Nyxoah S.A. (NYXH) Q1 2023 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to Nyxoah's First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Ms. Mikaela Kirkwood, Corporate Communications and Investor Relations Manager. Please go ahead.

Good afternoon and good evening, everyone, and welcome to our earnings call for the first quarter of 2023. I am Mikaela Kirkwood, Corporate Communication and Investor Relations 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 first 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 section of our Form 20-F filed with the Securities and Exchange Commission on May 16, 2023. With that, I will now turn the call over to Olivier.

Thank you, Mikaela. Good afternoon and good evening, everyone, and thank you for joining us for our first quarter 2023 earnings call. 2023 will be an important year for Nyxoah with DREAM patient follow-up and further PMA module submissions. We completed all 115 implants in our U.S. pivotal study DREAM in the fourth quarter, and the clock is ticking to 12-month data in the first quarter of 2024. We are highly confident in DREAM outcome based not only on our prior clinical and commercial experience but also on the data released on the first 34 patients in the DREAM study. These 34 patients demonstrated a 65% AHI response rate, a 76% ODI response rate and safety in line with expectations. As a reminder, for the trial to be successful of the 115 patients at least 63% need to be AHI and ODI responders at the 12-month follow-up. These abstract data will be presented at SLEEP 2023 on June 6 in a late-breaking poster session. The model of PMA submission was kicked off with the first module having been submitted during the first quarter. We anticipate filing three out of the four modules in 2023. The final fourth module, which will include 12-month safety and efficacy data will be submitted shortly after the follow-up period is complete. Our increasing conviction in DREAM outcomes and the market opportunity for Genio has driven our decision to accelerate preparation to enter the U.S. market. To that end, I'm very pleased to announce that Christoph Eigenmann has joined Nyxoah as Chief Commercial Officer. Christoph brings a wealth of medical device experience to Nyxoah having spent over 20 years at Johnson & Johnson leading orthopedic and neuro businesses in the U.S. and other global geographies. Christoph and his family are based in the U.S., and his priority will be preparing the U.S. commercialization strategy and driving international sales growth and further market access. The U.S. ACCCESS pivotal study, focused on complete concentric collapse patients is well underway with implant expect to be completed in 2024. As a reminder, CCC patients represent approximately 30% of AG&S eligible-to-treat OSA patients who are contraindicated to our commercially available hypoglossal nerve stimulation therapy in the U.S. and do not have suitable treatment options other than major palate surgery. The ACCCESS primary endpoints are similar to the DREAM study primary end points as Genio has demonstrated similar results in both CCC and non-CCC patients. Commercially, we reported European sales of Є441,000 during the quarter, which was below expectations. However, after an in-depth review, we see the quarter was impacted by several transitory factors. First, our highest volume accounts saw a seasonal reduction in OR capacity. Second, several newly activated accounts were slower to implant due to the administrative burden necessary to clear procedure funding. Lastly, doctor availability was limited during the quarter. And therefore, several new accounts had to postpone procedures. The German team managed to resolve these challenges, resulting in sales thus far in the second quarter exceeding first quarter revenue. Finally, we reported our first implant in Austria during the quarter. We continue to achieve becoming an innovation leader in the obstructive sleep apnea space. Clinicians have embraced Genio technology, driven by a single incision, leadless system offering bilateral stimulation, powered by an external battery and full-body MRI compatibility. For patients, Genio's ability to upgrade to the latest technology without the need for another surgical intervention is strongly resonating. This is demonstrated with our recent approval of the Genio 2.1, which improves patients' comfort and compliance without the need for a surgical procedure to replace the implantable component. Finally, we anticipate the ansa cervicalis feasibility study to begin this year, which will explore the stimulation of the ansa cervicalis nerve in patients who are hypoglossal nerve stimulation non-responders. We are making strong progress towards our key objectives for 2023, which are to focus on patient follow-up in the DREAM study, resulting in reaching the primary end points. We begin 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 CFO, Loic Moreau, who will provide a financial update.

Thank you, Olivier. Good day to everyone and thank you for joining us today. Revenue for the first quarter ended March 31, 2023, was Є441,000. The average selling price in the quarter was Є20,000, consistent with prior quarters. Total operating loss for the first quarter was Є11.4 million versus Є7.3 million in the first quarter of '22, driven by an acceleration of clinical activities, notably the start of the ACCCESS study as well as commercial investments in Europe. Last quarter, we raised Є15.9 million through private investments in our ATM with historical shareholders, including ResMed, Cochlear and Robert Taub, Nyxoah's Chairman and Founder. As of March 31, 2023, cash and financial assets totaled Є96.1 million compared to Є94.9 million in December 31, 2022. During the first quarter, our monthly cash burn was Є4.9 million. And based on our current cash position, we have runway until late 2024. With that, I will turn the call back over to Olivier.

Thank you, Loic. I would like to reiterate our key objectives for 2023, which are focusing on patient follow-up in the U.S. DREAM study, resulting in reaching the primary end points, beginning preparations to enter the U.S. market, and driving further revenue growth in Germany while entering additional European markets. This concludes the formal part of our presentation. Operator, I will turn the call over to you and begin our Q&A session.

[Operator Instructions] Our first question comes from the line of Jon Block of Stifel. Your line is open.

First question, Olivier, just maybe on your comments for the quarter and then the trends in 2Q. So I just want to make sure it's clear. The sales for the second quarter to date have exceeded the full amount of 1Q. I guess, as we sit here in mid-May, maybe if you could just verify that. And then if that is true and if something like that was the case, are you comfortable with, call it, over Є1 million in the second quarter and then sort of a q-over-q ramp from there for the balance of the year? I know you don't want to give specific guidance but maybe if you could comment on that Є1 million for 2Q and then the sequential growth on the balance of '23 off that type of a number.

Hello, Jon. And thank you for the question. We do not provide guidance, you know this. But what we do provide is that and that we can confirm that the momentum in opening new accounts and capturing patients is continuing. And I'm also very happy that the second quarter sales already exceeded the first quarter. So I think important to understand that Q1 was rather disappointing or below our expectations. We understand why. We did an in-depth analysis, and we are extremely pleased to see that the momentum is continuing. And you not only see this in the opening of new centers but also in the lining up of new patients and of course the number of new surgeons that are newly trained. So answering your question, unfortunately, I cannot provide further guidance on Q2, but I can confirm that we started extremely strong.

Okay. That's helpful. And then I'll pivot to a different road to go down on. Genio 2.1, Olivier, are there any data points that you can point to that show that implanted patients on Genio 2.1 have better outcomes and better compliance? And I guess where I'm trying to go with this, maybe then you can also answer, were any of the first 34 patients where you released the data, right, when you released the data in conjunction with the Analyst Day, were they beneficiaries of 2.1 or were they not on that version? Thanks guys.

Yes. Thanks again for the question, Jon. So commenting on the Genio 2.1, it's a little bit funny because 30 minutes before the call, we got the first patients in ACCCESS that were activated using the Genio 2.1. And I can confirm that mainly driven by the trimming option, where we can gradually increase or decrease stimulation to reach an optimal outcome was really beneficiary for those two patients. We really saw immediately the added value, and we were able also, when activating patients to find optimal stimulation settings. So that is really very promising in going forward. Now when it comes to 2.1 in the first 34 patients that we have in the abstract for DREAM, there I can say that we did not yet implement the 2.1. So we're just using our initial device, but it's also clear that in going forward in other DREAM patients, where we believe 2.1 can be beneficiary, that we definitely will start implementing this as well.

Okay. And maybe, sorry, just as a follow-up to that last one. 115 patients in DREAM, the 34 that you released data on were not using 2.1, to your point. Do you know approximately how many are, call it, the remainder or the roughly 81 were beneficiaries of 2.1 as the trial progressed?

So at this moment, so our strategy is fairly straightforward. Those patients who are doing extremely well, of course, we will not introduce the 2.1 because there is no need for it. In patients in going forward that's not yet reached 12 months and where our clinical team is seeing a need, we will phase in the 2.1.

Thank you. One moment please. Our next question comes from the line of Adam Maeder of Piper Sandler. Your line is open.

Maybe to start, I'll actually ask one on the P&L and just how to think about OpEx spend going forward. It looks like R&D spending stepped up in Q1. So would love to get some more color in terms of how those dollars were spent. You also made, I think, a comment, Olivier, that you are accelerating preparation for the U.S. So just any color you can give us both on the R&D and SG&A line would be helpful. Thank you.

I will leave the first part of your question to our CFO, Loic.

Thanks, Adam, for the question. So as you saw acceleration in R&D, the biggest driver of this is that we are now running ACCCESS study on top of DREAM. So if you compare with Q1 last year, we only had DREAM, and that's the big driver for the increase in R&D.

And when it comes to a further acceleration in the U.S. preparation of commercialization, I mentioned it already. We're extremely pleased to be able to recruit a caliber like Christoph Eigenmann to join Nyxoah with more than 20 years at Johnson & Johnson in neuro and in spine, leading the U.S. organization. I think it's very clear that he has a very strong proven track record that he will add a wealth of experience and added value, when we are preparing our launch in the U.S. And not only this, also internationally, we can also benefit from his experience and his proven track record, especially in Germany. So that's one part. Next to this, Adam, you know that we are in the interaction with AAO and AMA in obtaining more coding clarity. Also there was some work done and we are waiting for further results. And besides this, in going forward, as we always communicated, it is an open-label study. And the more confident we are getting, the more patients we're seeing reaching 12 months. We'll also explain our future hiring in the second half of 2023 in preparing for commercialization in the U.S.

Okay. Got it. Thank you, Olivier and Loic, for the color there. And I guess just one kind of quick follow-up there. So it sounds like the level of R&D spend, given that you have the ACCCESS study that's commenced, given that DREAM is ongoing, this is kind of the new baseline to kind of work off of going forward in our models. Is that fair for R&D expense?

Yes and no because we expect in the second half of 2023 to see a decrease of the DREAM monitoring costs with more and more patients exiting the study. In terms of overall burn, we're not expecting to see an increase for the next quarters in 2023.

But I would like to further comment on this that it's clear that driving patient-centered innovation, it's key and crucial for Nyxoah. And Genio 2.1 already demonstrated the added value in the first ACCCESS patients. Next to this, also the ansa cervicalis project, starting off the feasibility study in collaboration with the Vanderbilt team, is also very exciting for us to further explore and to offer solutions on patients that are currently non-responding to hypoglossal nerve stimulation. So I just want to summarize with this. We will be continue showing innovative leadership and investing strongly in further innovation that will help benefiting our patients.

That's helpful color. Thanks guys. And just for the follow-up, Olivier, you just touched on reimbursement considerations for the U.S. I was hoping just to get a little bit more details there. Do you have any sense for when you should expect to get an answer? In Q3, I think, is when you previously kind of said you expected to learn more. So when will we get an update in terms of path forward on reimbursement and any more visibility on that process that you can share at this point in time? Thanks so much for taking the questions.

Yes. So we are working with the ENT scientific society, AAO, the American Academy of Otolaryngology, to define our CPT code, what would best support Genio. The recommendation has been made to AMA and we are waiting for the response. Unfortunately, this is not completely in our control. I know the timing of the response is not completely in our control, but we definitely expect some kind of response definitely before year end or even sooner. There are 2 options. I explained this already in the past. One option would be using the existing AG&S code. The second option would be using the existing neuromodulation code that is closest to our technology. On either scenario, we anticipate reimbursement being at least the same as for the existing AG&S procedures. So that's where we are from a reimbursement perspective. I can, again, also add a little bit more color on the regulatory perspective. There, the first module has been submitted. We expect to submit module 2 and 3 before year-end. And then the final module with clinical data, review and IFU labeling will be submitted the moment we have 12-month data in the first quarter of 2024.

Thank you. One moment please. Our next question comes from the line of Michael Polark of Wolfe Research. Your line is open.

I want to follow up on the revenue in the quarter. And I just want to make sure I understand what happened in the first quarter, specifically. It's a really low number measured anyway. I mean, last year, you were averaging Є800,000 a quarter throughout the year. I heard the influences you flagged, but kind of what else can you say to provide some comfort that this isn't -- centers not interested in the product, share loss, that sort of thing. I guess, it strikes me as a low enough number such that I'd hope for a little more than maybe just kind of timing of OR access and slow-to-ramp new accounts. So any other color you can provide there as to kind of what you see on the ground in Germany?

Yes. No, definitely, Mike. Hello and thank you for the question. So let me first be very straightforward also. The Q1 sales is really below our expectation. There is no need in hiding this. It's below the expectations. When we dig them, and I'll keep repeating myself, we see that we were really faced with seasonality in mainly our leading accounts. On the other hand, we also are experiencing in opening new accounts that have not yet funding experience with hypoglossal nerve stimulation that this is taking longer than we expected. And last, also a little bit part of the success in opening new account is also the need for proctors. And we were also struggling with this more specifically in the last 3 weeks of March in finding more proctors. Now that being said, I'd like to look really positive to the future. And to answer your question, do you see further momentum? Yes. We now have 41 accounts that are fully trained, that are activated and where the first patients are lined up. So that's a continuous growth of opening new accounts. Just for the reference, you know that competition is having over 50 accounts in Germany. We are now getting more and more close with 41 accounts. That's one thing. The second thing we are seeing is also the result. The patient result and the feedback that we get in accounts that are experienced with Nyxoah, they are really, really very positive. And this will also lead in further case report and also further publications on these first experiences that will be shared in going forward. That's the second thing. Last, we are also seeing that we continue building momentum, not only with ENT-implanting surgeons but also with referral physicians. So we get more and more requests from sleep physicians to better understand what our technology is doing. We also continue to invest in DTC in Germany because we see that a hotline. We see also the number of hits on our website is really showing an increased interest resulting also in concrete patients that are eligible to be treated. And last, we also invested in a rental sales force that is now actively visiting sleep physicians, positioning Genio. So that's the color that I can provide on what we are doing in Germany.

Thank you. One moment please. Our next question comes from the line of Suraj Kalia of Oppenheimer. Your line is open.

Hi, Olivier. Can you hear me all right?

Yes, I can. Good afternoon.

So Olivier, two questions from my side. What percent of your 41 German sites overlap with Inspire?

So I can be very precise. So we have 34 that are overlapping, and we have 7 sites that are unique or exclusive with Nyxoah.

Fair enough. Olivier, do you expect U.S. pricing also to be 20 -- excuse me, was it Є20,000 and the reimbursement approximately around Є30,000? Is that sort of the thought process?

So the short answer is yes. As I was explaining so we have two different scenarios. But in both scenarios, the price points will be around the same and also in line with what we just mentioned and in line with the current price point for AG&S in the U.S.

Got it. Olivier, one of the questions people ask and I'd love your clarification on this is, is there a requirement in terms of for men to shave every time you have to attach the external power source? Just trying to determine if that's another burden for the patients or not.

First of all, is there a requirement? The answer is no. There is no requirement. But what we learned in our daily clinical practice is, of course, to have the best adhesive connection with your chin, that it's best when there is no facial hair. So we do recommend that people are shaving. But as you can understand, it's different man-to-man. But there is no official requirement to shave, but we do recommend that a very -- how do you say that, a chin without facial hair is the best way to have the adhesive connecting to the skin.

Fair enough. And Olivier, if I could just ask my last question. Olivier, correct me if I'm wrong, the last patient in DREAM was implanted in, I believe it was January or February, please correct me if I'm wrong. And more specifically, what I'm curious about is, let's say, Q1 2024, the last patient 12-month follow-up would be over, right? You'll think you can turn around the data analysis and mining and everything and deliver the outcomes or at least report the outcomes by Q1? Thank you for taking my questions.

Thank you, and I will try to answer very clear. So the last patient was implanted in the first week of March to be very precise. We plan on completing the final PMA module submission soon after the data, the 12-month data, is released in the first quarter of 2024. That said, we do not predict the exact timing of FDA decision, given it will be subject to variables we cannot influence. But we expect FDA approval before year-end 2024. Now I think also the question was, is 2024 still realistic? And there, the answer is yes. It is realistic based upon the review time lines around the model of PMA.

Thank you. One moment please. Our next question comes from the line of Ross Osborn of Cantor. Your line is open. [Operator Instructions] I'm showing no further questions at this time. I'd like to turn the call back over to Olivier Taelman for any closing remarks.

So thank you. And for the closing remarks, I would like to repeat again that our key objectives for 2023 are focusing on patient follow-up in U.S. DREAM study, resulting in reaching primary endpoints. And of course, we will continue with the preparation for the U.S. market and driving further revenue growth in Germany and also continue opening new sites in Europe. So thank you all for joining. Thank you for the questions. I'm happy to connect more if there should be more questions. Good evening or good afternoon.

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