth quarter was €20,300, consistent with prior quarters. Total operating loss for the fourth quarter was €9.1 million versus €6.5 million in the fourth quarter of 2021, driven by an acceleration in clinical, commercial, and R&D activities. As of December 31, 2022, cash and financial assets totaled €94.9 million, compared to €135.5 million on December 31, 2021. This represents a monthly cash burn of €3.4 million. Based on our current cash position, we have a runway into the second half of 2024. With that, I will turn the call back over to Olivier.

Thank you, Loïc. I would like to reiterate our key objectives for 2023, which are focusing on patient follow-up in the DREAM study, resulting in reaching the primary end points; beginning preparations to enter the U.S. market with regulatory, manufacturing and market access readiness; and driving further revenue growth in Germany, while opening additional European markets. 2023 will be a pivotal year for Nyxoah, which I look forward to reviewing in more detail during our Investor Analyst Meeting tomorrow. I look forward to seeing many of you there. With that, I will open the call to Q&A.

...questions and congrats on the progress. A couple from me and maybe just to start, I wanted to ask about the announcement on the 12-month data that you submitted for a late breaker at SLEEP, I think I heard 34 DREAM patients. Can you put the 65% AHI responder rate, the 76% ODI responder rate in context with the broader DREAM trial design and kind of what’s needed for success? I guess that’s my first question, and then I had a follow-up or two. Thanks.

Yeah. Thank you, Adam. Thank you for the question. So, to put them in the right perspective, for the trial, the DREAM trial to be successful, out of 115 patients at least 63% of patients need to be AHI and ODI responders at a 12-month follow-up. Within the abstract, the result is 65% AHI for the 34 patients and an ODI of 76%.

Okay. Perfect. That’s very helpful. Thank you for that. And also, I wanted to ask about DREAM and congrats on finishing implants there. Can you put a finer point on when you did the last patient implant in the DREAM study? Just trying to get a sense for kind of exactly when that 12-month follow-up clock started. Yeah, any color there, Olivier? Thanks.

Yeah. Yes, Adam. Definitely. So the last patient was implanted in the first week of March. So next to this, we plan on completing the final PMA module submission soon after the data is released in the first quarter of 2024. That said, we do not want to predict the exact timing of the FDA decision, given it will be subject to variables we cannot influence, but we do expect FDA approval before the end of 2024.

Okay. That’s helpful. So I think on the Q3 call, last quarter you were kind of aiming for Q2 2024 approval. So it sounds like a little bit of a push out there, but before the end of 2024, did I hear that correctly, Olivier?

Yes, that's correct. The delays in scheduling PSG and DISE procedures, mainly due to long waiting lists at the sites where we are active and some of it coinciding with the holiday period, caused the final implants to take longer to complete than we anticipated. However, we have officially started the clock now, and that's why we are quite confident in the timelines I've shared.

Thank you for the clarification. I have one last question about the Q4 results. Can you discuss the impact of carryover from Q3, specifically how some orders affected by supply issues transitioned into Q4? I’d like to understand how much of Q4 revenue was organic versus catch-up revenue and your thoughts on patient commercial sales moving forward in 2023. Thank you for taking my questions.

We had to shift some implants from Q3 to Q4, and I am pleased to report that we did not lose any patients and demand remained strong. Despite limited work capacity at some of our German sites and the holiday season, Q4 turned out to be our best quarter of the year. Regarding 2023, we are very confident in increasing the adoption of Genio and executing our commercial strategy effectively. However, as Adam knows, we are not providing specific guidance, and we also acknowledge that the first quarter is affected by seasonal trends.

Thanks, guys. Good afternoon. Olivier, maybe the first one in Germany, I think you may have cited a 34% market share exiting the year and that arguably might have benefited from some of the push that we saw around the third quarter and the 34%, I think, is below the ambitious plans that you had to exit north of 50%. Maybe you can just talk about why you think you didn’t quite reach the 50%, you still had the label expansion with CCC. Maybe just talk to us on what prevented that exit rate from being a little bit higher than you had initially expected?

It’s clear, Jon, that when we started to provide monthly updates, we had a 30% market share. Now, as we end the year with 34%, I want to commend the team in Germany for achieving these results. We view this as a strong result. We remain ambitious and aim to become the market leader with an even higher market share, which we will continue to pursue in 2023 by opening more new sites and further increasing our penetration. To your point, we also expect the CCC impact to significantly influence our overall results. Looking at the performance of our top 10 accounts in Germany, we’ve managed to become market leaders with several high-volume accounts, which gives us confidence that physicians are embracing our technology. This also clearly demonstrates, from a patient perspective, the need for an additional technology, providing both patients and physicians with options. Overall, we are pleased with our results at 34% market share and expect to increase it further in 2023 alongside opening new accounts, while the CCC impact will also help accelerate our market share growth.

Okay. Great. That was very helpful. Thanks for that. And maybe just two more for me. You completed all 115 patients and I think in the PR from a week ago or whenever it was, you also said the first module had been submitted, obviously, the last module will come in with the data. But the next two, Olivier, I think, I had that correct, are there two more before the clinical data call out and will those two be submitted in 2023? I guess maybe walk us through the timing for the next couple of modules that you expect to submit and then I have just got a final question to ask? Thanks.

There are a total of four modules. We have already submitted the first one. The next two modules will be submitted this year, prior to receiving the 12-month DREAM safety and efficacy data. The final module will be submitted after we obtain the 12-month DREAM data. To provide more details, module one includes the product overview and preclinical data. The second module contains the remaining preclinical data, while the third module covers manufacturing validation. These three modules will be submitted in 2023, and the last module will consist of the clinical data review.

Okay. Great. Thanks for that color. And the last question, let me see if I can get your cost clearly on the phone, I think it’s an important one and you had the helpful footnote in the release that says, for the trial to be successful, of the 115 patients, at least 63% of the patients need to be AHI and ODI responders at 12-month follow-up, okay? And then for the first 34 patients, it says, 65 % are AHI responders and 76% are ODI responders and so I guess what I am trying to ask you, are those apples-to-apples? In other words, of the 65% that are AHI responders for those first 34 patients, are all of those ODI responders, so that we could think about for the first 34 patients you hitting the threshold that seems to be necessary for the trial to be successful and let me know if that made sense, and hopefully, you did and you can give us some color? Thanks.

Yes, definitely, Jon. I look forward to welcoming you tomorrow during Analyst Day, where we will have more time to delve deeper into this topic, particularly regarding the next clinical aspects. To answer your question, the AHI responders and the ODI responders do not have to be the same patients. We need to demonstrate that the cohort of 115 patients shows at least a 63% AHI response. Additionally, within that same cohort, we must also showcase patients achieving at least a 63% ODI response, but these do not need to be the same individuals. I hope this clarifies your inquiry.

It is. In other words, got it. So you hit both criteria in the first 34. You are sort of well above on ODI and slightly north on AHI, but to your point, that is an apples-to-apples when we think about the 34 versus the 115, is that fair?

That is completely correct.

Hi, Olivier, Loïc. Can you hear me all right?

Clearly, Suraj.

Hi.

Hello. Good afternoon.

Perfect. So, Olivier, congrats on DREAM enrollment, a few questions from my side, Olivier, when the final data set is presented next year, would there be cohorts or subgroups where the learning curve impact would also be assessed? Specifically, what I am trying to understand is, most physicians are pretty well versed with Inspire, right, and now this is something different. So is it a learning curve part of the equation that different subgroups of patients would need to go through that we can analyze the data?

So, Suraj, the short answer is, no. When we look at the DREAM study design, this is not part of the study design. So, that being said, of course, we will further analyze the data and we will also report the regular earnings. And then if I understand the question also correct, I think, what you are referring to is the fact that when surgeons start during the first implants, they are going through a learning curve and once they reach, we saw already in commercial patients and also in previous study patients that after four implants they really pass the learning curve and that the placement and also the speed of the implant is only increasing. So, repeating a little bit of somehow, no, it’s not part of the study design, but we will definitely take the learnings and also incorporate them going forward and we see that the surgeons only get better after they pass the learning curve.

Fair enough. Olivier, in terms of compliance i.e. they have turned on the Genio and all, how is that being maintained in DREAM, because again, Inspire is an internal pacemaker, right, and you guys are not. So I am just curious if that is a variable that we need to be cognizant of in the final data analysis?

Yeah. Suraj, as you can understand, I cannot comment on compliance in the DREAM trial. But based on historical clinical and commercial compliance data, we know that we are reaching a 91% reporting and compliance using the Genio system more than five days a week and minimum 5 hours a night.

In Germany, for the same site, it might be somewhat unfair to compare directly, but let’s say Suraj enters a tubing hospital needing hypoglossal nerve stimulation. How is the decision made between Inspire and Genio, assuming all factors are equal? Thank you for addressing my questions.

That's a very interesting question, Suraj. What we've learned is that the voice of the patient plays a crucial role in the choice of technology. Consequently, we are intensifying our direct-to-consumer efforts and enhancing our patient health line. Additionally, we are increasing interactions not only with ENT surgeons who perform the implants but also with sleep physicians. When you enter the hospital, I'm sure the surgeon will inform you about the available options, which currently include two systems. Furthermore, as a patient, you will have a significant say in which technology you choose. This is one reason we feel confident; if you explain that our system involves a single incision and a quick procedure that benefits from the latest technological advancements, you'll see the advantages. Importantly, in Germany and Europe, we have the necessary approvals, and opting for Genio offers a quicker path to treatment through hypoglossal nerve stimulation compared to our competitors.

Got it. Thank you.

Yes. Thank you. And I just can say thank you for joining us today. We look really forward to welcoming as many as possible on the Analyst Day and Investor Day that we are hosting tomorrow and we are really excited for 2023, because as I mentioned before, it will be a great year for Nyxoah. Thank you.

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.

Thank you.