Sedana Medical AB’s Interim report January-June 2023
Strong sales momentum and a clear target to achieve EBITDA break-even in our Ex-US business during 2024
Second quarter 2023
- Net sales for the quarter totalled MSEK 37.3 (26.9), equivalent to an increase of 39% compared to the same quarter 2022. At constant exchange rates, sales increased by 27%.
- Gross profit was MSEK 26.6 (18.9) equivalent to a margin of 71% (70%).
- Earnings before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK -10.7 (-23.9), equivalent to an EBITDA margin of -29% (-89%).
- Operating income (EBIT) totalled MSEK -16.3 (-29.8), equivalent to an EBIT margin of -44% (-111%).
- Net income for the quarter was MSEK 1.4 (-11.1) and earnings per share before and after dilution was SEK 0.01 (-0.11). The main reason behind the positive net income is a positive financial net resulting from currency gains on cash held in USD.
- Cash and short-term investments at the end of the quarter totalled MSEK 504 compared to MSEK 560 at the beginning of the quarter.
- Cash flow from operating activities totalled MSEK -36.0 (-38.6).
- Cash flow from investing activities totalled MSEK -45.8 (-38.8).
- Total cash flow for the quarter was MSEK -83.0 (-75.4).
- Net sales totalled MSEK 75.1 (60.5), equivalent to an increase of 24% compared to 2022. At constant exchange rates, sales increased by 15%.
- Gross profit was MSEK 54.1 (41.9), equivalent to a margin of 72% (69%).
- Earnings before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK -21.4 (-40.4), equivalent to an EBITDA margin of -28% (-67%).
- Operating income (EBIT) totalled MSEK -32.6 (-51.9), equivalent to an EBIT margin of -43% (-86%).
- Net income for the interim period was MSEK -14.7 (-30.1) and earnings per share before and after dilution was SEK -0.15 (-0.30).
- Cash and short-term investments amounted to MSEK 504 at the end of the period compared to MSEK 608 at the beginning of the year, of which short-term investments were MSEK 317 (0).
- Cash flow from operating activities totalled MSEK -43.0 (-66.1).
- In order to favor from better interest rates, investments in short-term deposits were made of MSEK -306.2 during the period. Cash flow from investing activities thus totalled MSEK –391.4 (-71.0).
- Total cash flow for the period was MSEK -436.7 (-136.3). Adjusted for the allocation of cash to deposits, total cash flow was MSEK -130.6 (-136.3).
Strong sales momentum and a clear target to achieve EBITDA break-even in our Ex-US business during 2024
With 49% growth in Germany (36% excl. currency effects) and 65% growth in our other direct markets (52% excl. currency effects), we report strong sales performance in the second quarter. We remain fully focused on our three strategic priorities: achieve profitable sales growth in Europe, get closer to break-even in our Ex-US business, and make headway towards the NDA approval in the United States.
Strong growth in our direct markets
After showing growth in Q1 for the first time after the Covid-19 pandemic, I am pleased to report that our business grew by 39% (27% excl. currency effects) in the second quarter. This is despite the anticipated sales decline in our distributor markets.
Our main market Germany grew by 49% (36% excl. currency effects). While we have been able to continuously add new hospitals to our customer list, the main growth driver was an increased penetration in existing customers. I am very happy about this development, as it shows that our field force productivity measures are effective, and our compelling clinical benefits convince customers to use inhaled sedation in more of their patients.
Access to our customers has largely normalized, but we continued to see less ventilated patients in German ICUs compared to 2022: on average, the total number of intensive care patients in high-care and ECMO settings, i.e. where ventilators are typically available, was 9% lower than last year. The number of ventilated Covid-19 patients was 67% lower than last year, indicating that Covid-19 today plays a less significant role in intensive care.
Our other direct markets Spain, France, UK, Nordics and Benelux continued on their solid growth trajectory and increased sales by 65% (52% excl. currency effects). The majority of the growth in these markets stems from new customers that we have added over the last year, but we also saw an increased penetration in existing customers. In Spain, the pricing and reimbursement process for our pharmaceutical Sedaconda® (isoflurane) is not yet finalized, although the Spanish Ministry of Health had published information in April that Sedana Medical had been granted pricing and reimbursement approval in April. In the administrative process following the decision, it has become apparent that further adjustments to Sedana Medical’s submission are necessary to agree on a mutually satisfactory reimbursement level. Therefore, we have proposed a revised offer to the Ministry of Health and anticipate to receive a new decision at the next meeting of the Drug Pricing Commission in the fall 2023. Despite the delayed pricing and reimbursement decision for our pharmaceutical, Spain remained our fastest growing market during the quarter.
As anticipated, we saw another decline of 38% (44% excl. currency effects) in our distributor markets. Again, the gap is explained by the lack of orders from our South American distributor who continues to work through high inventory levels, especially in Mexico. The last sizeable order from South America was received in the second quarter of 2022, meaning that we are not expecting this kind of decline in our distributor business going forward. Excluding this specific distributor, the remaining distributors showed aggregate growth during the quarter.
Further steps towards profitability Ex-US
We have made it a strategic priority to take decisive steps towards reaching break-even of our Ex-US business. Hard work has been, and still is, ongoing to optimize all elements of our cost structure, enhance organizational effectiveness and improve our commercial focus.
We report a gross margin of 71% for the quarter, up from 70% last year. As already anticipated in the Q1 report, the number is slightly lower than in Q1, but still above the 70% mark. The explanation is that our own price adjustments had affected the income statement faster than the cost increases in the supply chain have.
At fixed currencies, our operating expense level, compared to the same quarter last year, came down by 4% in an inflationary environment, and overall, we were able to improve our EBITDA by 55%.
USA: continued progress in patient enrolment but an adjusted submission plan after FDA interactions
I am pleased to report that patient enrolment for our US clinical program is continuing to progress according to plan. We are in a constructive dialogue with the FDA after the agency granted our Phase III trials Fast Track Designation, a program designed to bring important medications to US patients in an expedited way.
In July, the FDA has requested that we include our long-term outcomes data in the Clinical Study Report (CSR) before submission. This means that the New Drug Application (NDA) can only be submitted once the long-term follow-up is completed, evaluated, and integrated into the Clinical Study Report. Previously Sedana Medical had assumed that the long-term follow-up data could be submitted during the review period. We estimate that this will shift the submission to Q1 2025 and – assuming a standard review time – the approval to late 2025 or early 2026.
It is important to stress that the study as such is not affected and no new data are required. As the feedback purely impacts the sequence in which we will be able to submit our data, the risk or the cost of the study are not affected either. Therefore, there is no change to our previous statement that our cash position is expected to be sufficient to finalize our clinical program and finance the launch in the United States.
The new timeline currently assumes no positive effects from the Fast Track Designation granted earlier in the year. We will however have the opportunity to discuss possible measures to accelerate the timeline, such as accelerated approval, priority review and rolling review, in a pre-NDA meeting closer to submission. Should the FDA find us eligible for an accelerated review time or a rolling review for instance, the timeline may shorten.
Updated guidance to reflect focus on profitability ex-US
In this report, we are changing the way that we provide financial guidance (see page 5 and 6 for details). There are three new elements in how we provide information about our outlook, which I would like to highlight:
More transparency around our market potential: Sedana Medical is focusing on a unique segment, for which very limited data are available publicly. At the same time, the upcoming US approval will significantly expand our market potential. Therefore, we are creating better transparency around our view on the size of the market potential in our direct markets in Europe and the United States.
Profitability target: we are prioritizing profitable growth and are pursuing a prudent investment strategy, which leads us to invest in profitable and growing markets and to control cost in other markets until they have reached profitability and show a healthy growth momentum. Based on this approach and our solid growth trend this year, we have set a target to achieve EBITDA break even in our Ex-US business during 2024.
Short-term financial targets: after a very volatile sales development during and following the Covid-19 pandemic, we would like to provide more information about what we expect in the upcoming quarters. Therefore, we are introducing short-term targets for sales and – starting from 2024 – EBITDA, which if needed, will be updated in every year-end report for the subsequent financial year.
Continued focus on our strategic priorities
2023 is an important year for Sedana Medical, as we are gradually leaving the Covid-19 aftermath behind and are returning on a growth path. We are fully focused on generating growth and reaching profitability in our ex-US business and simultaneously preparing for our largest potential market, the United States. Half-way into this year, I am pleased to see a stronger and healthier Sedana Medical compared to 2022, and I am looking forward to keeping you updated on our further progress.
Johannes Doll, President and CEO
Please find the full report at: Interim Reports | Sedana Medical
This document has been prepared in both a Swedish and English version. In the event of any deviations, the Swedish version shall prevail.
Sedana Medical will hold a telephone conference at 13:30 pm (CET) Friday July 21, 2023.
If you wish to participate via webcast please use the link below. Via the webcast you are able to ask written questions. Link to webcast: Sedana Medical Q2 Report 2023 (financialhearings.com)
If you wish to participate via teleconference please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference. Link to teleconference: Call Access (financialhearings.com)
For additional information, please contact:
Johannes Doll, CEO, +46 (0)76 303 66 66
Johan Spetz, CFO, +46 (0)730 36 37 89
This information is such that Sedana Medical AB (publ) is obliged to disclose pursuant to the EU Market Abuse Regulation. The information was released for public disclosure, through the agency of the contact persons above, on July 21, 2023 at 07:00 am (CET).
About Sedana Medical
Sedana Medical AB (publ) is a pioneer medtech and pharmaceutical company focused on inhaled sedation to improve the patient’s life during and beyond sedation. Through the combined strengths of the medical device Sedaconda ACD and the pharmaceutical Sedaconda (isoflurane), Sedana Medical provides inhaled sedation for mechanically ventilated patients in intensive care.
Sedana Medical has direct sales in Benelux, France, Germany, Great Britain, the Nordics, and Spain. In other parts of Europe as well as in Asia, Australia, Canada, and South- and Central America, the company works with external distributors.
Sedana Medical was founded in 2005, is listed on Nasdaq Stockholm (SEDANA) and headquartered in Stockholm, Sweden.