Neola Medical AB (publ) (NEOLA) Earnings Call Transcript

Hello, and welcome to today's webcast with Neola Medical, where CEO, Hanna Sjostrom; and CFO, David Folkesson, will present the report for the second quarter of 2025. [Operator Instructions] And with that said, I hand over the word to you, Hanna.

Well, thank you so much, and everyone, a very warm welcome to this quarterly presentation for the Q2 and half year of 2025, where we are summarizing an intensive and productive first half year for Neola Medical, where we continue to reach our milestones according to our business strategy and plan. So presenting here today is myself, Hanna Sjostrom. I've been the CEO for the company since 2019. And with me here today, I also have CFO, David Folkesson. So first, I will shortly present Neola Medical as a company, our market and the significant events during the quarter and the first half year of 2025. And thereafter, David Folkesson will walk you through the numbers and the financial summary. Before we start, please note that today's presentation may include forward-looking statements. Actual results may differ due to risks and uncertainties, including, but not excluding such as market conditions, regulatory processes and execution of our strategies. Then to Neola, Neola Medical. So Neola Medical is a deep tech company, developing Neola Neonatal Lung Analyzer, the very first medical design -- device designed for noninvasive and continuous monitoring of the lungs of preterm-born babies with the aim to have an instant results of severe lung complications that today the babies are lying much too long with. Our mission is to transform neonatal care by giving preterm-born babies a safer start in life. And with Neola we aim to support health care professionals with real-time respiratory insights, enabling instant detection of lung complications, earlier prevention and intervention and also proactive care so that we can have -- ultimately, our goal is to have better outcomes for these very vulnerable patients with the potential to also reduce morbidity and improve long-term quality of life. Neola Medical was founded in 2016, and we have our headquarters here Lund, with also a small hub office in Palo Alto in the U.S. The technology behind Neola is based on very advanced research from Lund University. And today, we are in the clinical phase with our medical device aiming for market authorization primarily with the U.S. Neola is based on our patented technology called gas and scattering media absorption spectroscopy. This is a method that was developed at Lund University and further advanced by our team at Neola Medical. We currently hold 8 patent families covering both the medical methods, device and disposables ensuring protection of our core innovation, but also enabling scalability to other patient groups. And as you saw in the Q2 report that we published this morning, we continue to strengthen our patent portfolio, a real highlight in this quarter that I will soon talk more about. Our revenue model really extends beyond the primary sales of Neola main unit, but also includes the sales of disposable probes that are changed daily on the baby and also service agreements. And those disposable probes are very important for us, and we expect them to be really a key driver of our future revenue and our future margins. As we move towards market launch, clinical support is incredibly valuable. And we do also get that from the very best in the U.S. such as Stanford's Associate Professor in Neonatology and also from the main key opinion leaders in Europe. And this is something that we have worked relentlessly for many, many years to build up a very strong credibility with the key opinion leaders and a strong key opinion leader network in both Europe and the U.S. ahead of our market launch. We are importantly also Stanford Impact1 company, as Stanford has recognized Neola with the -- as one of the most promising innovations with the potential to really transform neonatal intensive care from day 1 in clinical use. And this is one way of how we really make sure that we have those most important U.S. endorsement with a lot of connections to the entire U.S. neonatologist community before launch. And now one of the reasons why we really get this support is that we are addressing such a growing clinical need as more babies are being born preterm. Today, 1 in 10 babies arrive too soon to this world and often depend on intensive care for their survival and for their long-term outcomes. Many of these babies face underdeveloped lungs that can quickly advance to life-threatening complications and lasting disabilities for them. So preterm birth is the leading cause of death for infants under 5 years of age after pneumonia. So it's very dangerous. And specifically, the respiratory failure is the primary driver of death. And that is the reason why neonatologist really want to find lung complications much faster than today because every single minute really counts for these babies. And also, this is a significantly under-invested market. So the current monitoring methods in neonatal care are highly insufficient. Doctors really rely on manual observation time, mainly by the nurses. They do chest x-ray on a daily basis. They have some blood gas sampling and some pulse oximetry tools that are really slow and provide only snapshots of what's going on in the lungs, and many of them are potentially also harmful for the baby such as repeated chest x-ray. And in the critical cases, results may take up to 2 hours for chest x-ray while a baby might already be deteriorating. So with Neola, our aim is really to provide that continuous and real-time lung monitoring that is safe for the baby's fragile skin with an instant result within seconds, exactly the type of neonatologists said that this is definitely the type of tools that they would like to have to improve care. And looking at the market worldwide, preterm birth are really increasing. And the number of neonatal intensive care units continue to grow. And this also creates a strong demand for improved monitoring solutions, especially then the U.S. is particularly attracted due to its very high rate of preterm birth. So we have more than 10.5% of all babies being born in the U.S. that are preterm. And this comes a lot from the success of fertility treatments in the U.S. that is causing more twins and triplets, but also, in general, a focus on really having more neonatal intensive care units to address these needs means that the number of, for us, relevant beds in neonatal intensive care is really growing. So currently, there are 35,600 beds in the neonatal intensive care, where our market research and our clinical advisers estimate that 50% to 70% of all these beds should have a Neola next to it in the future. So it's a great market opportunity for us. In the U.S. alone, our addressable market is 400,000 preterm-born babies annually. And we have identified the 10 leading children's hospital as a priority market for our launch. Importantly, we have already established relationship, mainly with two of them, as you would see here, Lucile Packard Children's Hospital in Stanford. We're very much connected to Stanford, and this is also where we have our U.S. office, but then also Cooper. And you have seen that during this quarter, we have also signed a contract with the Cooper Hospital to lay the foundation for that very early adoption through doing our first pivotal clinical study in the U.S. together with them. We have also received an approval from the hospital's IRB committee, which means that we are now also ready to start that study as soon as we are also signing contracts for our second study site. So I would say a lot of progress towards the clinical study in the U.S. during this quarter. For hospitals, Neola not only address the pressing clinical need, but also creates a clear financial value for the hospitals by enabling faster detection of complications. Neola really has the potential to shorten length of stay in the neonatal intensive care unit and also reduce the number of very invasive procedures such as blood gas samples and chest x-ray. It might also free up the nursing time for manual observation, which is important in the U.S. care as so many nurses have left the profession, especially after COVID. There is a decrease in nurses available. And this has really pressed up the salary levels. So it's not uncommon for nurses today to have similar salary as neonatologists in the clinic. So this is also a very important perspective from the American hospitals that any type of technology that can really reduce the burden of the nurses is very welcome in the clinic. So step by step, we have really moved from research validation amongst the early validation that we got from the independent research study in Ireland on 100 healthy newborns to now being currently in a clinical study in Sweden, our pilot study that we're doing ahead of our pivotal clinical study in the U.S. in order to make sure that we capture any learnings that we want to bring into the U.S. study. So we're in a very exciting stage this -- in our company history. And -- now we're working with a sharp focus on what we need to get done in 2025. And we're really focusing then on our clinical studies, the regulatory process, mainly with the FDA, but also our continued preparations in terms of preparing for our market launch. So with that short company introduction, I will now go into the highlights of the Q2 report. So for the first half year of 2025, we initiated the clinical pilot study in Sweden following the approval from the Swedish authorities. This pilot study will evaluate the safety and performance of Neola in preterm-born babies. So it's a very first time we're doing a clinical study on our intended population, preterm-born babies. In addition, this study is designed to demonstrate both the utility of the product and its compatibility with the clinical environment. The patient group ranges from gestational age of 28 weeks, and they weigh between 1,000 and 3,000 grams. The study is in total, 10 preterm-born babies. These babies are in intensive care when we do monitor them during the study. And the study is also conducted at Södra Älvsborgs Hospital in Borås. An excellent regional hospital in Sweden with a really high level of neonatal care. And the study team consists of experienced neonatologists but also neonatology nurses. And I will talk more about this in a minute as well. But then also some of the key highlights of this first half year is that we completed a directed share issue of approximately SEK 20 million, securing financing ahead of our clinical study start in the U.S. and in Sweden and really also strengthening our shareholder base. This is regard our first institutional investors on Board, Adrigo and Cicero funds alongside the support from existing shareholders. We have also our international IP portfolio was further strengthened, with corresponding patents in both China that we received during Q1 and then the same patent granted in Europe in Q2. So two very strategic markets for us. And these approvals is within a new patent family, and they really reinforce the protection of our core medical technology for noninvasive lung monitoring and how we detect pulmonary complication. So this is a very important medical patent for us, and we're excited to have it in both Europe and China at the moment. And then an application is also sent into the U.S. market. So a strong and expanding IP position really remains central to sharpen our competitive edge as we move through this clinical development phase and it really secures future value. So we continue to focus a lot on our patent portfolio. This new patent family really complements the protection of the company's first general patent on the basic fundamental concept of how we measure gases in body cavities using diode laser spectroscopy. So it's also from that perspective, a very important patent for us. And then moving into Q2 and the significant events here. So during this quarter, we have then had the very first baby successfully included in our ongoing clinical pilot study on preterm-born babies with Neola. So this marks the very first time Neola has been continuously monitoring the lungs of a baby. And it's the very first time we have done it also on a preterm-born baby. So first time in our intended patient population. So this is a major milestone for us. We have now reached halfway with our clinical pilot study. And once all the babies are enrolled and have completed the study, the data will be analyzed, the results will be concluded in accordance with the common practice and standards for clinical evaluation and thereafter, communicated. And just as a reminder, this pilot study really serves as a preparatory step to ensure that we capture any potential development refinements of the product or the clinical study protocol or process before entering the pivotal study in the U.S. So it's very much from our side, also a derisking study. And one of the main topics for this quarter as well is that we have now signed an agreement with our first U.S. clinical study site, the prominent neonatal intensive care unit at Children's Regional Hospital at Cooper in Camden, New Jersey in the U.S. So we have -- together with that, we also have obtained the IRB approval. So that is the approval institutional -- from Institutional Review Board that we need to have in order to sign a contract, but also to start our clinical study. We have all of that on board, and this really represents a key regulatory milestone for us. It enables the initiation of the pivotal clinical study on preterm-born babies in the U.S. And I would also say that we are honored to collaborate with Professor, Dr. Vineet Bhandari, who is the -- will be the principal investigator of this study. He is globally recognized neonatologist. He's a member of the Board of Directors for the U.S. Neonatologist Society. So he's very much, I would say, one of the key stakeholders within both noninvasive and respiratory monitoring but also as a very well-recognized neonatologist and key opinion leader in the U.S. So we are very excited that he wanted to be the principal investigator on this study, and it's also a signal of how important this new technology might be in the neonatal intensive care unit as we come to market. So we -- with this study, that will really play a central role on how we build our clinical evidence base for Neola Medical's planned FDA application. That it will then lay the foundation for a market launch. So it's an important study for us coming up. And this study will be initiated after the clinical pilot study. This study site is 1 out of 2 U.S. sites, and we will also be able to confirm the second U.S. site in a couple of months. So with that, I move over to another really exciting Q2 event for the company. Neola Medical was named a finalist for Sweden's new global innovation award, the ”Pioneer Prize. And we were invited to be part of Sweden's official delegation and for the company and our product to be showcased at the World Expo 2025 in Osaka in Japan. This award is organized by Swedish Institute together with Business Sweden. And the delegation was led by his majesty the King of Sweden. So this type of recognition really puts us in the spotlight as one of Sweden's most promising companies, driving innovation with a global impact. So for us, this was a true privilege to represent Swedish innovation, one of few life science company as well to be present and to be present in this global stage. So standing alongside of other visionary companies across industries really gave us not only the visibility but also valuable opportunities to build networks and strengthen Neola Medical's international profile. So these types of acknowledgments really help us position as a credible partner for future collaborations and international market growth. So with that, that was some of the highlights for the -- from the Q2 report, and I hand over to CFO, David Folkesson, for the numbers.

Thank you, Hanna. As you can see, operationally, the first half year has progressed in line with previous -- last year's previous period, and we keep our cost at an efficient level. With that said, we keep financial focus and to our path towards clinical validation, which will be a cost driving activity in the coming quarters. And also, as we discussed in previous reports, operationally, we're now focus on our clinical validation phase for Neola. That means internal preparation and executions for studies. This has resulted in this year's total cost being slightly lower than last year's as the need for external resources has decreased. With that said, the majority of cost for our ongoing study in Borås will occur in the second half of 2025. If we change slide, and as you also can see in the shareholders' list, we're still very grateful for the confidence from the shareholders. We can also see that the existing shareholders have a strong belief in the company, which has given us no major changes in the list of the shareholders. To the next slide. This is the financial calendar for the coming three periods. And next time, you will have a report will be on the 5th of November, which will be the Q3 report then. Over to you, Hanna.

Well, thank you so much, David. So just to summarize, we are really working towards our strategy with a very clear focus. You can see that we have a large and growing addressable market that we're really focusing to penetrate and bit by bit by really moving towards the top 10 hospitals in the U.S. with the greatest demand for this type of new innovation. There is a great clinical need and demand for continuous monitoring of preterm-born infants. And we have also built in a very attractive business models where our disposable probes that are changed daily on the baby will be critical for our revenue growth. We have a proven core technology that we have seen throughout the different studies that has the potential to be an important application within this target group. And with our highly experienced team, we think that we have definitely the right resources for the next step in Neola Medical's journey towards market authorization and launch. So with that, I thank you so much for attending this presentation, and I also leave the floor open for any type of questions that you might have.

[Operator Instructions] And the first question here is how many patients have been included in the Swedish study?

So we're now halfway. So in total, we have 10 patients to be enrolled in the study. To share some details around it, we can see that we have a healthy inclusion rates of approximately 50% of the eligible babies, where the parents are asked for consent also give their consent. So that is, I would say, a very healthy enrollment rate.

In the report, you expect the Swedish clinical study to conclude in the fall. Has there been a slight delay? Or is it according to plan?

It's always hard to plan exactly when you will have a baby in intensive care really fits also the weight class and the specifics of the baby that needs to be monitored. So it's really one of those that where we always have a team that is standby to do measurements as we get an acceptance from the parents. There was always an intense summer periods in terms of personnel schedules. But we now have -- I would say we're now in more the everyday action in the clinic, and we have done some measurements here after vacation times as well. So more or less on track.

You said earlier that the U.S. study will likely be initiated a few months after the Swedish study has been finalized. Is this still your expected time line?

Yes.

Crystal clear. So you secured IRB approval in the U.S. What are the next steps and time line before starting the pivotal study? And how do you view the regulatory risks ahead?