Nyxoah S.A. (NASDAQ:NYXH) Q3 2023 Earnings Call Transcript

Nyxoah S.A. (NASDAQ:NYXH) Q3 2023 Earnings Call Transcript November 11, 2023

Operator: Good day and thank you for standing by. Welcome to the Nyxoah’s Third 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] Please be advised that today’s call is being recorded. I would now like to hand the conference over to your first speaker today, Mikaela Kirkwood, Investor Relations and Corporate Communications Manager. Please go ahead.

Mikaela Kirkwood: Good afternoon, and good evening, everyone, and welcome to our earnings call for the third quarter of 2023. I am Mikaela Kirkwood, Investor Relations and Corporate Communications Manager at Nyxoah. Participating from the Company today will be Olivier Taelman, Chief Executive Officer; and Loic Moreau, Chief Financial Officer. During the call, we will discuss our operating activities and review our third 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.

A team of doctors and nurses in the operating room, utilizing a variety of Masimo’s medical technology.

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 list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section on our Form 20-F filed with the Securities and Exchange Commission on March 22, 2023.

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

Olivier Taelman: Thank you, Mikaela. Good afternoon, and good evening, everyone, and thank you for joining us for our third quarter 2023 earnings call. During the third quarter, we maintained focus on clinical execution in our open-label U.S. pivotal study dream, ensuring a steady course to complete data readout in March 2024. Based upon the DREAM data published back in June, in combination with commercial patient outcomes in Europe, our confidence is strengthened for a positive DREAM outcome. In anticipation of our U.S. launch, we have made great progress as we continue to work with the AAO on our interim and long-term coding strategy. Next, we continue to invest in gradually building our leadership in the U.S. commercial organization, including market access to facilitate reimbursement.

In Europe, we recently introduced a novel patient-centric approach by initiating a partnership with ResMed Germany. Together, we will strengthen our in-depth understanding of the obstructive sleep apnea patients’ journey, increasing patient overall OSA awarness and guiding them from diagnosis to treatment. While CPAP remains the golden standard, there is a large pool of patients not tolerating it and needing therapy due to the severity of their OSA. Through this partnership, we aim to increase hypoglossal nerve stimulation penetration and accelerate Genio adoption. Now, with that said, Nyxoah is entering one of the most exciting times in the Company’s history. In less than six months, we will report data from our DREAM U.S. pivotal trial. We recently filed the third module in our model of PMA and continue to anticipate submitting the fourth and final module.

Which will include DREAM 12-month safety and efficacy data, shortly after the follow-up period is completed. We remain on track for FDA approval before the end of 2024. In anticipation of this, Nyxoah continues to expand its U.S. footprint. [indiscernible] remains on patient follow-up in DREAM. As previously stated, our confidence in DREAM outcomes is supported not only by the roughly 500 commercial and clinical Genio [indiscernible], but also by the DREAM efficacy safety data released in a late-breaking poster session at SLEEP 2023 in June. In the poster, we reported efficacy data on the first 34 DREAM patients reaching 12 months follow-up. Which demonstrated a 65% AHI responder rate and the 76% ODI responder rate and safety data on all 115 patients enrolled in the study.

As a reminder, for the trial to be successful of the 115 patients, at least 62.9% need to be AHI and ODI responders a 12-month follow-up. Next, the U.S. ACCESS pivotal study focused on complete concentric collapse patients continues to enroll with implants expected to be completed in 2024. As a reminder, CCC patients represent approximately 30% of hypoglossal nerve stimulation eligible to treat OSA patients, who are contraindicated to commercially available HGNS therapy in the U.S. and do not have suitable treatment options other than major pellet surgery. The ACCESS primary endpoints are similar to the DREAM study primary endpoints as Genio has demonstrated similar results in both complete concentric collapse and non-CCC patients, which resulted in a label expansion in Europe.

While entering Germany, Nyxoah drove hypoglossal nerve stimulation awareness and therapy penetration, increasing market growth from an estimated 15% to 35% over the last two years. This clearly illustrates the benefit of having multiple hypoglossal nerve stimulation treatment options and having multiple companies on the market. To further our patient-centric approach to treating more OSA patients with the right solution, as I mentioned earlier, we partnered with ResMed Germany. This model partnership creates an OSA continuum of care that will shorten the time from diagnosis to treatment and ensure patients are not left without an appropriate therapy. As an example, there are approximately 1.1 million CPAP patients in Germany, of which up to 35% fail within three years.

This collaboration should increase the number of patients in Germany receiving and staying under OSA therapy. Completely, to increase patient awareness, we will collaborate to OSA outlines and DTC marketing initiatives. We will run joint sales force efforts towards ENT surgeons, sleep physicians and dentists as well as educational programs. Both companies will work closely with scientific societies to further optimize patient care guidelines. In conclusion, this initiative exemplifies our mission to make sleep simple again. Commercially, this quarter, we reported sales of €1 million and increased the number of German centers implanting Genio to 46. Our direct-to-consumer campaigns started in the second quarter this year, resulted in a strong website traffic with approximately 55,000 monthly website visits.

We are anticipating the first results from these initiatives already in Q4 later this year with strong year-over-year implant growth. We continue to position ourselves as an innovation leader in the OSA space with always putting patients at the center and listening to our surgeons. As a result, Genio has a different approach to HGNS, compared to an existing implanted battery with lead solution technology. Genio offers patients a leadless full-body 1.5 tesla and 3 tesla MRI compatibility. Non-implanted battery solutions powered and controlled biowearables. Our vision of an implant for life concept powered and controlled biowearable component allows patients to always have the most advanced technology without the need for another surgery. Independent patient market research confirm preference for a system with Genio features and foreign factor.

The recently launched Genio 2.1 wearable enables greater stimulation adjustability and gives patients the autonomy to adjust stimulation amplitude within predefined boundaries. While the Genio 3.1 implantable stimulator is under regulatory review and will further report our implants for life concept. We are also working on regulatory approval to activate existing sensors in the wearable component that will adjust stimulation based upon sleeping position. Future generations of the Genio system will provide patients with real-time feedback through data collection and also remote monitoring that will improve the patient experience and provide physicians the ability to optimize patient care more efficiently. All this should further increase patient access to hypoglossal nerve stimulation technology and have a positive impact on the Company’s gross margin.

Our European commercialization experience early DREAM data and Genio’s differentiated design, reinforce our confidence in a successful U.S. launch. We commissioned independent clinician and patient service, which demonstrates significant demand for Genio and support our view that we can more than replicate our European performance when entering commercially in the U.S. To ensure we are fully prepared that launch, we continue to invest in our U.S. commercial infrastructure and securing reimbursement. Last month, an advisory panel for the ENT scientific society discussed the CPT code that will best support Genio. While [indiscernible] outcome of this meeting, we expect reimbursement to be at the minimum in line with the current HGNS payment rates in the U.S..

Finally, we are making steady progress with our ansa cervicalis program through our exclusive licensing agreement with the Vanderbilt University. Under the lead of Professor David Kent and close collaboration with Nyxoah R&D team, we are evaluating stimulation of the ansa cervicalis nerve to address current HGNS nonresponders. We have ended the detailed design phase and anticipate beginning a feasibility study shortly. In summary, we continue to advance our key objectives for 2023, which are to focus on patient follow-up in the DREAM study resulting in reaching the primary endpoints, begin preparations to enter the U.S. market with regulatory, manufacturing, commercial and market access readiness and drive further revenue growth in Germany while opening new European markets.

To that end, we implanted our first patients in Italy. With that, I’m pleased to turn the call over to our CFO, Loic Moreau, who will provide a financial update.

Loic Moreau: Thank you, Olivier. Good day to everyone, and thank you for joining us today. Revenue for the third quarter ended September 30, 2023 was €1 million. Total operating loss for the third quarter was €11 million versus €8.8 million in the third quarter of 2022, driven by an acceleration in clinical activities as well as commercial investments in Europe. As of September 30, 2023, cash and financial assets totaled €73 million, compared to €95 million on December 31, 2022. During the third quarter, our monthly cash burn was €4 million. And based on our current cash position, we have a runway into late 2024. With that, I will turn the call back over to Olivier.

Olivier Taelman: Thank you, Loic. As I opened with, we are entering one of the most exciting times in Nyxoah’s history. I cannot emphasize this enough. We are less than six months away from the DREAM clinical data readout, which should result in obtaining FDA approval in late ’24, and initial [indiscernible] with reimbursement comparable to competition. The uniqueness of Genio system resonates well with both physicians and patients as well [indiscernible] The Germany and other markets where we are available, also confirmed by independent market research. I look forward to continuing to scale the Company in anticipation of U.S. market and continuing to grow in Europe. This concludes the formal part of our presentation. Operator, I will turn the call over to you to begin our Q&A session.

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Q&A Session

Operator: [Operator Instructions] Our first question today comes from Jon Block with Stifel.

Joe Federico: This is Joe Federico on for Jon. I guess to start, I wanted to ask, I know GLP-1 has been a hot topic lately. Do you have any expectations for the surmount OSA data that is supposed to be released early next year? We’ve heard some commentary from other players in the space. I was just curious to get your thoughts there.

Olivier Taelman: Yes. No. Thank you for the question. And to confirm, there was a lot of — there is a lot of conversation around GLP-1 impact. So I keep giving the same and providing the same answers, meaning that by having GLP-1’s lowering extreme high BMIs, we think, and we know that we will have more patients that will become eligible for a successful HGNS treatment. Because if we look at literature, HGNS is shown the most effective with the BMI up to 35. So high BMIs lowering in the range of 30 to 35 will provide those patients with an optimal treatment of HGNS. And if you look at it net-net, we do believe that we will have more patients entering in that range, then we will have patients that will go in the range below 15 and no longer be eligible for treatment.

Joe Federico: Okay. Great. That’s really helpful color. And I guess to follow up, I just wanted to follow up on the ResMed partnership in the quarter. There is — what are you seeing after implementing that partnership? Is it still early to tell? Or have you seen any benefits from that so far in Germany?

Olivier Taelman: So through the partnership, we aim to further our patient-centric approach by developing a complete OSA ecosystem where patients can be guided to which OSA therapy best suited the need. I think this is really important. We will collaborate on DTC initiatives, sales and marketing efforts to target both sleep physicians and ENT surgeons. The goal of this partnership or to expand OSA therapy penetration and increased market shares. The collaboration just kicked off, and we expect to start to see the benefit beginning next year.

Joe Federico: Okay. Great. That makes sense. And then if I could just sneak one last one in here. On ACCESS in the U.S. Are there any other data points from the trial that you can provide, maybe patients implanted to date or number of active sites? Just any more color there would be great.

Olivier Taelman: No. So when it comes to the ACCCESS study, we are staying confident that we will close the enrollment by the end of 2024. So that’s why — that’s when we anticipate completing the implants. We continue to make progress with the study. We will not be disclosing the number of patients implanted. But that being said, I repeat myself, we do feel confident that we will close all implants by the end of 2024.

Operator: Our next question is from Adam Maeder with Piper Sandler.

Simran Kaur: Olivier, Loic. This is Simran on for Adam. I guess, first, I wanted to just start off with the Q3 kind of commercial print. So could you elaborate on maybe what you’re seeing in terms of just commercial trends? It looks like volumes did take a step back sequentially. So any particular items to call out or seasonality impact. I guess I’m just trying to reconcile some of the disconnect between what the Street was expecting versus the print.

Olivier Taelman: Yes. No, no, definitely. So while we do not provide revenue guidance, it is important to mention that the third quarter is seasonally weak due to summer holidays. However, for implanting accounts continued to increase, now being 46, which bodes well for the future growth. We do anticipate also a sequential increase in the fourth quarter, driven by the DTC initiatives that we started in the second quarter, driven by the helpline outcome that we are seeing. And of course, although it may become a little bit early, but also about the collaboration that we have initiated with ResMed.

Operator: Our next question comes from Ed White with H.C. Wainwright.

Ed White: So I just want to get your thoughts on the DTC activity in Germany. You mentioned in the call that you had about 55,000 monthly hits. And I was just wondering how you’re thinking about that converting into commercial sales? And then I wanted to get your thoughts also on DTC — potential DTC activity in the U.S.

Olivier Taelman: Yes. So thank you. Thank you for the questions. So to your point [indiscernible] in dedicating and building up a dedicated digital marketing team focused on Germany as we launched the Nyxoah helpline in Germany last year. We engaged resources in the search engine optimization and the search engine advertising. This is really driving more patients to Nyxoah. So that’s already a first part of investment we did. And then next, our DTC advertising campaign was launched in March and has raised awareness for HGNS and Genio. As a result, we have seen a rapid growth in appointment requests through our helpline. The current plan from patient identification to Genio implant or the conversion time, as it sometimes referred to in Germany is six to eight months.

So we anticipate beginning next quarter to see a real strong benefit. When it comes to the U.S., I think I have to start with saying that Inspire from a DTC perspective, did or has done a tremendous job establishing the HGNS market for patients, physicians and payers in the U.S. In this regard, it is sometimes nice to be number two entering the market. We anticipate having our full sales force hired and trained by the time of launch. These reps will target both implanting ENTs and referring sleep physicians, supported by focused DTC investments. And I think that’s really important. So we are planning to invest in DTC, but it will be very focused. Additionally, we are currently investing in market access to ensure CMS reimbursement is secured at launch and to expedite commercial coverage.

Sorry for being a little bit long, but you had also two questions.

Operator: Our next question comes again from Adam Maeder with Piper Sandler.

Simran Kaur: I just wanted to follow up with another question on just reimbursement. So from a reimbursement perspective, can you remind us, one, on the coding, it sounded like last quarter that you would have a clear idea of what that code is by year-end. Is that still the case? And then two, just what is the strategy in terms of garnering payer coverage? And what kind of initiatives are you guys putting in place to kind of work up to that, so that everything is squared away or by launch?

Olivier Taelman: Yes. So last month, at the AAO meeting in Nashville, an advisory panel for the ENT scientific society discussed the CPT code that would best support Genio. And to your point, this is one of the scenarios that I was mentioning earlier that has now been put more forward. So multiple CPT codes were evaluated. And while I cannot yet disclose the complete outcome of the discussion, we expect reimbursement will be at minimum in line with the current HGNS payment rates. So that is already, I think, the first answer. Next, I have to again say that competition has done a terrific job educating the commercial payers about the benefit of HGNS, resulting in all having HGNS coverage policies. We have already engaged in informal discussions with payers and expect to be able to leverage those policies.

At launch, we anticipate being reimbursed through prior authorizations and we would expect to be included in coverage policies within 12 months afterwards. Now very complete from a market access perspective, we have the team in place that is working to secure reimbursement from both CMS and the commercial payers. That team will also work with customers through the prior authorization process when we launched in the U.S.

Operator: Our next question comes from Suraj Kalia from Oppenheimer & Company.

Shaymus Contorno: This is Shaymus on for Suraj. So I believe earlier you said that you had submitted the third module to the FDA. Have you received any questions on the submission so far? Any feedback yet that you can share with us?

Olivier Taelman: So the short answer is yes. We did receive some deficiency questions on module one and two. We answered them, and they will also be submitted shortly. So just to summarize, and as a reminder, there are four modules in total, the first module was more quality overview on preclinical data. We submitted. We got some questions, nothing that is worrying us in the sense that we do feel extremely confident, and we also have answered all these questions. Second module, same thing, remaining preclinical data. Also there, we got, I think, I can say the normal or the expected questions that we are answering and then now with third module, it’s more on manufacturing and the manufacturing validation. So it was submitted a week ago.

Now the last one, and that’s why it got really exciting. So module 4, it will be the final module and that is the one we can submit with, including clinical data review and IFU labeling, and we expect to do this somewhere end of March, beginning April after we had the time to analyze the data that we will have in the first week of March of the DREAM study.

Shaymus Contorno: Got it. Looking at Germany and kind of the competition there, there’s some overlap, I know you’ve discussed it before between you and a competitor. So in those sites, what’s the driving factor for those accounts saying I’m going to implant a patient with Genio versus one of your competitors’ systems.

Olivier Taelman: So first, I would like to point out that in quarter 3, we are still estimating that our market share stays in the range of 20% market share during the quarter. I think this is first really important point, because as you know, since we entered the German market two years ago, with having also CPT codes, we were able to immediately capture 20% to 25% market share, and this has been continuing always being in this range with a strong Q4, where we were slightly above 30%. So that is already the first part to your question. So if you look at implant sites, that we are going after as a fast follower in sites where Inspire already was several years active. We see that in those sites or in all sites, we are able to take market share in a significant way.

That’s number one. Point two, what we are seeing is when you go to higher volume side, we also saw that in the top 5, we were able to take more market share than the 20%. So there was even stronger uptake in some top implanting sites in Germany. Now I think when you have competition entering and there is a monopolistic market, you also can increase overall HGNS penetration. And I’m really pleased to see that we are driving this because that is something that we are hearing back from surgeons as well. First, we are extremely pleased that there is not an option to choose between two therapies. Second, by having this option, they’re also seeing that more patients are being treated with one of those two [indiscernible] an increased therapy penetration.

And I keep repeating, and I have to come back to the uniqueness of our system that a single incision, a CCC indication, a full body MRI compatibility and also a real patient-centric approach is really something that is speaking very positively to physicians and patients. [indiscernible] to the next quarter, we are looking forward to beginning 2024 also in Europe commercially to see the impact of the investment, and of course, to also further expand into new and other countries. And to that point, I’m sorry that I keep going. But to that point, we also have some good news coming from the U.K., where we are now officially allowed to participate in an NHS standard. So that will also definitely help us accelerating revenue in Europe coming from more countries than mainly Germany.

Shaymus Contorno: Got it. I appreciate all the color there. And if I can sneak one more in. Just kind of looking when you do the U.S. launch. I know it’s a little ways away, but I know you said about 100 to 150 reps. How many sites are you looking to initially launch at, how many centers? Just trying to tie the color of centers to reps, so to speak.

Olivier Taelman: So although I would really love to answer your question, I think you can understand that I do not want to be going too concrete to that question for the simple reason that ’24 will be the year where based on successful DREAM data, we will have FDA approval later at the end of the year and hopefully also start commercializing. Currently, we are looking at a couple of scenarios. One scenario is where we would go, of course, with a kind of focused launch and try to go immediately after, let’s say, roughly half of the Inspire side that we have today. On the other hand, it’s also not a secret when you look at productivity for a sales rep, whether it now is with Nyxoah or with another new modulation company, we would be aiming to have €1 million of sales by sales up.

Operator: Our next question comes from David Rescott with Baird.

David Rescott: I wanted to start off on the partnership that you announced a couple weeks ago, I’m curious. I know it’s — I mean it seems like it’s something that could be pretty exciting. I know it’s a couple of weeks or so into it since the announcement. I’m just curious if you’re at a point yet where things are kind of established and maybe you’re starting to see some patients start to either roll in specifically to Nyxoah, maybe through the partnership at all? Or if there’s anything you anecdotally — that you can provide just around how that maybe already is starting to impact the business? Or maybe if it’s a couple of more quarters still before the potential benefits from that partnership could be realized.

Olivier Taelman: Yes. So first, since it’s really [indiscernible], I think it’s difficult to exactly predict when we will see what kind of impact. But what I would like to come back to, and I think this is something where I also would like to give a lot of credit to the ResMed colleagues in Germany. It is really putting a patient at the centers. Really further looking beyond CPAP, hypoglossal nerve stimulation, mandibular device treatment. Now what is exactly and precisely the best solution for patients suffering from OSA. And therefore, I keep repeating, CPAP is the golden standard. It was excellent, but the issue is that a lot of patients simply quit their CPAP after a period of time. Now if these patients are suffering from moderate-to-severe OSA, it is so important to offer them a treatment.

We all know the cardiovascular risk that is associated, the risk of strokes, the cost for healthcare systems, if you do not treat patients suffering from moderate-to-severe OSA. So I’m really proud, on one hand that we can say that, together with ResMed in Germany, we are really looking at what is best for the patient. Now that being said, it’s also clear that we need to, first of all, stores then get used to each other a little bit. that is ongoing. Sales teams are talking with each other, marketing teams of talking with each other. We are looking at DTC initiatives. We have the first major congress coming up in Berlin, where we both will be present and interacting with several KOLs. And I think a realistic approach would be that you would see the first impact in overall patient penetration increase and Genio specific increase as of Q1 next year.

David Rescott: Okay. Great. That’s helpful. And just on ACCESS in the U.S. I’m wondering the level of visibility maybe you have into that trial, I know that with kind of complete concentric collapse patient population there, maybe a higher concern around those patients having higher BMIs and maybe there being a bigger impact from GLP-1s. So just wondering what level of visibility you have into that and whether or not you have a better informed view maybe on what the potential impact could be either into that specific patient population or just broadly across all nerve stimulators?

Olivier Taelman: Yes. So let me start with, first with some facts. So in the ACCESS study, that protocol [indiscernible] up to 40 sites that were implanted, although we do not anticipate activating that many, we have so far activated four sites, but we can go up to 40. That’s that one. Second fact is that we are feeling comfortable that we will close the enrollment by the end of 2024. Everything is going in this direction. So it’s trending really in a positive way. Now another fact is that in the ACCCESS study of BMI — the patient’s BMI cannot be above 35. I think this is important, as I already was commenting earlier, we believe, and we see this in clinical literature that to have an optimal therapeutic effect from HGNS, a patient should not be having a BMI that is higher than 35.

What we also learned in this that patients suffering from CCC and also the correlation with their BMI is present. So we see that we have a lot of patients with the BMI somewhere in the range of 30 to 35. Now what you can expect is that there are also quite some patients with a BMI above 35 that are suffering from CCC. And that is precisely where we are seeing a very positive impact from GLP-1s because — and if you speak to KOLs, what we did extensively, we’re also hearing there, but it’s clear that lower the BMI that is above 35, bring the patient in the range of 30 to 35 implant with HGNS and have a successful therapeutic response. Physicians are more behind that concept than increasing of implanting patients with a BMI above 35. And where there is a risk that there will be not a strong therapeutic response.

So I’m welcoming mostly the GLP-1 impact too low and to bring those really obese patients into this range below 35%. And then regardless, if they suffer from CCC or non-CCC, with Genio, we know that we can offer them a successful therapeutic solution.

Operator: Our next question comes from Ross Osborn with Cantor Fitzgerald.

Ross Osborn: In terms of commercialization activities outside of Germany, would you provide an update on how Spain is receiving your system following first implants this summer? Additionally, I would be curious to hear what other countries you had implants in during the quarter, in addition to Italy? And where we should be thinking about for the balance of this year and 2024?

Olivier Taelman: Yes. So to your point, so today, we are reimbursed in Spain, in Switzerland and also, of course, in Germany, where we generate like 95% of our revenue. And going forward, we did first Italy, because in Italy, in order to obtain reimbursement, there was a demand for country-specific data, and that’s why we did the first patients already. We are going up to 10 patients in Italy. And then based on these data, we will submit them together with the existing data. And hopefully, this will result also in a reimbursement in Italy. In the Nordic countries, same thing goes for Finland. So there we did some implants already. And based on these data, we are trying to secure hospital reimbursement hospital by hospital, and also we generate more commercial implants in Finland.

And what I was mentioning earlier on, I think a very important market will be the U.K. First step to enter the U.K. is to being allowed by NHS to participate in a tender. We have received this official communication that we are. Now the next steps will be how to compete in this tender and how to make our case strong, so we can enter. So that’s in a nutshell where we are and where you can expect us to be reimbursed shortly.

Operator: Thank you very much for your questions. I am showing no further questions at this time. Thank you for your participation in today’s conference. This does conclude the program. Enjoy your evening. And you may now disconnect.

Olivier Taelman: Thank you.